...Full Cost Accounting A Course Module on Incorporating Environmental and Social Costs into Traditional Business Accounting Systems Noellette Conway-Schempf, Ph.D. Carnegie Mellon University Pittsburgh, PA 15213 1 Overview: This module describes methods for incorporating environmental information into accounting management information systems to allow financial decision makers to include environmental criteria in their decisions. The module is subdivided to permit a progression of detail concerning accounting systems and their role in encouraging the design and development, marketing, and use of more environmentally-conscious products, services, and manufacturing processes. The module is suitable for use as part of an engineering or business environmental management course, at either the undergraduate or graduate level, through the selection of various components of the module. Thus for example, in an MBA course, the early material on types of accounting systems would be unnecessary, or in an engineering environmental management course, more emphasis could be placed on the managerial/cost accounting section than on the national accounting section. The module is subdivided as follows: 1) Introduction What is accounting? Relevance of accounting and capital budgeting to environmental management and engineering issues Types of accounting systems Shortcomings of accounting systems as environmental information systems Full cost accounting 2)...
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... Betty W. Steadman 135 IMPLEMENTING THE ACTIVITY BASE COSTING SYSTEM: A CASE STUDY ON DAKOTA OFFICE SUPPLY By Betty W. Steadman Overview Activity Based Costing (ABC) is an accounting method that allows an organization to determine actual costs associated with each product and/or service produced by the organization without regard to the organizational structure or other extraneous function. For Dakota Office Products (DOP), its existing costing system was inadequate because it is incapable of accounting for even all of the known costs such as the desktop delivery service as well as hidden costs such as the 10% DOP paid to maintain its working capital line of credit for accounts receivable (Kaplan, 2003, p.4). Since ABC is a powerful tool for measuring performance, identifying, describing, and assigning costs to, and reporting on an organization’s operations it could solve much of DOP’s critical cost oversights (Caplan, Melumad & Ziv, 2005). Used holistically ABC can be utilized to also improve processes and identify opportunities to improve business effectiveness and efficiency by determining the true or real costs of a given product or service. ABC principles are used to focus management’s attention on the total cost to produce a product or service, and as a basis for full cost recovery of a production or service process. Situational Analysis DOP is a regional office supply company with a strong reputation for customer service and quality supplies. Additionally...
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...Cookies How Aunt Connie’s Cookies could use cost accounting systems to determine their product costs Aunt Connie’s Cookies could utilize traditional cost accounting by using a mixture of materials and labor costs and allocating their expenses to each product. It would assume that the more cookies are created, the more overhead there will be. This would be a simple approach for Aunt Connie’s Cookies, but it may not necessary provide them with sufficient data to properly determine their product costs. Aunt Connie’s Cookies could use activity-based costing, in order to examine its costs by type of activity instead of end product. Unlike the traditional method, it would let the company analyze the overall systems with more detail in order for them to see if there are cost inefficiencies. It would be particularly helpful for Aunt Connie’s Cookies if its indirect costs are greater than its direct costs. If Aunt Connie’s Cookies were to utilize activity-based accounting, it would first need to identify its activities, and then designate a cost to each activity. Once that is completed, a determination of the components of each cost must take place, followed by data collection for every activity. Finally, a determination of the product costs can be made by dividing each product into unit-level activities, cost per batch, product-sustaining activities, and facility-sustaining activities. Total cost analysis and life-cycle cost analysis can also be used by Aunt Connie’s Cookies...
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...Cookies How Aunt Connie’s Cookies could use cost accounting systems to determine their product costs Aunt Connie's Cookies can use customary cost accounting if they apply a mix of the labor and material costs, and apply expenses to each product. It assumes that more cookies baked could cause more overhead expenses. This is an easy method for Aunt Connie's Cookies, but it might not give them enough of the right information to really determine what their product costs are. Aunt Connie's Cookies might decide to use activity-based costing, which looks at costs according to the kind of activity rather than the end product. It is different from the traditional method in that it allows a company to look at their overall systems in detail, so that they can pinpoint any cost inefficiencies. It will especially help Aunt Connie's Cookies if they have greater indirect than direct costs. If Aunt Connie's Cookies used activity-based accounting, they would have to identify their activities, and then assign each activity a set cost. When they have done that, they identify how much each component of each activity costs, and then they take data about each activity. Eventually they can determine the actual product costs, when they divide each product into activities at unit-level, the cost-per-batch, facility-sustaining activities, and product-sustaining activities. Aunt Connie's cookies might decide to use life-cycle cost analysis or total cost analysis. This helps the company understand...
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...Full cost accounting Calculations -----> Six full cost accounting decisions #1 Defining final cost objects What is the product #2 Determining mission and support cost centers Which centers support and who are production #3 Distinguishing between direct cost and indirect cost Direct cost can directly be attributed to either product or organizational unit #4 Choosing allocation bases for support center cost How is it stated that the support centers shall be allocated to mission #5 Selecting an allocation method And execute the allocation. Stepdown allocation or similar #6 Attaching a mission center's cost to it's cost objects Allocate mission centers to the cost object after how it's stated #1 Client services in each department #2 8 mission service departments T&E, recordkeeping, cleaning, utilities, rent, adm is support #3 Others are direct costs #4 Rent allocated by square foot Administration time allocated on salaries Utilities allocated by square foot Cleaning allocated by square foot Record keeping allocated by number of records (one record per visit) * After adm utilities and cleaning Training and Education allocated by hours used First rent, utilities, cleaning,administration, record keeping, T&E ANSWER ASSIGNMENT Full Costs per visits are: Homemaker Service FC pr visit W/O Counseling $ 46,34 $ 59,32 Tot cost $ 231 707,98 Family Planning $ 17,15 $ 19,02 $ 171...
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...Introduction to Managerial Accounting AIU Online Abstract This paper is going to cut cost for an uptown clinic. It will tell where the cuts should take place in order not to hurt the day to day functioning of the clinic. It will describe how managerial accounting is different from cost accounting and describe the lean production philosophy. It will compare and contrast accounting principles in lean production to those of typical production. The paper will advise the Dr.on how to prepare for reduced budgets. Introduction These are the cuts that are recommended to keep the clinic functioning in a manner that they can keep up with rising demand for their services. In this scenario the majority of cost cuts were non employee wages. Advertising, custodial, security, and supplies took most of the brunt of the cuts. If employees don’t mind doing most of the custodial duties during the times that they have nothing to do then that is a cost you can cut. If the clinic is doing well then advertising cost can be cut down because the best advertising is word of mouth which does not cost anything but good customer relations. Security could be important but in order not to effect the functions of the clinic you can get rid of security until you can afford it again. Purchasing supplies you can look at different ways in order to save money in getting supplies, such as purchasing them at a cheaper place, reusing things that can be reused and not buy anything new until you can afford...
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...Community Hospital. The Patton Fuller Community Hospital Nursing Statistics provided information including cost of nurse per hour, cost of nurse per 24 hour day, number of nurses per patient, number of nurses per day, nursing cost per day, and nursing cost per month. This statistical budget is the basis of our budget creating process. We are able to identify patient volume and resource assumptions used in other budgets (Gapenski, 2008). The decision was to provide a $1 raise to our nursing staff. The effect of this raise is demonstrated in the simulated budget for January through December. We added the total costs from the $1 increase over the course of the year to the 2010 operating budget. With adding in the additional salary costs of $631 (in thousands) to the prior year salary and benefit costs, total expenses will increase 1.3% for a total of $468,756. As a result of the salary increase the operating and net income will be $8,485. Because of the increase in pay to the nurses Patton Fuller Community Hospital income will decrease slightly. By using the statistic budget in developing a new operating budget, we are able to effectively identify trends and other issues where we would need to better the organization. Creating a better organization would result in using its resources effectively and efficiently and eliminated unnecessary costs. Accounting is a very important part of every business and...
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...SUBJECT: Cost Accounting Systems Managerial accounting concerns utilizing information available that assists managers to plan, control, and execute the company’s performance. It emphasizes on the relationships of internal costs and internal control tools in a systematic way. In a manufacturing organization, a typical cost accounting system aims to identify and allocate costs reasonably so that the organization can estimate the profitability of its products. With the input of numerical information such as direct materials and direct costs, management within the organization can make decisions such as the selling price of its products. The system is also a tool for managers to control the product lines. There are several types of costing systems, including job-order system, process costing system, and activity-based system. For instance, the activity-based system is composed of cost drivers, fixed cost, variable cost, and fixed/variable overheads. Cost drivers help allocate variable cost to the production of different product lines. Process costing method distributes the cost according to the manufacturing progress of the products, while job-order costing system assigns costs to different categories of job functions. Driven by the objective of controlling relevant cost and minimizing ineffective activities, managers of the organization examines the costs from a macro perspective instead of focusing on each piece of products. Under the method of full absorption costing, costs are...
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...Management Accounting-- Wilkerson Company Case - Essays - Rain820420 RESEARCH PAPERS AND ESSAYS FOR ALL Search 350,000 Essays Question? 888-442-7499 SEARCH Join Login Writing Service Help Contact Us Saved Papers Get Better Grades Today By Joining OPPapers.com and Accessing Over 350,000 Articles and Essays! GET BETTER GRADES Save papers so you can find them more easily! Join Now Get instant access to over 350,000 papers. JOIN NOW Management Accounting-- Wilkerson Company Case Home Page » Science » Engineering Management Accounting-- Wilkerson Company Case The purpose of this report is discussing the case of Wilkerson Company that confronting tough competition in price cutting in pumps which caused to a big drop of pre-tax operating income from 10% to 3%. After observing the existing costing allocation, we found out there is an issue on the existing costing report that the manager could not be able to see the real situation. In light of this, there will be brought to the discussion on the feasibility of using an alternative costing method – Activity based costing (ABC) in the latter paragraphs. The issue of misallocation cost With the use of Traditional Absorption Costing (TAC) which means Wilkerson Company is now only put the costing of direct labor and material in place. As we can see the table 1 below, the percentage of total direct cost allocation in Valves, Pumps and Flow Controllers are 46%, 46% and 52% respectively, and so for...
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...Accounting: Text and Cases Managerial Accounting Anthony, Hawkins and Merchant 13th Edition Garrison, Noreen and Bewer 13th Edition Management Accounting 1 2 Because… 3 4 5 6 ! " # 7 Chapter 15 The Nature of Management Accounting 8 Learning Agenda Describe the differences between financial and management accounting Measurement used in management accounting system Textbook problem exercises 9 Differences Between Financial and Managerial Accounting Financial Accounting 1. Users 2. Time focus 3. Verifiability versus relevance 4. Precision versus timeliness 5. Subject 6. Requirements External persons who make financial decisions Historical perspective Emphasis on verifiability Emphasis on precision Primary focus is on the whole organization Must follow GAAP and prescribed formats Managerial Accounting Managers who plan for and control an organization Future emphasis Emphasis on relevance for planning and control Emphasis on timeliness Focuses on segments of an organization Need not follow GAAP or any prescribed format 10 Accounting Differences Financial External focus Whole organization Historical Quantitative Monetary Verifiable GAAP Formal recordkeeping Managerial Internal focus Segments or divisions Current/projected Quantitative/qualitative Monetary and nonmonetary Timely/reasonable estimate Benefits exceed costs Formal and informal recordkeeping 11 Management vs. Financial accounting ...
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...Abstract The present study aims to outline the characteristics of the cost systems used in banking Institutions. It does so by describing the partial costs and full cost systems in banking institutions. It then looks at the limitations of these approaches to the current competitive conditions and goes on to consider the applicability of the activity based costing system in the allocation of indirect transformation costs to branches, products and customers. Finally, we will look at the findings of a questionnaire to Spanish savings banks in order to evaluate how widespread these systems are and how they are used in savings banks. We found that direct costs systems predominate in customer and products entries whereas full costs systems are much more widespread in the case of branches. Furthermore, we also found that the use of activity based costs systems is very limited. 1. Introduction Historically, management accounting in banking institutions was introduced considerably later in comparison with companies in other sectors. There are a number of reasons for this limited development. This was due, on the one hand, to external causes. For example, it was not until the 80's that competitive conditions in the banking sector fostered the development of accounting management planning and control systems. On the other hand, there were also internal conditions that had to do with the nature of the banking business and the operations that these companies carry out, which differ significantly...
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...Introduction According to Chand (2015), costing techniques are used by management for controlling cost and making managerial decisions. It systematically records expenses and analyses the cost of each product manufactured or service rendered by an organisation (Hariharan, n.d.). Firms choose to adapt to a specific costing theory that caters accordingly to their needs and objectives. Part 1: Evaluation of Costing Theories Costing theories are very important in business decision making. According to Hariharan (n.d.), they serve managers as a guide to make correct decisions such as what price to quote, whether to place order for inputs or whether to abandon or add a product to the production line. Costing theories also determines the price of the best alternative use of a factor of production and results in an efficient allocation of resources (Chand, 2015). The business will adopt the most profitable production inputs by identifying unprofitable activities, losses and inefficiencies (Chand, 2015) Costing theories also helps the decisions regarding the capital expenditure through the estimation of long-run function (Chand, 2015). This function will be useful to managers when deciding on the expansion or contraction of plant size in the firm and confirming that the present plant size is just nice for the output level that is being produced (Chand, 2015). It improves the overall productivity of an organisation and acts as an important guide in bringing prosperity to the firm (Vitez...
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...UNIVERSITY BAUCHI, SCHOOL OF MANAGEMENT TECHNOLOGY DEPARTMENT OF ACCOUNTING AND FINANCE. COURSE TITTLE: COST ACCOUNTING (BAT 212) ASSIGNMENT QUESTION:- WITH A CASE STUDY, DISCUSS THE IMPORTANCE AND APPLICATION OF COSTING TECHNIQUES IN HOSPITALITY INDUSTRY IN NIGERIA? (CASE STUDY OF YANKARI MASS TRANSIT CORPORATION) By Nwankwo Stephen c. TABLE OF CONTENTS 1.0 INTRODUCTION 1.1 Background of the assignment 1.2 Purpose/objectives of the assignment 1.3 Definition of the term 1.4 Historical background of the case study ABSTRACT The aim of the assignment is to find out the importance of using costing techniques such as operating costing, standard costing, direct costing, absorption costing etc. in one of the sub-sector of Nigerian economy(hospitality). And also to identify the techniques adopted by the hospitality industry and it’s important to the organization. INTRODUCTION 1.1 BACKGROUND OF THE ASSIGNMENT The hospitality industry is a broad category of fields within the service industry that include lodging, transportation, and additional fields within the tourism industry. Since the introduction of money, people have been concerned with cost. They think of how to manage money. Costing system was first recognized in manufacturing industries with the aim of finding the cost of production or cost of a product, presently, the system is used very widely in...
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...Services: A Management Accounting Approach Jordi Carenys Professor at the Management Control Department. EADA Business School EADA, c/o Aragó 204, 08011 Barcelona, Spain E-mail: jcarenys@eada.edu Tel: 934 520 844; Fax: 933 237 317 Web: www.eada.edu Xavier Sales Professor at the Management Control Department. EADA Business School E-mail: xsales@eada.edu Abstract The present study aims to outline the characteristics of the cost systems used in banking institutions. It does so by describing the partial costs and full cost systems in banking institutions. It then looks at the limitations of these approaches to the current competitive conditions and goes on to consider the applicability of the activity based costing system in the allocation of indirect transformation costs to branches, products and customers. Finally, we will look at the findings of a questionnaire to Spanish savings banks in order to evaluate how widespread these systems are and how they are used in savings banks. We found that direct costs systems predominate in customer and products entries whereas full costs systems are much more widespread in the case of branches. Furthermore, we also found that the use of activity based costs systems is very limited. Keywords: Saving banks Cost structure Management accounting Cost systems Activity based costing. JEL Classification Codes: M41 – Accounting G21 - Banks; Other Depository Institutions. 1. Introduction Historically, management accounting in banking institutions...
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...Cost Accounting David Norris Western Governors University Accounting doesn’t have the best reputation but for as long as there has been money, there has been a need for accounting. Long gone are the days of the smoke filled room piled floor to ceiling with the leger books of the entrepreneur. Using state of the art technology and creative techniques, today’s accounting is a vital component of the corporate world helping to build financial foundations that encourage long term growth and profitability. Cost accounting is the managerial financial budgeting tool of the accounting domain that deals specifically with cost and production. Cost accounting assists companies to understand the cost of product versus service and this helps to prepare bids and proposals and assembles information for planning and control which are needed to evaluate performance. Any business can use cost accounting but it is most effective with corporations that manufacture mass produced products and have a large employee base. Cost accounting is also becoming a valuable asset within the medical industry. In the ultra-competitive market of health care, hospitals are using price strategies, one of the new methods used in accounting, to entice customers and keep patients happy. Cost accounting techniques have developed as quickly as industry has in the 21st century. Basic accounting has become antiquated as new, creative approaches to financial stability emerge. Methods such...
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