南角先生
范文一：管理会计英文总结
One simple definition of management accounting is the provision of financial and non-financial decision-making information to managers.
According to the Institute of Management Accountants (IMA): "Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems,and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization's strategy". Differences between financial accountancy and management accounting Management accounting information differs from financial accountancy information in several ways: ? while shareholders, creditors, and public regulators use publicly reported financial accountancy information, only managers within the organization use the normally
confidential management accounting information;
?
? while financial accountancy information is historical, management accounting information is primarily forward-looking; while financial accountancy information is case-based, management accounting information is model-based with a degree of abstraction in order to support generic decision making;
? while financial accountancy information is computed by reference to general financial accounting standards, management accounting information is computed by reference to the needs of managers, often using management information systems. Focus : Financial accounting focuses on the company as a whole .
Consistent with other roles in modern corporations, management accountants have a dual reporting relationship. As a strategic partner and provider of decision based financial and operational information, management accountants are responsible for managing the business team and at the same time having to report relationships and responsibilities to the corporation's finance organization and finance of an organization.
The activities management accountants provide inclusive of forecasting and planning, performing variance analysis, reviewing and monitoring costs inherent in the business are ones that have dual accountability to both finance and the business team. Examples of tasks where accountability may be more meaningful to the business management team vs.
the corporate finance department are the development of new product costing, operations research, business driver metrics, sales management scorecarding, and client profitability
analysis. (See Financial modeling.) Conversely, the preparation of certain financial reports, reconciliations of the financial data to source systems, risk and regulatory reporting will be more useful to the corporate finance team as they are charged with aggregating certain financial information from all segments of the corporation.
In corporations that derive much of their profits from the information economy, such as banks, publishing houses, telecommunications companies and defence contractors, IT costs are a significant source of uncontrollable spending, which in size is often the greatest corporate cost after total compensation costs and property related costs. A function of management accounting in such organizations is to work closely with the IT department to provide IT cost transparency.
Given the above, one view of the progression of the accounting and finance career path is that financial accounting is a stepping stone to management accounting. Consistent with the notion of value creation, management accountants help drive the success of the
business while strict financial accounting is more of a compliance and historical endeavor. Activity-based costing (ABC)
Main article: Activity-based costing
Activity-based costing was first clearly defined in 1987 by Robert S. Kaplan and W. Bruns as a chapter in their book Accounting and Management: A Field Study Perspective. They initially focused on the manufacturing industry, where increasing technology and
productivity improvements have reduced the relative proportion of the direct costs of labor and materials, but have increased relative proportion of indirect costs. For example, increased automation has reduced labor, which is a direct cost, but has increased depreciation, which is an indirect cost.
Lean accounting (accounting for lean enterprise)[]
Main article:
In the mid- to late-1990s several books were written about accounting in the lean
enterprise (companies implementing elements of the ). The term lean accounting was coined during that period. These books contest that traditional accounting methods are better suited for mass production and do not support or measure good business practices in just-in-time manufacturing and services. The movement
reached a tipping point during the 2005 Lean Accounting Summit in , , United States. 320 individuals attended and discussed the advantages of a new approach
to accounting in the lean enterprise. 520 individuals attended the 2nd annual conference in 2006 and it has varied between 250 and 600 attendees since that time.
Resource consumption accounting (RCA)
Main article: Resource Consumption Accounting
Resource consumption accounting (RCA) is formally defined as a dynamic, fully
integrated, principle-based, and comprehensive management accounting approach that provides managers with decision support information for enterprise optimization. RCA emerged as a management accounting approach around 2000 and was subsequently developed at CAM-I the Consortium for Advanced Manufacturing–International, in a Cost Management Section RCA interest group in December 2001.
Throughput accounting
Main article: Throughput accounting
The most significant recent direction in managerial accounting is throughput accounting; which recognizes the interdependencies of modern production processes. For any given product, customer or supplier, it is a tool to measure the contribution per unit of
constrained resource.
Transfer pricing
Main article: Transfer pricing
Management accounting is an applied discipline used in various industries. The specific functions and principles followed can vary based on the industry. Management accounting principles in banking are specialized but do have some common fundamental concepts used whether the industry is manufacturing-based or service-oriented. For example, transfer pricing is a concept used in manufacturing but is also applied in banking. It is a fundamental principle used in assigning value and revenue attribution to the various business units. Essentially, transfer pricing in banking is the method of assigning the interest rate risk of the bank to the various funding sources and uses of the enterprise. Thus, the bank's corporate treasury department will assign funding charges to the business units for their use of the bank's resources when they make loans to clients. The treasury department will also assign funding credit to business units who bring in deposits (resources) to the bank. Although the funds transfer pricing process is primarily applicable to the loans and deposits of the various banking units, this proactive is applied to all assets and liabilities of the business segment. Once transfer pricing is applied and any other management accounting entries or adjustments are posted to the
ledger (which are usually memo accounts and are not included in the legal entity results), the business units are able to produce segment financial results which are used by both internal and external users to evaluate performance.
范文二：管理会计英文术语
管理会计(下)术语
Management Accounting 管理会计 约束性固定成本(committed fixed cost)
酌量性固定成本(discretionary fixed
cost)
fixed cost固定成本 variable cost 变动成本
mixed cost 混合成本
high-low point method 高低点法 scatter diagram method 散布图法 regression line method 回归直线法 cost-volume-profit analysis 本量利分析 technical variable cost 技术性变动成本 discretionary variable cost 酌量性变动成本
contribution margin 贡献毛益 边际贡献 contribution margin ratio 边际贡献率 break even point 保本点
margin of safety 安全边际
target profit目标利润 Absorption costing (full cost method) 完全成
本法
variable costing 变动成本法
Standard costs 标准成本
the direct materials price 直接材料价格 quantity variances 数量差异
the direct labor rate 工资率
efficiency variances 效率差
Ideal standards 理想的标准成本 Practical standards 现实的标准成本 Materials quantity variance 材料用量差异 Labor rate variance 工资率差异 Labor efficiency variance 直接人工效率差异
Variable overhead spending variance 变动制造费用开支差
Variable overhead efficiency variance 变动制造费用效率差异
范文三：英文成本管理会计chapter04
CHAPTER 4
ACTIVITY-BASED COSTING
QUESTIONS FOR WRITING AND DISCUSSION
1. Unit costs provide essential information needed for inventory valuation and preparation of income statements. Knowing unit costs is also critical for many decisions such as bidding decisions and accept-or-reject special order decisions.
2. Cost measurement is determining the dollar amounts associated with resources used in production. Cost assignment is associating the dollar amounts, once measured, with units produced.
3. An actual overhead rate is rarely used because of problems with accuracy and timeliness. Waiting until the end of the year to ensure accuracy is rejected because of the need to have timely information. Timeliness of information based on actual overhead costs runs into diffi-culty (accuracy problems) because overhead is incurred nonuniformly and because produc-tion also may be nonuniform.
4. For plantwide rates, overhead is first collected in a plantwide pool, using direct tracing. Next, an overhead rate is computed and used to assign overhead to products.
5. First stage: Overhead is assigned to production department pools using direct tracing, driver tracing, and allocation. Second stage: Individual departmental rates are used to assign overhead to products as they pass through the departments.
6. Departmental rates would be chosen over plantwide rates whenever some departments are more overhead intensive than others and if certain products spend more time in some de-partments than they do in others.
7. Plantwide overhead rates assign overhead to products in proportion to the amount of the unit-level cost driver used. If the products consume some overhead activities in different proportions than those assigned by the unit-level cost driver, then cost distortions can oc-cur (the product diversity factor). These distortions can be significant if the nonunit-level overhead costs represent a significant proportion of total overhead costs.
8. Low-volume products may consume nonunit-level overhead activities in much greater pro-portions than indicated by a unit-level cost driver and vice versa for high-volume products. If so, then the low-volume products will receive too little overhead and the high-volume prod-ucts too much.
9. If some products are undercosted and others are overcosted, a firm can make a number of competitively bad decisions. For example, the firm might select the wrong product mix or submit distorted bids.
10. Nonunit-level overhead activities are those overhead activities that are not highly correlated with production volume measures. Examples include setups, material handling, and inspec-tion. Nonunit-level cost drivers are causal factors— factors that explain the consumption of nonunit-level overhead. Examples include setup hours, number of moves, and hours of in-spection.
11. Product diversity is present whenever products have different consumption ratios for differ-ent overhead activities.
12. An overhead consumption ratio measures the proportion of an overhead activity consumed by a product.
13. Departmental rates typically use unit-level cost drivers. If products consume nonunit-level overhead activities in different proportions than those of unit-level measures, then it is poss-ible for departmental rates to move even further away from the true consumption ratios, since the departmental unit-level ratios usually differ from the one used at the plant level. 14. Agree. Prime costs can be assigned using direct tracing and so do not cause cost distor-tions. Overhead costs, however, are not directly attributable and can cause distortions. For example, using unit-level activity drivers to trace nonunit-level overhead costs would cause distortions.
15. Activity-based product costing is an overhead costing approach that first assigns costs to activities and then to products. The assignment is made possible through the identification of activities, their costs, and the use of cost drivers.
16. An activity dictionary is a list of activities accompanied by information that describes each activity (called attributes)
17. A primary activity is consumed by the final cost objects such as products and customers, whereas secondary activities are consumed by other activities (ultimately consumed by pri-mary activities).
18. Costs are assigned using direct tracing and resource drivers.
19. Homogeneous sets of activities are produced by associating activities that have the same level and that can use the same driver to assign costs to products. Homogeneous sets of activities reduce the number of overhead rates to a reasonable level.
20. A homogeneous cost pool is a collection of overhead costs that are logically related to the tasks being performed and for which cost variations can be explained by a single activity driver. Thus, a homogeneous pool is made up of activities with the same process, the same activity level, and the same driver.
21. Unit-level activities are those that occur each time a product is produced. Batch-level activities are those that are performed each time a batch of products is produced. Product-level or sus-taining activities are those that are performed as needed to support the various products produced by a company. Facility-level activities are those that sustain a factory’s general manufacturing process.
22. ABC improves costing accuracy whenever there is diversity of cost objects. There are vari-ous kinds of cost objects, with products being only one type. Thus, ABC can be useful for improving cost assignments to cost objects like customers and suppliers. Customer and supplier diversity can occur for a single product firm or for a JIT manufacturing firm.
23. Activity-based customer costing can identify what it is costing to service different customers. Once known, a firm can then devise a strategy to increase its profitability by focusing more on profitable customers, converting unprofitable customers to profitable ones where possi-ble, and ―firing‖ customers that cannot be made profitable.
24. Activity-based supplier costing traces all supplier-caused activity costs to suppliers. This new total cost may prove to be lower than what is signaled simply by purchase price.
EXERCISES
4– 1
1.
Units produced 400,000 160,000 80,000 560,000 1,200,000 Prime costs $8,000,000 $3,200,000 $1,600,000 $11,200,000 $24,000,000 Overhead costs $3,200,000 $2,400,000 $3,600,000 $2,800,000 $12,000,000 Unit cost:
Prime $20 $20 $20 $20 $20 Overhead
Total
2. Actual costing can produce wide swings in the overhead cost per unit. The cause appears to be nonuniform incurrence of overhead and nonuniform production (sea-sonal production is a possibility).
3. First, calculate a predetermined rate:
OH rate = $11,640,000/1,200,000
= $9.70 per unit
This rate is used to assign overhead to the product throughout the year. Since the driver is units produced, $9.70 would be assigned to each unit. Adding this to the actual prime costs produces a unit cost under normal costing:
Unit cost = $9.70 + $20.00 = $29.70
This cost is close to the actual annual cost of $30.00.
4– 2
1. Predetermined rates:
Drilling Department: Rate = $600,000/280,000 = $2.14* per MHr
Assembly Department: Rate = $392,000/200,000
= $1.96 per DLH
*Rounded
2. Applied overhead:
Drilling Department: $2.14 ? 288,000 = $616,320
Assembly Department: $1.96 ? 196,000 = $384,160
Overhead variances:
Actual overhead $602,000 $ 412,000 $ 1,014,000
Overhead variance
3. Unit overhead cost = [($2.14 ? 4,000) + ($1.96 ? 1,600)]/8,000
= $11,696/8,000
= $1.46*
*Rounded
4– 3
1. Yes. Since direct materials and direct labor are directly traceable to each product, their cost assignment should be accurate.
2. Elegant: (1.75 ? $9,000)/3,000 = $5.25 per briefcase
Fina: (1.75 ? $3,000)/3,000 = $1.75 per briefcase
Note: Overhead rate = $21,000/$12,000 = $1.75 per direct labor dollar (or 175 per-cent of direct labor cost).
There are more machine and setup costs assigned to Elegant than Fina. This is clearly a distortion because the production of Fina is automated and uses the ma-chine resources much more than the handcrafted Elegant. In fact, the consumption ratio for machining is 0.10 and 0.90 (using machine hours as the measure of usage). Thus, Fina uses nine times the machining resources as Elegant. Setup costs are similarly distorted. The products use an equal number of setups hours. Yet, if direct labor dollars are used, then the Elegant briefcase receives three times more machining costs than the Fina briefcase.
3. Overhead rate = $21,000/5,000
= $4.20 per MHr
Elegant: ($4.20 ? 500)/3,000 = $0.70 per briefcase
Fina: ($4.20 ? 4,500)/3,000 = $6.30 per briefcase
This cost assignment appears more reasonable given the relative demands each product places on machine resources. However, once a firm moves to a multipro-duct setting, using only one activity driver to assign costs will likely produce product cost distortions. Products tend to make different demands on overhead activities, and this should be reflected in overhead cost assignments. Usually, this means the use of both unit- and nonunit-level activity drivers. In this example, there is a unit-level activity (machining) and a nonunit-level activity (setting up equipment). The consumption ratios for each (using machine hours and setup hours as the activity drivers) are as follows:
Machining 0.10 0.90 (500/5,000 and 4,500/5,000)
Setup costs are not assigned accurately. Two activity rates are needed — one based on machine hours and the other on setup hours:
Machine rate: $18,000/5,000 = $3.60 per MHr
Setup rate: $3,000/200 = $15 per setup hour
Costs assigned to each product:
Machining:
$3.60 ? 500 $ 1,800
$3.60 ? 4,500 $ 16,200
Setups:
$15 ? 100
Total $ 3,300 $ 17,700
Units
Unit overhead cost
4– 4
Activity dictionary:
Activity Activity Primary/ Activity Providing nursing Satisfying patient Primary Nursing hours care needs
Supervising Coordinating Secondary Number of nurses nurses nursing activities
Feeding patients Providing meals Primary Number of meals to patients
Laundering Cleaning and Primary Pounds of laundry bedding and delivering clothes
clothes and bedding
Providing Therapy treatments Primary Hours of therapy physical directed by
therapy physician
Monitoring Using equipment to Primary Monitoring hours patients monitor patient
conditions
4– 5
1.
Price $900 100% $750 100% Cost
Unit gross profit
Total gross profit:
($324 ? 100,000) $32,400,000
($150 ? 800,000) $120,000,000 2. Calculation of unit overhead costs:
Unit-level:
Machining:
$200 ? 100,000 $20,000,000
$200 ? 300,000 $60,000,000 Batch-level:
Setups:
$3,000 ? 300 900,000
$3,000 ? 200 600,000 Packing:
$20 ? 100,000 2,000,000
$20 ? 400,000 8,000,000 Product-level:
Engineering:
$40 ? 50,000 2,000,000
$40 ? 100,000 4,000,000 Facility-level:
Providing space:
$1 ? 200,000 200,000
$1 ? 800,000
Total overhead $ 25,100,000 $ 73,400,000 Units
Overhead per unit
Price $900 100% $750.00 100% Cost
Unit gross profit
Total gross profit:
($120 ? 100,000) $12,000,000
($175.50 ? 800,000) $140,400,000 *$529 + $251 **$482.75 + $91.75 ***Rounded
3. Using activity-based costing, a much different picture of the deluxe and regular products emerges. The regular model appears to be more profitable. Perhaps it should be emphasized.
4– 6
1.
Sales a $12,500,000 $12,500,000
Allocation b 750,000 750,000
a $125 ? 100,000, where $125 = $100 + ($100 ? 0.25), and 100,000 is the average order size times the number of orders
b 0.50 ? $1,500,000
2. Activity rates:
Ordering rate = $880,000/220 = $4,000 per sales order
Selling rate = $320,000/40 = $8,000 per sales call
Service rate = $300,000/150 = $2,000 per service call
Ordering costs:
$4,000 ? 200 $ 800,000
$4,000 ? 20 $ 80,000
Selling costs:
$8,000 ? 20 160,000
$8,000 ? 20 160,000
Service costs:
$2,000 ? 100 200,000
$2,000 ? 50
T otal
For the non-JIT customers, the customer costs amount to $750,000/20 = $37,500 per order under the original allocation. Using activity assignments, this drops to $340,000/20 = $17,000 per order, a difference of $20,500 per order. For an order of 5,000 units, the order price can be decreased by $4.10 per unit without affecting customer profitability. Overall profitability will decrease, however, unless the price for orders is increased to JIT customers.
3. It sounds like the JIT buyers are switching their inventory carrying costs to Emery without any significant benefit to Emery. Emery needs to increase prices to reflect the additional demands on customer-support activities. Furthermore, additional
price increases may be needed to reflect the increased number of setups, pur-chases, and so on, that are likely occurring inside the plant. Emery should also im-mediately initiate discussions with its JIT customers to begin negotiations for achieving some of the benefits that a JIT supplier should have, such as long-term contracts. The benefits of long-term contracting may offset most or all of the in-creased costs from the additional demands made on other activities.
4– 7
1. Supplier cost:
First, calculate the activity rates for assigning costs to suppliers:
Inspecting components: $240,000/2,000 = $120 per sampling hour
Reworking products: $760,500/1,500 = $507 per rework hour
Warranty work: $4,800/8,000 = $600 per warranty hour
Next, calculate the cost per component by supplier:
Supplier cost:
Purchase cost:
$23.50 ? 400,000 $ 9,400,000
$21.50 ? 1,600,000 $ 34,400,000
Inspecting components:
$120 ? 40 4,800
$120 ? 1,960 235,200
Reworking products:
$507 ? 90 45,630
$507 ? 1,410 714,870
Warranty work:
$600 ? 400 240,000
$600 ? 7,600
Total supplier cost $ 9,690,430 $ 39,910,070
Units supplied
Unit cost
*Rounded
The difference is in favor of Vance; however, when the price concession is consi-dered, the cost of Vance is $23.23, which is less than Foy’s componen t. Lumus should accept the contractual offer made by Vance.
2. Warranty hours would act as the best driver of the three choices. Using this driver, the rate is $1,000,000/8,000 = $125 per warranty hour. The cost assigned to each component would be:
Lost sales:
$125 ? 400 $ 50,000
$125 ? 7,600
$ 50,000 $ 950,000 U nits supplied
I ncrease in unit cost
*Rounded
PROBLEMS
4– 8
1. Product cost assignment:
Overhead rates:
Patterns: $30,000/15,000 = $2.00 per DLH
Finishing: $90,000/30,000 = $3.00 per DLH
Unit cost computation:
Patterns:
$2.00 ? 0.1 $0.20
$2.00 ? 0.2 $0.40
Finishing:
$3.00 ? 0.2 0.60
$3.00 ? 0.4
Total per unit
2. Cost before addition of duffel bags:
$60,000/100,000 = $0.60 per unit
The assignment is accurate because all costs belong to the one product. 3. Activity-based cost assignment:
Overhead applied:
Backpacks: $1.50 ? 40,000* = $60,000
Duffel bags: $1.50 ? 40,000 = $60,000
Unit cost:
Backpacks: $60,000/100,000 = $0.60 per unit
Duffel bags: $60,000/25,000 = $2.40 per unit
4. This problem allows the student to see what the accounting cost per unit should be by providing the ability to calculate the cost with and without the duffel bags. With this perspective, it becomes easy to see the benefits of the activity-based approach over those of the functional-based approach. The activity-based approach provides the same cost per unit as the single-product set-ting. The functional-based approach used transactions to allocate accounting costs to each producing department, and this allocation probably reflects quite well the consumption of accounting costs by each producing department. The problem is the second-stage allocation. Direct labor hours do not capture the consumption pat-tern of the individual products as they pass through the departments. The distortion occurs, not in using transactions to assign accounting costs to departments, but in using direct labor hours to assign these costs to the two products.
In a single-product environment, ABC offers no improvement in product costing ac-curacy. However, even in a single-product environment, it may be possible to in-crease the accuracy of cost assignments to other cost objects such as customers. 4– 9
1. Unit-level costs ($120 ? 20,000) $ 2,400,000
Batch-level costs ($80,000 ? 20) 1,600,000
Product-level costs ($80,000 ? 10) 800,000
Facility-level ($20 ? 20,000)
Total cost
2. Unit-level costs ($120 ? 30,000) $ 3,600,000
Batch-level costs ($80,000 ? 20) 1,600,000
Product-level costs ($80,000 ? 10) 800,000
Facility-level costs
Total cost
The unit-based costs increase because these costs vary with the number of units produced. Because the batches and engineering orders did not change, the batch-level costs and product-level costs remain the same, behaving as fixed costs with respect to the unit-based driver. The facility-level costs are fixed costs and do not vary with any driver.
3. Unit-level costs ($120 ? 30,000) $ 3,600,000
Batch-level costs ($80,000 ? 30) 2,400,000
Product-level costs ($80,000 ? 12) 960,000
Facility-level costs
Total cost
Batch-level costs increase as the number of batches changes, and the costs of en-gineering support change as the number of orders change. Thus, batches and or-ders increased, increasing the total cost of the model.
4. Classifying costs by category allows their behavior to be better understood. This, in turn, creates the ability to better manage costs and make decisions.
4– 10
1. Overhead rate = $6,990,000/272,500 = $25.65 per DLH*
Overhead assignment:
X-12: $25.65 ? 250,000/1,000,000 = $6.41*
S-15: $25.65 ? 22,500/200,000 = $2.89*
*Rounded numbers used throughout
Unit gross margin:
Price $ 15.93 $ 12.00
Cost
Gross margin
*Prime costs + Overhead = ($4.27 + $6.41)
**Prime costs + Overhead = ($3.13 + $2.89)
2.
Setup Runs $240,000/300 = $800 per run
Machine Machine hrs. $1,750,000/185,000 = $9.46/per MHr Receiving Orders $2,100,000/1,400 = $1,500/per order Engineering Engineering hrs. $2,000,000/10,000 = $200/per eng. hour Material handling Moves $900,000/900 = $1,000/per move
Overhead assignment:
Setup costs:
$800 ? 100 $ 80,000
$800 ? 200 $ 160,000
Machine costs:
$9.46 ? 125,000 1,182,500
$9.46 ? 60,000 567,600
Receiving costs:
$1,500 ? 400 600,000
$1,500 ? 1,000 1,500,000
Engineering costs:
$200 ? 5,000 1,000,000
$200 ? 5,000 1,000,000
Material-handling costs:
$1,000 ? 500 500,000
$1,000 ? 400
Total overhead costs $ 3,362,500 $ 3,627,600
Units produced
Overhead cost per kg $ 3.36 $ 18.14
Prime cost per kg
Unit cost
Selling price $ 15.93 $ 12.00
Less unit cost
Unit gross margin
3. No. The cost of making X-12 is $7.63, much less than the amount indicated by functional-based costing. The company can compete by lowering its price on the high-volume product. The $10 price offered by competitors is not out of line. The concern about selling below cost is unfounded.
4. The $12 price of compound S-15 is well below its cost of production. This explains why Pearson has no competition and why customers are willing to pay $15, a price that is probably still way below competitors’ quotes.
5. The price of X-12 should be lowered to a competitive level and the price of S-15 increased so that a reasonable return is being earned.
4– 11
1. GAAP mandate that all nonmanufacturing costs be expensed during the period in which they are incurred. GAAP are the most likely cause of the practice. The limita-tions of GAAP-produced information for cost management should be emphasized. 2. The total product consists of all benefits, both tangible and intangible, that a cus-tomer receives. One of the benefits is the order-filling service provided by Soren-sen. Thus, it can be argued that these costs should be product costs and not as-signing them to products undercosts all products. From the information given, there are more small orders than large (50,000 orders averaging 600 units per order);
thus, these small orders consume more of the order-filling resources. They should, therefore, receive more of the order-filling costs.
The average order-filling cost per unit produced is computed as follows:
$4,500,000/90,000,000 units = $0.05 per unit
Thus, order-filling costs are about 6 to 10 percent of the selling price, clearly not a trivial amount.
Furthermore, the per-unit cost for individual product families can be computed us-ing the number of orders as the activity driver:
Activity rate = $4,500,000/100,000 orders
= $45 per order
The per-unit ordering cost for each product family can now be calculated:
Category I: $45/600 = $0.075 per unit
Category II: $45/1,000 = $0.045 per unit
Category III: $45/1,500 = $0.03 per unit
Category I, which has the smallest batches, is the most undercosted of the three categories. Furthermore, the unit ordering cost is quite high relative to Category I’s selling price (9 to 15 percent of the selling price). This suggests that something should be done to reduce the order-filling costs.
3. With the pricing incentive feature, the average order size has been increased to 2,000 units for all three product families. The number of orders now processed can be calculated as follows:
Orders = [(600 ? 50,000) + (1,000 ? 30,000) + (1,500 ? 20,000)]/2,000
= 45,000
Reduction in orders = 100,000 – 45,000 = 55,000
Steps that can be reduced = 55,000/2,000 = 27 (rounding down to nearest whole number)
There were initially 50 steps: 100,000/2,000
Reduction in resource spending:
Step-fixed costs: $50,000 ? 27 = $1,350,000
Variable activity costs: $20 ? 55,000 =
Customers were placing smaller and more frequent orders than necessary. They were receiving a benefit without being charged for it. By charging for the benefit and allowing customers to decide whether the benefit is worth the cost of providing it, Sorensen was able to reduce its costs (potentially by shifting the cost of the service to the customers). The customers, however, apparently did not feel that the benefit
was worth paying for and so increased order size. By increasing order size, the number of orders decreased, decreasing the demand for the order-filling activity, al-lowing Sorensen to reduce its order-filling costs. Other benefits may also be rea-lized. The order size affects activities such as scheduling, setups, and material handling. Larger orders should also decrease the demand for these activities, and costs can be reduced even more.
Competitive advantage is created by providing the same customer value for less cost or better value for the same or less cost. By reducing the cost, Sorensen can increase customer value by providing a lower price (decreasing customer sacrifice) or by providing some extra product features without increasing the price (increasing customer realization, holding customer sacrifice constant). This is made possible by the decreased cost of producing and selling the bolts.
4– 12
1. Supplier cost:
First, calculate the activity rates for assigning costs to suppliers:
Replacing engines: $3,200,000/4,000 = $800 per engine
Expediting orders: $4,000,000/400 = $10,000 per late shipment
Repairing engines: $7,200,000/5,000 = $1,440 per engine
Next, calculate the cost per engine by supplier:
Supplier cost:
Purchase cost:
$900 ? 72,000 $64,800,000
$1,000 ? 16,000 $16,000,000
Replacing engines:
$800 ? 3,960 3,168,000
$800 ? 40 32,000
E xpediting orders:
$10,000 ? 396 3,960,000
$10,000 ? 4 40,000
Repairing engines:
$1,440 ? 4,880 7,027,200
$1,440 ? 120
Total supplier cost $ 78,955,200 $16,244,800
Units supplied
Unit cost
The Johnson engine costs less when the full supplier effects are considered. This is a better assessment of cost because it considers the costs that are caused by the supplier due to poor quality, poor reliability, and poor delivery performance.
2. In the short run, buy 40,000 from Johnson and 48,000 from Watson. In the long run, one possibility is to encourage Johnson to expand its capacity; another possi-bility is to encourage Watson to increase its quality and maintain purchases from both sources.
Managerial Decision Cases
4– 13
1. Disagree. Chuck is expressing an uninformed opinion. He has not spent the effort to find out exactly what activity-based management and costing are attempting to do; therefore, he has no real ability to offer any constructive criticism of the possible benefits of these two approaches.
2. and 3.
A t first glance, it may seem strange to even ask if Chuck’s behavior is unethical. After all, what is unethical about expressing an opinion, albeit uninformed? While offering uninformed opinions or recommendations may be of little consequence in many settings, a serious issue arises when a person’s expertise is relied upon by others to make decisions or take actions that could be wrong or harmful to them-selves or their organizations. This very well may be the case for Chuck’s setting, and his behavior may be labeled professionally unethical.
Chuck’s lack of knowledge about activity-based systems is a signal of his failure to maintain his professional competence. Standard I-1 of the IMA ethical standards indicates that management accountants have a responsibility to continually develop their knowledge and skills. Failure to do so is unethical.
范文四：管理会计英文论文范文-会计英文职称论
会计英文职称论文发表-代写代发英语职称论文-管理会计英文论文范文，The
era of knowledge economy intangible assets accounting
Abstract: with the arrival of the era of knowledge economy, intangible assets of enterprises in the proportion of growing, the management of intangible assets becomes an important contents of corporate management. But our country enterprise accounting standards for intangible assets disposal regulations exist some disputes. The confirmation of intangible assets, metric, amortize problem, to do some theoretical study. Key words: knowledge economy human resources of internally generated goodwill
Twenty-first Century is the time of knowledge economy, knowledge economy is with intellective resource have, configuration, the production with knowledge, allocate and use the economy that is the mainest factor. One of its important characteristics is the enterprise assets from the visible invisible to the direction of development. Knowledge becomes the first essential factor that economy grows. This will cause the people's knowledge and capital investment, so as to promote enterprise assets structure is changed, i.e. the proportion of intangible assets rises with each passing day, or even replaced rich to become the company's future cash flow and market value of the main power. In the high-tech industry,
patent technology already became an a variety of patent rights, non-
enterprise to win in the competition and the survival and development of essential condition. Therefore, measure the value of the enterprise sign is no longer the amount of material resources, but the amount of intangible assets. Under this background, the intangible asset confirmation, measurement and amortization of more realistic significance. One, the confirmation of intangible assets
( a ) the new guidelines on the recognition of intangible assets " Accounting standards for business enterprises -- intangible assets" stipulated:" intangible assets refer to enterprises owned or controlled no physical shape, variable non monetary assets." Intangible assets to meet the following two conditions, in order to confirm: and the assets related to economic benefits are likely to flow into the enterprise; the cost of the assets can be measured reliably. At the same time, the enterprise goodwill and internally generated brand, newspapers and periodicals name, shall not be confirmed as intangible assets. ( two) the problems existing in the confirmation of intangible assets The confirmation of intangible assets is too narrow,"" to confirm the provisions of accounting standards of intangible assets include only patent rights, non-patent technology, trademarks, copyrights, land use rights, the franchise as well as purchased goodwill, business-generated goodwill can not be confirmed. With the coming of knowledge economy era, science and technology contribution to economic growth rate will be higher and higher, knowledge has become the decisive factor of economic growth,
knowledge-based intangible assets will become the company's future cash flow and market value of the main power. In high-tech enterprises. The main indicator to measure corporate value is not the amount of material resources, but the amount of intangible assets. For example, the United States of America Microsoft, far less than its book value, GM is one of the book value, but its output value and profit is more than the United States big three auto companies combined, which can not but thanks to Microsoft's goodwill. Similarly, China has a similar high-tech enterprise,
because the" accounting" does not confirm the goodwill, will make the but
value of such enterprises can not be fully reflected. In addition, under the knowledge economy environment, there are a lot of new intangible assets, such as the ISO9000 quality system certification, environmental management system certification, access of green food mark. 会计英文论文In two, the measurement of intangible assets
( a ) the new guidelines of the measurement of intangible assets " Standards" of the measurement of intangible assets has put forward specific requirements. Purchased intangible assets, should be based on the purchase price, relevant taxes and directly attributable to the asset to the expected use the other expenditure as the entry value; through the debt restructuring is achieved by means of intangible assets, book value of the debt to be restructured as intangible assets recorded value; through non-monetary transactions, investors entering investment of intangible assets, it should be stipulated in the investment contract or agreement value is determined, but the contract and agreed that the fair value is not applicable. At the same time, the promulgation of the new" rules" also provides for the self-developed and apply for intangible assets, its value should be determined to distinguish research expenditures and development expenditures. Research expenditures, shall be recorded into the profits and losses of the current period; development expenditures, meanwhile meet the following conditions, can be confirmed as intangible assets; completion of the intangible assets to allow it to be used or sold in the technically feasible; with the completion of the intangible asset and use or sell intent; intangible assets to generate economic benefits on the way. Including being able to prove that the intangible asset products market and intangible assets ' market, intangible assets will be used internally, should prove its usefulness; adequate technical, financial and other resources, to complete the development of the intangible assets, and the ability to use or sell the intangible asset; attribution in the development stage of the intangible asset can be measured reliably the expenditure. , in addition," guidelines" also pointed out that, for the previous period have cost spending longer adjusted. At the end of the criteria method confirmation of the amortization of intangible assets value, will stand by value as intangible assets book value shown in the balance sheet of the intangible
assets in the project.
( two) the problems existing in the measurement of intangible assets 1 human resources can not be confirmed as intangible assets will lead to a serious distortion of accounting information. The current accounting system to set, the enterprise must to have intangible assets has to
and the human resource has its particularity, can not satisfy "control",
this condition, thus excluded from the intangible assets, it is the intangible assets accounting theory. The era of knowledge economy, the competition between enterprises is actually the competition of talents and knowledge. According to a study by the statistics, in modern society, physical ability, skill, intelligence, between the three has two groups of simple analogy between. Human physical strength, skill, intelligence to wealth of society contribution for 1 : 10: 100 that has a physical and a specific skill, intelligence, and people will contribute nearly 100 times the gap. Therefore, from seed to sense, human resources development, utilization and management, will be the development of the enterprise and the key factors to restrict. At present, most enterprises are aware of this, so the investment of pair of manpower resource more and more, such as not to be identified and measured, will lead to a serious distortion of accounting information.
2 did not develop specific research and development stage judgment standard. Although intangible assets development stage division and the capitalization condition, in the guidelines are clearly defined, but did not make specific research and development stage judgment standard, just define. This will give an enterprise to bring greater uncertainty and randomness, enterprises for a variety of purposes, will adjust the capitalized amount and expenses amount, so as to achieve the purpose of earnings management, thereby reducing the authenticity of accounting information. At the same time, research and development expense capitalization specified operating of the poor, enterprises are difficult to judge which belongs to the scope of activities, as a result of our country economy is not developed, laws and regulations are not perfect, management and accounting personnel of the occupation judgment ability is limited and a series of factors, so that in practice it is difficult to grasp what belongs to the research stage, which belongs to the stage of development, led to the R & D division had a greater subjective factors. In three, the amortization of intangible assets
( a ) the new guidelines on the amortization of intangible assets The new standards, the enterprise shall obtain when intangible assets to analyze and judge the service life, only to the service life of intangible assets with limited amortization. Intangible assets with uncertain service life may not be amortized; the period of amortization of intangible assets shall be determined, since available for use, and not confirmed as intangible assets during the entire period of time; the
amortization method choice, should reflect the intangible assets related to the expected realization pattern of the economic benefits, cannot be reliably determine the expected realization way, ought to adopt straight-line amortization method.
( two) the problems existing in the amortization of intangible assetsAs in the previous guidelines: enterprise obtains intangible assets should be analyzed to determine its service life limited in lifespan within reasonable amortize, intangible assets with uncertain service life may not be amortized. Intangible assets criterion to determine the use of intangible assets while life all factors should be considered to make a provision, but it is not mature market environment, it is difficult to find the useful experience for reference, the enterprise often in determining the service life of intangible assets with very strong subjectivity, or simply to intangible assets life which is determined, in order to achieve the desired results. In addition, intangible asset criterion requirements at the end of each year, the service life of intangible assets with limited service life and amortization of intangible assets are reviewed, the service life and the amortization method different from the previous estimates, should change the amortisation period and the amortization method. This provision also on the other side for the enterprise to change accounting estimates hint, optional larger enterprises.
Four, in view of the above question strategy
Accounting system for accounting environment and the needs of production, but also because of the changing environment of accounting development. In view of the above problems, the author thinks that we should take the following measures:
( a ) to broaden the range of intangible assets accounting As a result of the knowledge economy environment such as ISO9000 quality system certification, environmental management system certification, access of green food mark new intangible assets, shall be included in the intangible assets of the enterprise, in order to reflect the value of intangible assets; business-generated goodwill is also a very important intangible assets, it is to make the enterprises to exist for a long time excess profit important factors, which must be correct and metric. According to the excess return to measure, in the enterprise namely the actual gain in net income, deduction according to the social average profit margin calculation of net income and non goodwill factors ( preferential policies, special industry or monopoly, net income ), is by the enterprise goodwill obtain excess profit, the profit according to the social average profit rate of capital, can be used as a self generated goodwill of enterprise value.
( two) human resources will be included in the intangible assets of enterprises
Human resources itself is a potentially valuable unique intangible assets, it is found in human and in man's efforts to produce the economic value and social value. Human resources into the accounting of intangible assets and to measure, is under the condition of knowledge economy, intangible assets business accounting content is outspread. Human resources will be included in the intangible assets of the enterprise important content,
effectiveness of the two cardinal must follow the importance and cost-
principles, do not need to all the staff all information into the invisible assets. The key management personnel and other key personnel of relevant information such as the part of the age, title, flow and level of education, have main customers and relationships, into the accounting of intangible assets. Human resource valuation can use the service period total wages and benefits discounted value plus has occurred in the education, training of human capital.
( three) developed specifically for the research and development stage judgment standard
With the constant development of our economy, the increasingly fierce market competition, enterprises continue to increase new products, new technology development. In the technical competition advantage, the future to occupy initiative in the market competition. The guidelines should be based on our country enterprise research development ability and the level, to enumerate the clear form part of research and development activities, to develop specific research and development stage judgment standard, in order to R & D cost measurement standards.
( four) attention to the intangible assets amortization
It should be possible to reduce guidelines for enterprises can choose a space. First of all, the intangible assets with uncertain service life the amortization provision, and by the enterprise reasonable estimates of a life, using the
http://www.1daixie.com/EI_SCI_CSSCIfuwu/test/straight-line
amortization method. Secondly, the intangible assets amortization period and the amortization method is confirmed, it shall not be changed randomly. In third, at the end of each year. Business to check the service life of intangible assets, intangible assets such as the previous year influence service life estimation of factors change, affect the service life of intangible assets, and this change is the enterprise cannot reasonably be expected, can be used as a change in accounting estimate. Otherwise, as an important early accounting error retroactive adjustment.
范文五：管理会计英文讲义 管理会计Session 8 Process costing
管理会计英文讲义 管理会计Session 8 Process
costing
Session 8 Process costing
Main contents 1. Process costing
2. Losses in process costing
3. Losses with scrap value
4. Loss with a disposal cost
5. Valuing closing work in process
6. Valuing opening in progress: FIFO & Weighted average cost method
8.1 Process costing:
Process costing is a costing method used when it is not possible to identify separate units of production, or job, usually because of the continuous nature of the production processes involved.
Conversion cost = direct labour + production overheads
Features of process costing
? The output of one process becomes the input to the next until the finished product is made in the final process
? The closing work in process must be valued.
? There is often a loss in process due to spoilage, wastage, evaporation and so on
? Output from production may be a single product, by-product or
joint product
Process 1 account
Unit
$
Unit
$
Direct materials
1000
50000
Output to process 2
1000
<>90000
Direct labour
20000
Production overhead
20000
1000
<>90000
1000
<>90000
Process 2 account
Unit
$
Unit
$
Materials from process 1
1000
<>90000
Output to finished goods
1000
150000
Added materials
30000
Direct labour
15000
Production overhead
15000
1000
150000
1000
150000
8.2 Losses in process costing
Normal loss is the amount of loss expected from the operation of a process. This expectation is based on past experience, and this loss is considered to be unavoidable.
Abnormal loss is then extra loss resulting when actual loss is greater than normal or expected loss, and it is given a cost.
Abnormal gain is the gain resulting when actual loss is less than the normal or expected loss, and its is given a “negative cost”.
Example 1
Input to a process is 1000 units at a cost of $4500
Normal loss is 10%
There is no opening or closing stocks
(1)output = 860 units
(2)output = <>920 units
Solution:
(1)output = 860 units
Step 1: determine output and losses
units
Actual Loss 1000 units-860 units 140
Normal Loss 1000 units x 10% 100
Abnormal loss 40
Step 2: calculate cost per unit of output and losses
Cost incurred = $4,500 = $5 per unit
Expected output 1000 units x <>90%
The cost per unit of output and the cost per units of abnormal
loss are based on expected output.
Step 3: calculate total cost of output and losses
Calculate total cost of output and losses; normal loss is not
assigned any cost.
Simply, total cost of output = total cost of input
$
Cost of output 860 units x $5 4,300
Normal loss 0
Abnormal loss 40 units x $5 200
Total cost 4500
Step 4: complete accounts
Process account
Unit
$
Unit
$
Cost incurred
1000
4500
Normal loss
100
0
Output(finished goods a/c)
860 x $5
4300
Abnormal loss
40 x $5
200
1000
4500
Abnormal loss account
Unit
$
Unit
$
Process account
40
200
Profit/loss account
40
200
40
200
40
200
(2)output = <>920 units
Step 1: determine output and losses
$
Actual loss 1000 units – <>920 units 80
Normal loss 1000 units x 10% 100
Abnormal gain 20
Step 2: calculate cost per unit of output and losses
Costs incurred = $4,500 = $5 per unit
Expected output <>900 units
Step 3: calculate total cost of output and losses
$
Cost of output <>920 units x $5 4600
Normal loss 0
Less: abnormal gain 20 units x $5 (100)
Total cost 4500
Step 4: complete accounts
Process account
Unit
$
Unit
$
Cost incurred
1000
4500
Normal loss
100
Abnormal gain
20 x $5
100
Output(finished goods a/c)
<>920 x $5
4600
1000
4600
1000
4600
Abnormal gain account
Unit
$
Unit
$
Profit/loss account
20
100
Process account
20
100
20
100
20
100
Example 2:
Period 1: costs of input to a process = $2<>9070
Inputs = 1000 units
Outputs = 850 units
Normal loss = 10%
Period 2: costs of input = $2<>9070
Inputs = 1000 units
Output = <>950 units
There are no units of opening or closing inventory
Solution:
Step 1: determine output and losses
Period 1: Units
Input 1000
Actual output 850
Actual loss 150
Normal loss 100 1000 units x 10%
Abnormal loss 50
Period 2: Units
Input 1000
Actual output <>950
Actual loss 50
Normal loss 100 1000 units x 10%
Abnormal gain 50
Step 2: calculate cost per unit of output and losses
Cost incurred = $2<>9,070 = $32.30 per unit
Expected output <>900 units
Step 3: calculate total cost of output and losses
Period 1:
$
Cost of output 850 units x $32.50 27455
Normal loss 0
Abnormal loss 50 units x $32.30 1615
Total cost 2<>9070
Period 2:
$
Cost of output <>950 units x $32.30 30685
Normal loss 0
Less: Abnormal gain 50 units x $32.30 (1615)
Total cost 2<>9070
Process account
Unit
$
Unit
$
Period 1
Normal loss
100
0
Cost of input
1000
2<>9070
Output(finished goods a/c)
850 x $32.30
27455
Abnormal loss
50 x $32.30
1615
1000
2<>9070
1000
2<>9070
Unit
$
Unit
$
Period 2
Normal loss
100
0
Cost of input
1000
2<>9070
Output(finished goods a/c)
<>950 x $32.30
30685
Abnormal gain
50 x $32.30
1615
1050
30685
1050
30685
Abnormal loss or gain account
Unit
$
Unit
$
Abnormal loss
1615
Abnormal gain
1615
1615
1615
8.3 Losses with scrap value
Solution procedure:
1. Calculate the outputs and losse
2. Calculate the cost per unit (using the total cost over expected
output units)
3. Total the process costs
4. Write up the process account and normal loss account
Example 3:
Inputs = 3000 units
Material = $11700
Conversion cost = $6300
Output = 2000 units
Normal loss = 20%
The units of loss could be sold for $1 each
Solution:
1. Calculate the outputs and losses
Units
Input 3000
Normal loss 600 3000 units x 20%
Expected units 2400
Actual output 2000
Abnormal loss 400
2. Calculate the cost per unit
$
Scrap value of normal loss 600
Scrap value of abnormal loss 400
1000
Costs incurred = $(11700 – 600 + 6300) = $7.25 per unit
Expected output 2400 units
Notes: the scrap value of normal loss ($600) is usually deducted
from the cost of materials
3. Total the process costs
$
Output 2000 x $7.25 14,500
Normal loss 600 x $1 600
Abnormal loss 400 x $7.25 2<>900
18,000
4. Write up the process account and normal loss account
Process account
Unit
$
Unit
$
Material
3000
11700
Output
2000
14500
Conversion costs
6300
Normal loss
600
600
Abnormal loss
400
2<>900
3000
18000
3000
18000
Abnormal loss account
$
$
Process a/c
2<>900
Scrap value
400
P & L
2500
2<>900
2<>900
Scrap value
$
$
Normal loss
600
Cash
1000
Abnormal loss
400
1000
1000
Example 4
There are two production processes: cutting pasting
Normal loss: 10% in each process
Scrapped units out of the cutting process sells for $3 per unit,
whereas scrapped units out of the pasting process sell for $5 per unit.
Cutting process Pasting process
Unit $ Unit
$
Input materials 18000 54000
Transferred to pasting process 16000
Materials from cutting process 16000
Added materials 14000 70000
Labour and overheads 32400 135000
Output to finish goods 28000
Solution:
(1) cutting process
1. Calculate the outputs and losses
Units
Input 18000
Normal loss (1800) 18000 x 10%
Expected units 16200
Actual output (16000)
Abnormal loss 200
2. Calculate the cost per unit
$
Normal loss 188 units x $3 5400
Abnormal loss 200 units x $3 600
Total scrap 2000 units x $3 6000
Total cost Cost per
expected
$ unit of
output
Materials 54000
Less: normal loss scrap value (5400)
48600 /16200 units 3
Labour and overhead 32400 /16200 units 2
Total 81000 / 16200 units 5
3. Total the process costs
$
Output 16000 x $5 80000
Normal loss 1800 x $3 5400
Abnormal loss 200 x $5 1000
86400
4. Write up the process account and normal loss account
Process 1 account
Unit
$
Unit
$
Materials
18000
54000
Output to pasting process
16000 x $5
80000
Conversion costs
32400
Normal loss
1800 x$3
5400
Abnormal loss
200 x $5
1000
18000
86400
18000
86400
(2) Pasting process
1. Calculate the outputs and losses
Units
Input 30000 16000 + 14000
Normal loss 3000 30000 x 10%
Expected units 27000
Actual output 28000
Abnormal gain 1000
2. Calculate the cost per unit
$
Normal loss 3000 units x $5 15,000
Abnormal loss 1000 units x $ 5 (5,000)
Total scrap 2000 units x $5 10000
3. Total the process costs
$
Output 28000 x $10 280000
Normal loss 3000 x $5 15000
Abnormal gain 1000 x $10 (10,000)
285,000
4. Write up the process account and normal loss account
Process 2 account
Unit
$
Unit
$
Materials from cutting process
16000
80000
Finished output
28000 x $10
280000
Added materials
14000
70000
Normal loss
3000
15000
Direct labour
135000
Abnormal gain
1000 x $10
10000
31000
2<>95000
31000
2<>95000
Abnormal loss account
Unit
$
$
Cutting process
200
1000
Output
600
P & L
400
1000
1000
Abnormal gain account
$
Unit
$
Scrap value
5000
Cash
P & L
5000
Pasting process
1000
10000
10000
10000
Scrap value
Unit
$
Unit
$
Normal loss
Cash
Cutting process
1800 x $3
5400
Sale of cutting process
(1800 + 200) x $3
6000
Pasting process
3000 x $5
15000
Sale of pasting process
(3000- 1000) x $5
10000
Abnormal loss
600
Abnormal gain
5000
21000
21000
Conclusion:
? In the first process, total cost of output = total cost of input, though there are losses in process and those loss with certain scrap value
? The unit cost of abnormal loss and gain = the unit cost of good unit produced
? The scrap value of abnormal loss/gain is not accounted to the process account
8.4 Loss with a disposal cost
Example 5
Inputs = 1000 units, at a cost of $4,500
Normal loss = 10%
There are no opening and closing inventories
Outputs = 860 units, at disposal cost = $0.<>9 per unit
Solution:
Units
Input 1000
Normal loss 100 1000 units x 10%
Expected units <>900
Actual output 860
Abnormal loss 40
Cost incurred = $4500 +100 units x $0.<>9 = $5.1 per unit
Expected output <>900 units
Process account
Unit
$
Unit
$
Cost of input
1000
4500
Normal loss
100
0
Disposal cost
<>90
Output (finished goods a/c)
860 x $5.1
4386
Abnormal loss
40 x $5.1
204
1000
45<>90
1000
45<>90
Abnormal loss account
Unit
$
Unit
$
Process a/c
204
Disposal cost
40 x 0.<>9
36
P & L
240
240
240
Notes:
? Increase the process costs by the cost of disposing of the
units of normal loss and use the resulting cost per unit to value good
output and abnormal loss/gain.
Only the disposal costs of normal loss includes into process ?
account
? The disposal costs of abnormal loss includes into abnormal
loss account.
8.5 Valuing closing work in progress
WIP equivalent units (EUS)
Equivalent unit
The output for a period
? Completed product
? Work-in-process product
Equivalent units
Once processing has started on a unit of output, to the extent that it remains in an uncompleted state it can be expressed as a proportion of a completed unit.
Extension of the equivalent units approach
It is unlikely that all inputs to production will take place at the same time.
Materials are frequently added at the beginning of a process, and so any closing WIP will have 100% of their direct material content. For other cases, materials might be added gradually throughout the process, in which case closing inventory will only be a certain percentage complete as to material content.
Direct labour and production overheads are assumed to be incurred at an even rate throughout the process. When we refer to a unit that is 50% complete, we mean that it is half complete for labour and overhead, although it might be 100% complete for materials.
Example 6
Inputs = 1000 units at the total material cost of $6200, labour and overhead of $2850
Finished goods = 800 units
Closing WIP = 200 units, with 100% complete for materials and 25% complete for labour and overhead.
Solution:
Step 1: calculate the equivalent units
Materials
Labour and overhead
Total Degree of Equivalent Degree Of equivalent
Units Completion units completion units
Finished 800 100% 800 100% 800
Output
Closing WIP
200 100% 200 25% 50
1000 1000 850
Step 2: calculate the average cost per equivalent units
Materials Labour and overhead
Costs incurred in the period $6,200 $2,850
Equivalent units of work done 1000 850
Cost per equivalent units(approx) $6.20 $3.352<>9
Step 3: statement of evaluation
Materials
Labour and overhead
Equivalent Cost per Cost Equivalent Cost Per Cost Total
Units equivalent unit Units equivalent Cost
Finished 800 $6.20 4<>960 800
$3.352<>9 2682 7642
Output
Closing 200 $6.20 1240 50 $3.352<>9 168 1408
WIP 1000 6200 850 <>9050
Process account (WIP)
Unit
$
Unit
$
Materials
1000
6200
Finished goods
800
7642
Labour overhead
2850
Closing WIP
200
1408
1000
<>9050
1000
<>9050
Example 7
Process account
Unit
$
Unit
$
Input
10000kg
5<>9150
Finished goods
8000kg
52000
Closing WIP
2000kg
7150
10000kg
5<>9150
10000kg
5<>9150
How many equivalent units were there for closing WIP?
A. 1000
B. 1100
C. 2000
Solution:
Cost per unit = Cost of finished goods = 52000 = $6.50
Number of kg 8000
If 2000kg (Closing WIP figure) were fully complete total cost would be 2000 x $6.5 = $13000. Actual cost of closing WIP = $7150
Degree of completion = $7150/ $13000 = 55%
Therefore, equivalent units = 55% * 2000 kg = 1100 kg
Further materials may be added gradually during the process, so that closing inventory is only partially complete in respect of these added materials.
Example 8:
Materials input from process 1: 4000 units at a cost of $6000
Added materials in process 2 cost $1080, conversion costs in progress are $1720.
Closing WIP in progess 2 are 800 units, complete as to:
Process 1 material 100%
Add materials 50%
Conversion costs 30%
Required to prepare the account for process 2
Solution:
(1)Statement of equivalent units
Process 1 Added materials
Labour and overhead
Inputunits Output Total units Units %
Units % Units %
4000 Completed 3200 3200 100 3200 100 3200 100
Production
Closing 800 800 100
400 50 240 30
4000 Inventory 4000 4000 3600 3440
(2) Statement of cost per equivalent units:
Cost Equivalent production in units Cost per unit $
Process 1 material 6000 4000 1.5
Add materials 1080 3600 0.3
Conversion costs 1720 3440 0.5
8800 2.3
(3) Statement of evaluation of finished work and costing inventories
Cost element Units Cost per equivalent unit Total Cost
Completed production 3200 $2.3 $7360
Closing inventory
Process 1material 800 $1.5
$1200
Added material 400 $0.3
$120
Labour and overhead 240 $0.5
$120
$1440
$8800
(4)Process account
Unit
$
Unit
$
Process 1 material
4000
6000
Finished goods
3200
7360
Add materials
1080
Closing WIP
800
1440
Conversion costs
1720
4000
8800
4000
8800
8.6 Valuing opening in progress: FIFO & Weighted average cost method
Accounting for the changes in the level of WIP
The FIFO method
This method distinguish between units completed in the period that from the opening work in progress and those new items started and completed in the period.
Procedure:
1. Equivalent units:
Total equivalent units consist of
? The completion of opening WIP
? Units started and completed in the period
? The work done on closing WIP
2. Costs to be accounted for
Current cost added
3. Costs per equivalent units
4. Cost of finished gproduction
? Cost from opening WIP (value at the beginning of the period add conversion cost added in this period)
? Cost of the finished goods which started and completed in this period
? Value of closing WIP
5. Complete the process account
Example <>9
Opening inventory 500 units. Degree with completion: 60%
Cost to date: $2800
Cost incurred: Direct materials ( 2500 units introduced)
$13,200
Direct labour $6600
Production overhead $6600
Closing inventory 300 units: degree with completion: 80%
There was no loss in the process.
Solution:
Step 1: determine output and losses
Total units
Equivalent units
Opening inventory 500 40% 200
Fully completed units 2200 100% 2200
Output 2700 2400
Closing inventory 300 80% 240
3000
2640
Step 2: calculate cost per unit of output and losses
Costs incurred = $26,400 = $10
Equivalent units 2640
Step 3: calculate total costs of output, losses and WIP
Equivalent units Valuation $
Opening inventory done in this process 200
2000
Fully worked units 2200
22000
Closing inventory 240
2400
2640 26400
Step 4: complete accounts
Process account
Unit
$
Unit
$
Opening inventory
500
2800
Opening inventory completed
500
4800
Direct materials
2500
13200
Fully worked units
2200
22000
Direct labour
6600
Closing inventory
300
2400
Production overhead
6600
3000
2<>9200
3000
2<>9200
Weighted Average Method
Cost: opening stock values are added to current costs to provide
an overall average cost.
Unit: no distinction is made between units in process at the start
of the period and those
New units added during the period.
Procedure:
1. Equivalent units:
Total equivalent units consist of:
All completed units ( whether they were started in previous period) and the closing WIP work done.
2. Costs per equivalent unit
Costs to be accounted for:
Opening stock values are added to current costs to provide an
overall average cost,
3. Costs of finished production
4. Complete the process account
Example 10
Opening inventory 800 units
Degree of completion: Process 1 materials 100% $4,700
Added materials 40%
$600
Conversion costs 30%
$1000
$6300
In process 2, 3000 units were transferred from process 1 at a valuation of $18100. Added materials cost $<>9600 and conversion costs were $11800.
Closing inventory from process 2 were 1000 units which were 100% complete with respect to process 1 materials and 60% complete with respect to added materials. Conversion cost work was 40% complete.
Solution
1. equivalent units:
Equivalent units
Total Process 1
Added Conversion
Units material
material costs
Opening inventory 800 100% 800
800 800
Fully worked units 2000 100% 2000 2000 2000
Output to finished goods
2800 2800
2800 2800
Closing inventory 1000 100% 1000 60% 600 40% 400
3800 3800
3400 3200
2. Cost of equivalent units:
Process 1material Added
materials Conversion costs
Opening inventory 4700 600 100
Added cost in process 2 18100 <>9600 11800
Total costs 22800 10200 12800
Equivalent units 3800 3400 3200
Cost per equivalent units 6 3 4
1. Costs of finished production
Process 1 Added
Conversion Total costs
Material materials costs
$ $ $ $
Output to finished goods
(2800 units) 16800 8400
11200 36400
Closing inventory 6000 1800
1600 <>9400
45800
2. Complete the process account
Process account
Unit
$
Unit
$
Opening inventory
800
6300
Finished goods
2800
36400
Process 1 account
3000
18100
Added material
<>9600
Closing inventory
1000
<>9400
Conversion cost
11800
3800
45800
3800
45800
Which method should be used?
FIFO inventory valuation is more common than the weighted average method, and should be used unless an indication is given to the contrary.
General rules:
? If you are told the degree of completion of each element in opening inventory, but not the value of each cost element, then you must use the FIFO method.
? If you are not given the degree of completion of each cost element in opening inventory, but you are given the value of each cost element, then you must use the weighted average method.
