The document discusses managerial accounting applications including segmented reporting and responsibility accounting, cost-volume-profit analysis, budgeting, standard costs, and managerial decision making. It provides examples of how to calculate unit variable cost using the scatter diagram and high-low methods. Break-even analysis and its applications in computing income from expected sales, determining sales volume needed for a target income, and calculating margin of safety are also summarized.
The document outlines audit working paper purposes, contents, organization and types of audit evidence. It discusses how working papers support the audit opinion, substantiate competence, guide future audits and evaluate staff. Contents include entity information, risk assessments, audit programs, analyses, conclusions and representations. Organization includes permanent files on the client and current files indexing planning, compliance, balances and income/expenses. Evidence includes physical counts, confirmations, representations, documents, observation, accuracy checks and comparisons.
There are four main types of auditors:
1) External auditors perform independent reviews of a company's financial records
2) Internal auditors provide independent evaluations of a company's financial and operational activities
3) Government auditors are employed by state and local government agencies
4) Forensic auditors are trained to detect, investigate, and deter fraud and white-collar crime.
The document summarizes key provisions relating to the duties and powers of auditors under Section 143 of the Companies Act 2013 in India. It discusses the following in 3 sentences or less:
- Section 143(1) outlines matters auditors must inquire into including loans/advances, personal expenses, asset sales, and share issuances.
- Section 143(2) requires auditors to report on accounts examined and compliance with accounting standards in reports to the company.
- Sections 143(3) and 143(4) specify the contents of audit reports, including compliance with laws and standards, transactions, director qualifications, and reasons for qualifications.
Intercompany transactions of non-current assets - depreciable assetsArthik Davianti
The document discusses accounting for transfers of depreciable assets between a parent company and its subsidiary. It provides an example of an upstream sale, where a subsidiary sells equipment to its parent company. The key steps are to record the sale and purchase transactions by the subsidiary and parent separately. Under the equity method, the parent must defer recognition of its share of the subsidiary's gain on the intercompany sale by crediting an investment account. In subsequent years, a portion of the deferred gain is recognized through adjusting consolidation entries.
Audit of the inventory and warehousing cyclesellyhood
This document provides an overview of auditing the inventory and warehousing cycle. It describes the key functions and documents in the cycle including purchasing raw materials, transferring materials through production to finished goods, and shipping finished goods. The document outlines eight learning objectives which cover topics like how e-commerce affects inventory, the five parts of the audit cycle, testing cost accounting, analytical procedures, physical inventory observation, and pricing/compilation testing. It also demonstrates how the various audit tests are integrated and relate to each other across the acquisition, payroll, inventory, and sales cycles.
The document outlines audit working paper purposes, contents, organization and types of audit evidence. It discusses how working papers support the audit opinion, substantiate competence, guide future audits and evaluate staff. Contents include entity information, risk assessments, audit programs, analyses, conclusions and representations. Organization includes permanent files on the client and current files indexing planning, compliance, balances and income/expenses. Evidence includes physical counts, confirmations, representations, documents, observation, accuracy checks and comparisons.
There are four main types of auditors:
1) External auditors perform independent reviews of a company's financial records
2) Internal auditors provide independent evaluations of a company's financial and operational activities
3) Government auditors are employed by state and local government agencies
4) Forensic auditors are trained to detect, investigate, and deter fraud and white-collar crime.
The document summarizes key provisions relating to the duties and powers of auditors under Section 143 of the Companies Act 2013 in India. It discusses the following in 3 sentences or less:
- Section 143(1) outlines matters auditors must inquire into including loans/advances, personal expenses, asset sales, and share issuances.
- Section 143(2) requires auditors to report on accounts examined and compliance with accounting standards in reports to the company.
- Sections 143(3) and 143(4) specify the contents of audit reports, including compliance with laws and standards, transactions, director qualifications, and reasons for qualifications.
Intercompany transactions of non-current assets - depreciable assetsArthik Davianti
The document discusses accounting for transfers of depreciable assets between a parent company and its subsidiary. It provides an example of an upstream sale, where a subsidiary sells equipment to its parent company. The key steps are to record the sale and purchase transactions by the subsidiary and parent separately. Under the equity method, the parent must defer recognition of its share of the subsidiary's gain on the intercompany sale by crediting an investment account. In subsequent years, a portion of the deferred gain is recognized through adjusting consolidation entries.
Audit of the inventory and warehousing cyclesellyhood
This document provides an overview of auditing the inventory and warehousing cycle. It describes the key functions and documents in the cycle including purchasing raw materials, transferring materials through production to finished goods, and shipping finished goods. The document outlines eight learning objectives which cover topics like how e-commerce affects inventory, the five parts of the audit cycle, testing cost accounting, analytical procedures, physical inventory observation, and pricing/compilation testing. It also demonstrates how the various audit tests are integrated and relate to each other across the acquisition, payroll, inventory, and sales cycles.
A chartered accountancy firm named M/s ABC Associates has recently switched to Tally ERP 9 for their billing and accounting needs. The firm approaches the document author for help in facilitating client billing in Tally ERP 9. The author identifies some potential issues the firm may face, such as allocating receipts to bills and dividing profits between partners. The document then provides examples of how cost centers in Tally ERP 9 can help address these issues by allowing the allocation of revenues and expenses to different parts of the organization. It also discusses features of cost centers like creating, altering and using multiple cost centers. Finally, it gives examples of how the author's own firm JP Associates uses cost centers.
The audit programme summarizes the audit procedures to be carried out on trade receivables for Sheridan AV for the year ending March 31, 2015. Substantive testing is to be done on the statement of financial position to evaluate presentation and disclosure, accuracy/classification/valuation, rights and obligations, completeness and cut-off, and existence. Tests include analytical procedures, agreeing balances to prior years, testing a sample of receivables, cut-off testing for sales, and a trade receivables circularization. Issues were identified with incorrect presentation of dates and sales invoices in some transactions. The circularization identified wrong recording dates for payments from two customers. Follow up is needed for an unresponsive customer balance.
Audit of the acquisition and payment cyclesellyhood
The document discusses the acquisition and payment cycle. It covers the key accounts and transactions in the cycle including acquisitions of goods and services, cash disbursements, and purchase returns and allowances. The document also describes the related business functions like processing purchase orders and cash disbursements. It discusses how e-commerce has impacted the cycle through electronic data interchange and business-to-business transactions over the internet. Finally, it outlines the audit procedures for the cycle including understanding internal controls, assessing risks, and designing tests of transactions and account balances like accounts payable.
The document discusses assurance services and audits. It defines assurance services as independent, professional services that improve the quality of information for decision makers. It outlines the key elements of an assurance engagement as having a three party relationship between the practitioner, responsible party, and intended users, a suitable subject matter, criteria to evaluate the subject matter, sufficient evidence to support the assurance opinion, and a written report. The document also discusses the differences between reasonable and limited assurance engagements.
An auditor's report formally presents the results of an audit. It assesses whether a company's financial statements are fairly presented and comply with accounting standards. The report includes sections identifying the statements audited, the auditor's responsibilities, and their opinion on whether the statements give a true and fair view. Auditors can issue unqualified, qualified, disclaimer of opinion, adverse opinion, or exception reports depending on any issues identified during the audit.
Audit working papers are documents prepared or obtained by auditors that provide evidence of the audit work performed. They include information used to plan and conduct the audit, as well as evidence to support the auditor's opinion. Working papers serve several purposes, such as providing evidence of compliance with auditing standards, supporting the conclusions in the audit report, and allowing for review of the audit work. They must be organized, indexed, and signed or initialed by the preparer and reviewer. Working papers are the property of the auditing firm but may be subpoenaed by a court.
This document provides guidance on developing a balanced scorecard for internal audit departments. It outlines seven steps to create a balanced scorecard: 1) identify customer needs, 2) assess internal audit capabilities, 3) develop strategic objectives, 4) identify performance measures, 5) identify targets and initiatives, 6) develop a strategic map, and 7) develop a scorecard for each performance category. Examples and exercises are provided for each step. The goal is to develop a performance measurement system that is driven by strategy and includes cause-and-effect linkages, leading indicators, and outcome measures. Continuous refinement of the system is emphasized.
This document contains information about the CMA April 2013 examination for the Foundation Level subject "Principles of Accounting". It provides instructions for the exam and includes 5 questions. Question 1 has 3 parts asking students to (a) show accounting transactions in an equation, (b) identify accounting principles/assumptions, and (c) determine when revenue should be recognized. Question 2 has parts about accounting for fixed assets and journalizing transactions. Question 3 covers notes receivable, adjusting entries, and revenue recognition. Questions 4 and 5 contain additional accounting problems and scenarios. The document spans 3 pages and tests students' knowledge of basic accounting concepts.
The document summarizes key provisions around the appointment, eligibility, duties, and reporting responsibilities of auditors according to the Companies Act 2013 in India. It discusses requirements for appointing auditors such as obtaining prior consent, filing notices, and auditor rotation. It also outlines auditor qualifications and disqualifications, powers to access company information, services auditors cannot provide, requirements for audit reports, and auditors' attendance at shareholder meetings.
Applying IFRS
Presentation and
disclosure requirements
of IFRS 15
July 2017
Applying IFRS
Presentation and
disclosure requirements,
of IFRS 15,
July 2017,
An audit programme outlines the guidelines and specifics for conducting an audit, including the audit objectives, location, timing, and procedures. It is developed after understanding the client's business by determining audit strategies and preparing a checklist. The advantages of an audit programme are that it provides instructions, divides work responsibilities, and facilitates supervision, future planning, and efficient audits. However, audit programmes can also lead to rigid and mechanical work, as well as a lack of flexibility and initiative.
SA 230 outlines requirements for audit documentation. Audit documentation includes records of audit procedures performed, relevant audit evidence obtained, and conclusions reached. Documentation must be dated and signed, with all significant matters documented. Documentation assists the audit engagement, enables accountability, and allows for quality reviews and inspections. Sufficient documentation must be prepared to enable an experienced auditor to understand the size and complexity of the entity, nature of audit procedures, significant matters, and conclusions. Documentation includes audit programs, summaries, issues memos, and confirmations. The final audit file must be assembled within 60 days of the audit report date and retained for 7 years.
The document discusses refunds under tax law. It states that a taxpayer who has paid excess tax may apply for a refund within two years of the tax assessment or payment. The Commissioner must refund any excess paid after applying it against other outstanding taxes. If a refund is not paid within three months, the taxpayer is entitled to additional compensation at the KIBOR interest rate until the refund is paid. Appeals procedures are outlined for taxpayers aggrieved by refund decisions.
The document discusses internal audit effectiveness and quality assessment (IAEQA). IAEQA involves evaluating the effectiveness, efficiency, and quality of an organization's internal audit function. It assesses compliance with internal auditing standards and benchmarks the function against a balanced scorecard approach. The methodology uses a holistic evaluation of the internal audit process, coverage, findings, skills, and compliance with standards. Key components reviewed include the internal audit process, compliance with standards, skills/competence, structure, cross-functional engagement, and board oversight. Specific tactical audit areas are also assessed by re-performing audit procedures and critically reviewing findings. The outcome is an internal audit effectiveness scorecard and action plan to improve areas.
Vouching is the process by which an auditor examines documentary evidence to verify transactions recorded in accounting books. It involves substantiating entries with evidence like receipts, invoices, contracts, and ensuring transactions are properly authorized, recorded, and classified. The objectives of vouching are to verify genuineness of transactions, ensure all business transactions are recorded, authenticate documentary evidence, and check for fraudulent payments. Vouchers provide documentary evidence to support transactions, and can be primary documents like invoices or secondary documents like copies. Important aspects of vouching cash receipts include verifying serially numbered receipts, ensuring timely recording of receipts, and authorization of discounts.
This document summarizes the key points of the Companies (Auditor's Report) Order, 2020 (CARO 2020) in India. It applies to all companies except for banking, insurance, Section 8 companies, and small/private companies meeting certain criteria. CARO 2020 contains 21 clauses requiring auditors to report on matters like fixed assets, inventory, loans and investments, statutory dues, fraud, related party transactions, internal audits, cash losses, auditor resignations, and consolidated financial statements. The order is effective from April 1, 2020 and aims to improve transparency in company financial reporting.
Marginal costing is a technique used for managerial decision making that differentiates between fixed and variable costs. It involves calculating contribution as the difference between selling price and variable costs, and profit as contribution minus fixed costs. Absorption costing values inventory at total cost while marginal costing values it at variable cost only. Marginal costing focuses on selling and pricing while absorption costing focuses on production. Formulas are used to calculate contribution, profit volume ratio, breakeven point, and margin of safety. An example shows calculating BEP, profit, and the effects of a labor efficiency decrease on both.
The document analyzes the cost sheet of Dabur India Limited for the year 2010-2011. It prepares the cost sheet, analyzes various cost elements, and applies concepts of marginal costing. Key findings include direct materials constituting 5.91% of prime cost, advertising expenses accounting for 74.59% of selling and distribution overhead, and fixed costs representing 27.42% of total costs. Marginal costing tools like contribution, P/V ratio, break-even point, and margin of safety are also calculated.
A chartered accountancy firm named M/s ABC Associates has recently switched to Tally ERP 9 for their billing and accounting needs. The firm approaches the document author for help in facilitating client billing in Tally ERP 9. The author identifies some potential issues the firm may face, such as allocating receipts to bills and dividing profits between partners. The document then provides examples of how cost centers in Tally ERP 9 can help address these issues by allowing the allocation of revenues and expenses to different parts of the organization. It also discusses features of cost centers like creating, altering and using multiple cost centers. Finally, it gives examples of how the author's own firm JP Associates uses cost centers.
The audit programme summarizes the audit procedures to be carried out on trade receivables for Sheridan AV for the year ending March 31, 2015. Substantive testing is to be done on the statement of financial position to evaluate presentation and disclosure, accuracy/classification/valuation, rights and obligations, completeness and cut-off, and existence. Tests include analytical procedures, agreeing balances to prior years, testing a sample of receivables, cut-off testing for sales, and a trade receivables circularization. Issues were identified with incorrect presentation of dates and sales invoices in some transactions. The circularization identified wrong recording dates for payments from two customers. Follow up is needed for an unresponsive customer balance.
Audit of the acquisition and payment cyclesellyhood
The document discusses the acquisition and payment cycle. It covers the key accounts and transactions in the cycle including acquisitions of goods and services, cash disbursements, and purchase returns and allowances. The document also describes the related business functions like processing purchase orders and cash disbursements. It discusses how e-commerce has impacted the cycle through electronic data interchange and business-to-business transactions over the internet. Finally, it outlines the audit procedures for the cycle including understanding internal controls, assessing risks, and designing tests of transactions and account balances like accounts payable.
The document discusses assurance services and audits. It defines assurance services as independent, professional services that improve the quality of information for decision makers. It outlines the key elements of an assurance engagement as having a three party relationship between the practitioner, responsible party, and intended users, a suitable subject matter, criteria to evaluate the subject matter, sufficient evidence to support the assurance opinion, and a written report. The document also discusses the differences between reasonable and limited assurance engagements.
An auditor's report formally presents the results of an audit. It assesses whether a company's financial statements are fairly presented and comply with accounting standards. The report includes sections identifying the statements audited, the auditor's responsibilities, and their opinion on whether the statements give a true and fair view. Auditors can issue unqualified, qualified, disclaimer of opinion, adverse opinion, or exception reports depending on any issues identified during the audit.
Audit working papers are documents prepared or obtained by auditors that provide evidence of the audit work performed. They include information used to plan and conduct the audit, as well as evidence to support the auditor's opinion. Working papers serve several purposes, such as providing evidence of compliance with auditing standards, supporting the conclusions in the audit report, and allowing for review of the audit work. They must be organized, indexed, and signed or initialed by the preparer and reviewer. Working papers are the property of the auditing firm but may be subpoenaed by a court.
This document provides guidance on developing a balanced scorecard for internal audit departments. It outlines seven steps to create a balanced scorecard: 1) identify customer needs, 2) assess internal audit capabilities, 3) develop strategic objectives, 4) identify performance measures, 5) identify targets and initiatives, 6) develop a strategic map, and 7) develop a scorecard for each performance category. Examples and exercises are provided for each step. The goal is to develop a performance measurement system that is driven by strategy and includes cause-and-effect linkages, leading indicators, and outcome measures. Continuous refinement of the system is emphasized.
This document contains information about the CMA April 2013 examination for the Foundation Level subject "Principles of Accounting". It provides instructions for the exam and includes 5 questions. Question 1 has 3 parts asking students to (a) show accounting transactions in an equation, (b) identify accounting principles/assumptions, and (c) determine when revenue should be recognized. Question 2 has parts about accounting for fixed assets and journalizing transactions. Question 3 covers notes receivable, adjusting entries, and revenue recognition. Questions 4 and 5 contain additional accounting problems and scenarios. The document spans 3 pages and tests students' knowledge of basic accounting concepts.
The document summarizes key provisions around the appointment, eligibility, duties, and reporting responsibilities of auditors according to the Companies Act 2013 in India. It discusses requirements for appointing auditors such as obtaining prior consent, filing notices, and auditor rotation. It also outlines auditor qualifications and disqualifications, powers to access company information, services auditors cannot provide, requirements for audit reports, and auditors' attendance at shareholder meetings.
Applying IFRS
Presentation and
disclosure requirements
of IFRS 15
July 2017
Applying IFRS
Presentation and
disclosure requirements,
of IFRS 15,
July 2017,
An audit programme outlines the guidelines and specifics for conducting an audit, including the audit objectives, location, timing, and procedures. It is developed after understanding the client's business by determining audit strategies and preparing a checklist. The advantages of an audit programme are that it provides instructions, divides work responsibilities, and facilitates supervision, future planning, and efficient audits. However, audit programmes can also lead to rigid and mechanical work, as well as a lack of flexibility and initiative.
SA 230 outlines requirements for audit documentation. Audit documentation includes records of audit procedures performed, relevant audit evidence obtained, and conclusions reached. Documentation must be dated and signed, with all significant matters documented. Documentation assists the audit engagement, enables accountability, and allows for quality reviews and inspections. Sufficient documentation must be prepared to enable an experienced auditor to understand the size and complexity of the entity, nature of audit procedures, significant matters, and conclusions. Documentation includes audit programs, summaries, issues memos, and confirmations. The final audit file must be assembled within 60 days of the audit report date and retained for 7 years.
The document discusses refunds under tax law. It states that a taxpayer who has paid excess tax may apply for a refund within two years of the tax assessment or payment. The Commissioner must refund any excess paid after applying it against other outstanding taxes. If a refund is not paid within three months, the taxpayer is entitled to additional compensation at the KIBOR interest rate until the refund is paid. Appeals procedures are outlined for taxpayers aggrieved by refund decisions.
The document discusses internal audit effectiveness and quality assessment (IAEQA). IAEQA involves evaluating the effectiveness, efficiency, and quality of an organization's internal audit function. It assesses compliance with internal auditing standards and benchmarks the function against a balanced scorecard approach. The methodology uses a holistic evaluation of the internal audit process, coverage, findings, skills, and compliance with standards. Key components reviewed include the internal audit process, compliance with standards, skills/competence, structure, cross-functional engagement, and board oversight. Specific tactical audit areas are also assessed by re-performing audit procedures and critically reviewing findings. The outcome is an internal audit effectiveness scorecard and action plan to improve areas.
Vouching is the process by which an auditor examines documentary evidence to verify transactions recorded in accounting books. It involves substantiating entries with evidence like receipts, invoices, contracts, and ensuring transactions are properly authorized, recorded, and classified. The objectives of vouching are to verify genuineness of transactions, ensure all business transactions are recorded, authenticate documentary evidence, and check for fraudulent payments. Vouchers provide documentary evidence to support transactions, and can be primary documents like invoices or secondary documents like copies. Important aspects of vouching cash receipts include verifying serially numbered receipts, ensuring timely recording of receipts, and authorization of discounts.
This document summarizes the key points of the Companies (Auditor's Report) Order, 2020 (CARO 2020) in India. It applies to all companies except for banking, insurance, Section 8 companies, and small/private companies meeting certain criteria. CARO 2020 contains 21 clauses requiring auditors to report on matters like fixed assets, inventory, loans and investments, statutory dues, fraud, related party transactions, internal audits, cash losses, auditor resignations, and consolidated financial statements. The order is effective from April 1, 2020 and aims to improve transparency in company financial reporting.
Marginal costing is a technique used for managerial decision making that differentiates between fixed and variable costs. It involves calculating contribution as the difference between selling price and variable costs, and profit as contribution minus fixed costs. Absorption costing values inventory at total cost while marginal costing values it at variable cost only. Marginal costing focuses on selling and pricing while absorption costing focuses on production. Formulas are used to calculate contribution, profit volume ratio, breakeven point, and margin of safety. An example shows calculating BEP, profit, and the effects of a labor efficiency decrease on both.
The document analyzes the cost sheet of Dabur India Limited for the year 2010-2011. It prepares the cost sheet, analyzes various cost elements, and applies concepts of marginal costing. Key findings include direct materials constituting 5.91% of prime cost, advertising expenses accounting for 74.59% of selling and distribution overhead, and fixed costs representing 27.42% of total costs. Marginal costing tools like contribution, P/V ratio, break-even point, and margin of safety are also calculated.
Marginal costing is a technique that differentiates between fixed and variable costs. It treats variable costs as product costs and fixed costs as period costs. Under marginal costing, only variable costs are considered in inventory valuation. Absorption costing treats both fixed and variable costs as product costs and includes a share of fixed costs in inventory valuation. The chapter provides definitions and concepts related to marginal costing, characteristics that distinguish it from absorption costing, and how profit is calculated differently under each method.
The document discusses marginal costing and its key concepts. It defines marginal cost as the incremental cost of producing one additional unit. Marginal costing is a technique where only variable costs are treated as product costs, while fixed costs are treated as period costs. Key aspects covered include:
- Characteristics of marginal costing such as classification of costs into fixed and variable, treatment of fixed costs as period costs, and determination of profitability based on contribution margin.
- Distinction between marginal costing and absorption costing in how they treat fixed costs and value inventory.
- Determination of costs and profits under marginal costing based on classification of costs into product/variable and period/fixed costs.
The document defines key terms related to cost accounting including:
- Cost, revenue, and profit. Revenue is sales, costs include expenses to generate sales, and profit is revenue minus costs.
- Fixed and variable costs. Fixed costs remain the same regardless of production levels, while variable costs change with production levels.
- The three main financial statements are the income statement, balance sheet, and cash flow statement. The income statement shows profits, the balance sheet assets/liabilities over time, and the cash flow statement tracks cash inflows/outflows.
- Manufacturing costs include direct materials, direct labor, and manufacturing overhead. Non-manufacturing costs are marketing/selling and administrative.
Chapter 10 Segmented Reporting, Investment Center Evaluation, And Transfer Pr...Yesica Adicondro
This document contains questions and problems related to segmented reporting, investment center evaluation, and transfer pricing. It discusses concepts such as decentralized decision making, reasons for decentralization, absorption versus variable costing, contribution margin, residual income, return on investment, and transfer pricing approaches. Sample calculations are provided for problems involving product line income statements, divisional performance measurement, investment center analysis, and transfer pricing.
The key users of accounting information include investors, lenders, regulators and rating agencies, security analysts, and management. Investors and lenders rely on accounting information to assess the return and risk of their investments and loans. Regulators, rating agencies, and analysts use accounting data to evaluate companies and provide guidance to investors. Management utilizes accounting reports to review financial performance and solvency, ensure efficient resource usage, and inform strategic decision making. Overall, accounting aims to meet the common information needs of these various user groups for financial decision making purposes.
This document provides an overview of marginal costing. It begins with an introduction to marginal costing, defining it as a technique that differentiates between fixed and variable costs. It then covers key aspects of marginal costing including its meaning, features, advantages, and disadvantages. Examples of how marginal costing can be used for decision making are also provided. The document concludes with sections on absorption costing, the differences between marginal and absorption costing, contribution analysis, break-even analysis, and cost-volume-profit analysis.
Chapter 6 planning & control in decentralization operation amandaluo1988
This document discusses decentralization and segmented reporting. It defines decentralization as dispersing functions, powers, or decisions away from a central authority. Decentralized companies delegate operating responsibility to division managers. Effective decentralization requires segmented reporting to analyze division profitability. Preparing segmented income statements requires distinguishing between traceable fixed costs assigned to segments and common fixed costs not assigned. Challenges in segmented reporting include omitting costs, arbitrarily dividing common costs, and using inappropriate cost allocation methods. External reporting of segmented financial information poses issues around competitively sensitive data and reconciling to GAAP standards.
This document discusses decentralization and the balanced scorecard approach to segment reporting. It provides definitions and examples of key concepts such as decentralization, segments, traceable vs common costs, contribution margin, and residual income. It also discusses how performance measures should be aligned with an organization's strategy, using the example of a paper manufacturer shifting from a high-volume to a flexible production strategy.
The document discusses various users of accounting information including investors, lenders, regulators and rating agencies, security analysts, and management. It notes that investors and lenders are the most obvious users as they need information to assess returns on investments and ability to repay loans. Regulators, rating agencies, and analysts also use accounting information to assess companies and provide analysis to help other users. Management uses the information for decision making, ensuring efficient resource use, and reviewing profitability and solvency.
Marginal costing is an alternative to absorption costing where only variable costs are charged as cost of sales. Fixed costs are treated as period costs. Closing inventories are valued at marginal cost. Contribution is the difference between sales revenue and marginal cost of sales, and it goes towards recovering fixed costs and generating profit. Break-even point is where contribution equals fixed costs and there is no profit or loss. Marginal costing focuses on distinguishing variable and fixed costs and uses marginal cost for inventory valuation and contribution for decision making.
The document discusses different costing methods used by organizations:
1. Job costing tracks costs for one-off jobs based on customer requirements.
2. Batch costing tracks costs for lot production using a cost card for each order.
3. Contract costing tracks long-term work done at customer sites.
4. Process costing is for continuous production and tracks work in progress, normal/abnormal losses, and joint products requiring further processing.
Different organizations use different costing methods depending on their production activities, such as job, batch, contract, service, or process costing.
Transfer pricing refers to the pricing of goods and services transferred between divisions within a decentralized organization. The key objectives of transfer pricing are to encourage optimal cost-revenue tradeoffs, goal congruence between divisions and the overall company, and accurate measurement of divisional performance. Common transfer pricing methods include market price, cost-based methods like marginal cost and full cost, and negotiated prices. Proper administration of transfer prices includes clear communication of strategies, documentation, and establishing negotiation and conflict resolution procedures.
This cost function will help Menatel to predict the total cost for any level of activity and to make better decisions.
2-4. COST CONTROL
To control costs Menatel apply the following:
- Rational consumption policy for all expenses.
- Review all contracts with suppliers to reduce discounts and get best prices.
- Freeze investments in new fixed assets and optimize use of current assets.
- Review all resources to achieve optimum productivity.
- Standard costing system to set standards and monitor variances from standards.
- Budgeting to set targets and monitor performance against budget.
- Variance analysis to identify reasons for variances and take corrective actions.
The document discusses various cost concepts and classifications that are important for business decision making, including classifying costs as fixed, variable, or mixed based on their behavior in relation to changes in business activity levels. It also covers calculating cost-volume relationships, break-even analysis, and differential costs to evaluate alternatives and their trade-offs. Opportunity costs and marginal analysis are introduced as tools to assess the potential benefits forgone by choosing one option over another.
This document provides an overview of cost-volume-profit (CVP) analysis and how it can be used to answer questions about sales volumes, costs, income, and break-even points. It discusses identifying cost behavior as fixed, variable, or mixed; measuring cost behavior using scatter diagrams, the high-low method, and least-squares regression; using break-even analysis to determine the sales volume or dollars needed to cover fixed costs; computing income from sales and costs data; and sensitivity analysis of changes to estimates. Multiproduct CVP analysis and degree of operating leverage are also covered.
This document provides an introduction and overview of break even analysis (BEA) for engineering economics and management. It defines BEA as the production level that results in no profit or loss. It presents an example of a company that breaks even at a production level of 2000 units. It also explains that BEA can be presented algebraically or graphically, with fixed costs plotted on the y-axis and quantity on the x-axis. Strategies to shift the break even point to the left for increased efficiency are increasing selling price, decreasing variable costs, and decreasing fixed costs.
Marginal costing is a technique where only variable costs are treated as product costs and fixed costs are treated as period costs. It focuses on marginal cost and contribution margin. Absorption costing is a technique where both fixed and variable costs are treated as product costs. Three key differences are:
1) In marginal costing, only variable costs are considered as inventory costs while in absorption costing, both fixed and variable costs are considered as inventory costs.
2) Profits are calculated based on contribution in marginal costing while in absorption costing, profits are calculated by deducting total costs from sales.
3) Inventory valuation and profit determination methods are different between the two techniques.
EGT267 Programming for Engineering Applications Spring 2020 .docxgidmanmary
EGT267 Programming for Engineering Applications Spring 2020
1
EGT 267 HW-1 (Due on February 20 in the class)
PROGRAMMIING ENGINEERING PROBLEMS
Problem 1: (Conversions) This problem involves converting a value in one unit to a value in
another unit. The program should prompt the user for a value in the specified units and then print
the converted value, along with the new units.
(1) Write a program to convert pounds to kilograms. (Recall that 1 kg = 2.205 lb). The pound
value you input/test is 159 lb.
Problem 2: (Areas and Volumes) This problem involves computing an area or a volume using
input from the user. The program should include a prompt to the user to enter the variables needed.
(1) Write a program to compute the area of a triangle with base b and height h. (Recall that
Aerea = ½* (b * h). ) The b and h values are 1.8 and 6.7 meters, respectively.
Problem 3: (Wind Tunnels) A wind tunnel is a test chamber built to generate different wind
speeds, or Mach numbers (which is the wind speed divided by the speed of sound). Accurate scale
models of aircraft can be mounted on force-measuring supports in the test chamber, and then
measurements of the forces on the model can be made at many different wind speeds and angles.
At the end of an extended wind tunnel test, many sets of data have been collected and can be used
to determine the coefficient of lift, drag, and other aerodynamic performance characteristics of the
new aircraft at its various operational speeds and positions. Data collected from a wind tunnel test
are listed in the following table:
EGT267 Programming for Engineering Applications Spring 2020
2
Assume that we would like to use linear interpolation to determine the coefficient of lift for
additional flight-path angles that are between -4 degrees and 21 degrees (Let’s estimate the
coefficient of lift @ 9 flight-path angle degrees). Write a program that allows the user to enter the
data for two points and a flight-path angle between those points. The program should then compute
the corresponding coefficient of lift.
Homework requirements:
please take two screenshots (one screen shot is for your code; the other is for the results), copy &
past them into your homework, and then submit a hard copy.
Sheet1MAC 7200, CASE STUDY WEEK 61) BREAK EVEN POINTA) IN UNITSSales Revenue16.00 Variable Materials3.00 Variable Labor1.00 Variable Overhead3.50 Variable Marketing Costs1.50Total Variable Costs:9.00CONTRIBUTION MARGIN PER UNIT7.0044%Fixed overhead4.00Fixed Marketing costs2.00Total Fixed Costs6.00BREAK EVEN POINT IN UNITS = FIXED COSTS / CONTRIBUTION MARGIN PER UNITEQUATION16N - 9N - 90,000 = 0Fixed Costs:90,000.007N = 90000CONTRIBUTION MARGIN PER UNIT7.00BREAK EVEN POINT IN UNITS12,857N=B) BREAK EVEN IN DOLLARSUNITS BREAKEVEN12,857SALES PRICES$ 16.00BREAK EVEN IN DOLLARS$ 205,712.00Combined2. SPECIAL ORDER ANALYSISremainder of ca ...
Similar to Managerial accounting applications (20)
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive functioning. Exercise causes chemical changes in the brain that may help protect against mental illness and improve symptoms.
This document provides information about guess papers for the B.Com Part 2 examination prepared by Sir Khalid Aziz of Iqra Commerce Network. It includes important questions on subjects like banking and finance, auditing and income tax, management, cost and advanced accounting, business communication, stock market terms, and economics of Pakistan. Contact information for Iqra Commerce Network and Sir Khalid Aziz is provided for students interested in obtaining these practice question papers.
This document contains practice questions for the B.Com Part 1 exam provided by Khalid Aziz of Iqra Commerce Network. It includes questions on microeconomics, macroeconomics, economic systems, introduction to business, and accounting. For each subject, short questions and essay questions are provided covering key concepts and theories. Contact information is provided for Khalid Aziz to obtain the guess papers.
This document discusses key concepts in job order costing systems including:
- Job order costing tracks costs by individual jobs or orders while process costing tracks costs by departments.
- A job can refer to a client, project, or contract. Costs like direct materials, direct labor, and overhead are accumulated for each job.
- Forms like material requisitions, time sheets, and job order cost sheets are used to track costs by job.
- Standard costs can be used to compare actual costs to budgeted costs for management decision making.
- Normal losses are expected and included in overhead rates while abnormal losses are treated as period costs.
Elasticity is a measure of how responsive buyers and sellers are to changes in price and other market conditions. Price elasticity of demand specifically measures the responsiveness of quantity demanded to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. Demand can be perfectly inelastic, inelastic, unit elastic, or elastic depending on whether the quantity changes less than, equal to, or more than the price change. Determinants of price elasticity include whether a good is a necessity vs luxury and the availability of substitutes. Income elasticity measures responsiveness of demand to income changes.
Budgeting involves planning, directing, and controlling finances to achieve goals. A budget allocates estimated income and expenses over a set period of time. This document provides an example budget for a manufacturing company called Elite Accessories. The master budget includes sales, production, materials purchases, labor, and factory overhead budgets. It also includes income statement and balance sheet budgets such as cost of goods sold. The production budget estimates materials, labor hours, and costs needed to produce the estimated units to be sold. The budgets allow the company to plan and control its finances.
The document repeats the phrase "IQRA COMMERCENETWORK" multiple times without any other text or context. It appears to be promoting or advertising an organization or business called IQRA COMMERCENETWORK but provides no additional information about what they do or their purpose.
The document repeatedly lists the phrase "IQRA COMMERCENETWORK" across multiple lines without any other context. It provides no clear information about the topic or any events, people, or ideas.
1. The document defines and explains macroeconomics and its importance. Macroeconomics examines the overall economy and economic aggregates, rather than individual units.
2. It addresses key macroeconomic issues like determining income, employment, price levels, economic growth, business cycles, international trade, and unemployment.
3. Macroeconomics is important for formulating policies around issues like inflation, growth, and fiscal and monetary policy. However, it also has limitations like ignoring individual welfare.
Professor Hicks and Allen developed the indifference curve approach in 1928 as an improvement over earlier approaches that assumed utility could be measured and that consumers only purchase one good at a time. The indifference curve approach is based on ordinal utility and assumes consumers are interested in combinations of goods. It assumes rational consumer behavior, ordinal and non-satiable utility, diminishing marginal rate of substitution, consistency in choices, and that preferences are not contradictory. Goods are substitutable, so the consumer is indifferent between combinations that provide the same satisfaction. Indifference curves illustrate combinations that provide equal utility.
1. The document provides solutions to economics exam questions on macroeconomics, distinguishing between GDP at market price and factor price. GDP at market price is equal to GNP at market price minus depreciation, while GDP at factor cost is the sum of incomes to the four factors of production.
2. It then explains the expenditure method of measuring GDP as the sum of consumption, investment, government spending, and net exports. Precautions for this method include excluding used goods and transfer payments.
3. The document also covers the Keynesian theory of income and employment, which states that equilibrium income is determined by aggregate demand and supply and may be below full employment. Government spending can increase aggregate demand and raise income to
1. The document discusses microeconomics and macroeconomics. Microeconomics examines individual units like households and firms, while macroeconomics examines aggregates like national income and output.
2. It provides definitions and explanations of microeconomics and macroeconomics. Microeconomics is concerned with prices, allocation of resources, and economic efficiency at an individual level. Macroeconomics analyzes economy-wide issues like unemployment, inflation, and economic growth.
3. While micro and macroeconomics analyze different levels, they are interdependent and complementary in understanding how economies function. Both approaches are needed for comprehensive economic analysis.
This document provides solutions to economics examination questions from 2015 compiled by Khalid Aziz of Iqra Commerce Network. It covers topics in microeconomics including opportunity cost, production possibility curves, income and substitution effects, demand curves for normal goods, price elasticity of demand, kinked demand curves, and short-run equilibrium under monopolistic competition. Diagrams and equations are used to explain concepts such as opportunity cost, production possibility frontiers, indifference curves, budget constraints, demand curves, price elasticity, kinked demand curves, marginal revenue curves, and profit/loss calculations.
The document discusses various topics related to commercial law in India including agreements to sale, ascertainment of price under the Sale of Goods Act, rights of an unpaid seller, bill of lading, negotiable instruments, partnership law, and rights and duties of parties in bailment, agency, and suretyship agreements. It provides explanations and examples for each topic.
ICMAP CGBLE MOCK FOR NOVEMBER 2019 EXAMKhalid Aziz
The document is a mock exam for Corporate Governance, Business Laws & Ethics compiled by Sir Khalid Aziz of Iqra Commerce Network. It contains sample questions and answers for a mock exam on this subject compiled by Sir Khalid Aziz, and includes his contact information.
This document contains information about a mock exam for the PIPFA Financial Accounting qualification compiled by Sir Khalid Aziz of Iqra Commerce Network. It lists the title, compiler, and contact information for Sir Khalid Aziz multiple times.
This document contains a mock exam for PIPFA Management Accounting that was compiled by Sir Khalid Aziz of Iqra Commerce Network. It includes 9 multiple choice questions to help examinees prepare for the actual PIPFA Management Accounting exam, along with contact information for Sir Khalid Aziz.
B-COM Part 2,Business law Guess Paper of Sir Khalid Aziz,solved Khalid Aziz
The document discusses the classification and essential elements of contracts. It covers:
1) Contracts are classified as express, implied, or quasi based on formation. They are also unilateral, bilateral, executed, or executory based on performance.
2) The essential elements of a valid offer include being definite, creating legal obligations, communicated to the offeree, and not containing negative conditions.
3) An offer can be revoked any time before acceptance is communicated to the offeror.
This document provides sample questions for the B.Com Part 1 exam by Sir Khalid Aziz. It includes questions in Microeconomics, Macroeconomics, Economic Systems, Introduction to Business, Accounting, English, and Islamic Studies. Contact information is provided for Sir Khalid Aziz and Iqra Commerce Network for B.Com Part 1 guess papers and regular/private tutoring. Key subjects covered include economics analysis, financial statements, accounts receivable, inventory, depreciation, and partnership.
ScyllaDB is making a major architecture shift. We’re moving from vNode replication to tablets – fragments of tables that are distributed independently, enabling dynamic data distribution and extreme elasticity. In this keynote, ScyllaDB co-founder and CTO Avi Kivity explains the reason for this shift, provides a look at the implementation and roadmap, and shares how this shift benefits ScyllaDB users.
Freshworks Rethinks NoSQL for Rapid Scaling & Cost-EfficiencyScyllaDB
Freshworks creates AI-boosted business software that helps employees work more efficiently and effectively. Managing data across multiple RDBMS and NoSQL databases was already a challenge at their current scale. To prepare for 10X growth, they knew it was time to rethink their database strategy. Learn how they architected a solution that would simplify scaling while keeping costs under control.
What is an RPA CoE? Session 2 – CoE RolesDianaGray10
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Speaker:
Chris Bolin, Senior Intelligent Automation Architect Anika Systems
What is an RPA CoE? Session 1 – CoE VisionDianaGray10
In the first session, we will review the organization's vision and how this has an impact on the COE Structure.
Topics covered:
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• How do the organization’s priorities determine CoE Structure?
Speaker:
Chris Bolin, Senior Intelligent Automation Architect Anika Systems
From Natural Language to Structured Solr Queries using LLMsSease
This talk draws on experimentation to enable AI applications with Solr. One important use case is to use AI for better accessibility and discoverability of the data: while User eXperience techniques, lexical search improvements, and data harmonization can take organizations to a good level of accessibility, a structural (or “cognitive” gap) remains between the data user needs and the data producer constraints.
That is where AI – and most importantly, Natural Language Processing and Large Language Model techniques – could make a difference. This natural language, conversational engine could facilitate access and usage of the data leveraging the semantics of any data source.
The objective of the presentation is to propose a technical approach and a way forward to achieve this goal.
The key concept is to enable users to express their search queries in natural language, which the LLM then enriches, interprets, and translates into structured queries based on the Solr index’s metadata.
This approach leverages the LLM’s ability to understand the nuances of natural language and the structure of documents within Apache Solr.
The LLM acts as an intermediary agent, offering a transparent experience to users automatically and potentially uncovering relevant documents that conventional search methods might overlook. The presentation will include the results of this experimental work, lessons learned, best practices, and the scope of future work that should improve the approach and make it production-ready.
LF Energy Webinar: Carbon Data Specifications: Mechanisms to Improve Data Acc...DanBrown980551
This LF Energy webinar took place June 20, 2024. It featured:
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-Hallie Cramer, Google
-Daniel Roesler, UtilityAPI
-Henry Richardson, WattTime
In response to the urgency and scale required to effectively address climate change, open source solutions offer significant potential for driving innovation and progress. Currently, there is a growing demand for standardization and interoperability in energy data and modeling. Open source standards and specifications within the energy sector can also alleviate challenges associated with data fragmentation, transparency, and accessibility. At the same time, it is crucial to consider privacy and security concerns throughout the development of open source platforms.
This webinar will delve into the motivations behind establishing LF Energy’s Carbon Data Specification Consortium. It will provide an overview of the draft specifications and the ongoing progress made by the respective working groups.
Three primary specifications will be discussed:
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-Power systems data, focusing on grid data, inclusive of transmission and distribution networks, generation, intergrid power flows, and market settlement data
Conversational agents, or chatbots, are increasingly used to access all sorts of services using natural language. While open-domain chatbots - like ChatGPT - can converse on any topic, task-oriented chatbots - the focus of this paper - are designed for specific tasks, like booking a flight, obtaining customer support, or setting an appointment. Like any other software, task-oriented chatbots need to be properly tested, usually by defining and executing test scenarios (i.e., sequences of user-chatbot interactions). However, there is currently a lack of methods to quantify the completeness and strength of such test scenarios, which can lead to low-quality tests, and hence to buggy chatbots.
To fill this gap, we propose adapting mutation testing (MuT) for task-oriented chatbots. To this end, we introduce a set of mutation operators that emulate faults in chatbot designs, an architecture that enables MuT on chatbots built using heterogeneous technologies, and a practical realisation as an Eclipse plugin. Moreover, we evaluate the applicability, effectiveness and efficiency of our approach on open-source chatbots, with promising results.
The Microsoft 365 Migration Tutorial For Beginner.pptxoperationspcvita
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Session 1 - Intro to Robotic Process Automation.pdfUiPathCommunity
👉 Check out our full 'Africa Series - Automation Student Developers (EN)' page to register for the full program:
https://bit.ly/Automation_Student_Kickstart
In this session, we shall introduce you to the world of automation, the UiPath Platform, and guide you on how to install and setup UiPath Studio on your Windows PC.
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UiPath Studio CE Installation and Setup
💻 Extra training through UiPath Academy:
Introduction to Automation
UiPath Business Automation Platform
Explore automation development with UiPath Studio
👉 Register here for our upcoming Session 2 on June 20: Introduction to UiPath Studio Fundamentals: https://community.uipath.com/events/details/uipath-lagos-presents-session-2-introduction-to-uipath-studio-fundamentals/
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Northern Engraving | Modern Metal Trim, Nameplates and Appliance PanelsNorthern Engraving
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"Scaling RAG Applications to serve millions of users", Kevin GoedeckeFwdays
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Main news related to the CCS TSI 2023 (2023/1695)Jakub Marek
An English 🇬🇧 translation of a presentation to the speech I gave about the main changes brought by CCS TSI 2023 at the biggest Czech conference on Communications and signalling systems on Railways, which was held in Clarion Hotel Olomouc from 7th to 9th November 2023 (konferenceszt.cz). Attended by around 500 participants and 200 on-line followers.
The original Czech 🇨🇿 version of the presentation can be found here: https://www.slideshare.net/slideshow/hlavni-novinky-souvisejici-s-ccs-tsi-2023-2023-1695/269688092 .
The videorecording (in Czech) from the presentation is available here: https://youtu.be/WzjJWm4IyPk?si=SImb06tuXGb30BEH .
Northern Engraving | Nameplate Manufacturing Process - 2024Northern Engraving
Manufacturing custom quality metal nameplates and badges involves several standard operations. Processes include sheet prep, lithography, screening, coating, punch press and inspection. All decoration is completed in the flat sheet with adhesive and tooling operations following. The possibilities for creating unique durable nameplates are endless. How will you create your brand identity? We can help!
2. Outline
Segmented Reporting and Responsibility
Accounting System
Cost-Volume-Profit Analysis
Budgeting and Budgetary Control
Standard Costs and Variance Analysis
Managerial Decision Making
Khalid Aziz-0322-3385752
3. Introduction
Let’s look at the XYZ Company example.
A manager at XYZ Company wants to replace an old
machine with a new, more efficient machine.
New machine:
List price 900000
Annual variable expenses 800000
Expected life in years 5
Old machine:
Original cost 720000
Remaining book value 600000
Disposal value now 150000
Annual variable expenses 1000000
Remaining life in years 5
Khalid Aziz-0322-3385752
4. Introduction
XYZ’s sales are Rs2000000 per year.
Fixed expenses, other than amortization, are
Rs700000 per year.
Should the manager purchase the new machine?
Khalid Aziz-0322-3385752
5. Introduction
The manager recommends that the
company not purchase the new machine
since disposal of the old machine would
result in a loss:
Remaining book value 600000
Disposal value -150000
Loss from disposal 450000
Khalid Aziz-0322-3385752
6. Introduction
Is it correct?
What’s your comment to the
manager’s decision?
After learning this chapter,
you will know how to employ
the tools of managerial
accounting and make decisions
correctly.
Khalid Aziz-0322-3385752
7. Segmented Reporting
Organizations may break down their
operations into various segments
divisions, stores, services, or departments.
Management needs reports on each segment
for
cost management
performance evaluation
Khalid Aziz-0322-3385752
8. Segmented Reporting
Segments may be evaluated as
a cost centre
a profit centre
→Profit centre reports include information on a
segment’s revenues and costs.
an investment centre.
Some costs are direct and some are indirect.
Indirect costs may be allocated to various
departments.
Khalid Aziz-0322-3385752
9. Segmented Reporting
Service department costs are shared indirect
expenses of operation departments.
They may be allocated using a variety of bases.
Service Department Common Allocation Bases
General Office Number of employees
Personnel Number of employees
Payroll Number of employees
Advertising Sales
Purchasing Number of Purchase Orders
Cleaning Floor space occupied
Maintenance Floor space occupied
Khalid Aziz-0322-3385752
10. Responsibility Accounting System
Responsibility Accounting System
An accounting system
assigns managers the responsibility for
costs and expenses under their control.
Khalid Aziz-0322-3385752
11. Responsibility Accounting System
Responsibility accounting budgets
are prepared prior to each accounting period
Responsibility accounting performance
reports
compare actual costs and expenses to budgeted
amounts
Khalid Aziz-0322-3385752
12. Cost-Volume-Profit Analysis (CVP)
CVP analysis is used to answer:
How much must I sell to earn my desired
income?
How will income be affected if I reduce selling
prices to increase sales volume?
How will income be affected if I change the
sales mix of my products?
……?
Khalid Aziz-0322-3385752
13. Assumptions of CVP Analysis
CVP analysis assumes relations can be
expressed as straight lines within the
relevant range.
Unit selling price remains constant.
Unit variable costs remain constant.
Total fixed cost remain constant.
If the expected cost and revenue behaviour is
different from the assumptions, then the results of
CVP analysis are of limited use.
Khalid Aziz-0322-3385752
14. Scatter Diagram
Change in cost
Unit Variable Cost = Slope =
Change in units
1,000’s of Dollars
20
* ** *
Total Cost in
Vertical
* * distance
**
10 * * is the
change in
cost.
Horizontal distance is
the change in activity.
0
0 1 2 3 4
Activity, 1,000’s of Units Produced
Khalid Aziz-0322-3385752
15. High-Low Method
Unit Variable Cost = 30 - 20 =
5 - 1 Rs2.50/unit
1,000’s of Dollars
30
* ** * Vertical
Total Cost in
* * distance
20 * * ** is the
change
Horizontal distance is
10 in cost.
the change in activity.
(5 - 1)
(30 - 20)
0
0 1 2 3 4 5
Activity, 1,000’s of Units Sold Khalid Aziz-0322-3385752
16. Least-Squares Regression
Least-squares regression
is usually covered in advanced cost accounting
courses.
is commonly used with computer software
because of the large number of calculations
required.
The objective of the cost analysis remains the
same: determination of total fixed cost and the
variable unit cost.
Khalid Aziz-0322-3385752
17. Break-Even Analysis
The break-even point
is the unique sales
level at which a
Costs and Revenue
company neither earns Sales
in Dollars
a profit nor incurs a
Total costs
loss.
Volume in Units
Khalid Aziz-0322-3385752
18. Break-Even Analysis
The break-even point may be expressed in
units or in dollars of sales.
Fixed Costs
Break-even point in units =
Contribution margin per unit
Unit sales price less unit variable cost
Khalid Aziz-0322-3385752
19. Break-Even Analysis
The break-even formula may also be
expressed in sales dollars.
Fixed Costs
Break-even point in dollars =
Contribution margin ratio
Unit sales price
Unit variable cost
Khalid Aziz-0322-3385752
20. Computing Income from
Expected Sales
What is the income given a predicted level
of sales?
Pre-tax
= Sales – [Fixed costs + Variable costs]
Income
or
Pre-tax
= Sales –Fixed costs - Variable costs
Income
Khalid Aziz-0322-3385752
21. Sales Volume Needed to
Earn a Target Income
Break-even formulas can be adjusted to
show the sales volume needed to earn any
amount of income.
Fixed costs + Target income
Unit sales =
Contribution margin per unit
Fixed costs + Target income
Dollar sales =
Contribution margin ratio
Khalid Aziz-0322-3385752
22. Margin of Safety
Margin of safety
How much sales can decrease before the
company incurs a loss?
Margin of Expected sales - Break-even sales
safety, =
percent Expected sales
Khalid Aziz-0322-3385752
23. Sensitivity Analysis
The effects of changes in variables such as
sales price, variable costs, and fixed costs.
CVP analysis can be used to show the effects
of such changes.
New break- New fixed costs
even point =
in dollars New contribution margin ratio
Khalid Aziz-0322-3385752
24. Budgets
Budgets
formal statements of a company’s plans
expressed in monetary terms
attempt to capture the future activities of an
organization
are used by businesses, not-for-profit,
government, educational, and other types of
organizations.
Khalid Aziz-0322-3385752
25. Importance of Budgeting
Defines goals
and objectives
Promotes analysis and
Communicates plans
a focus on the future
and instructions
Advantages
Coordinates
business activities Motivates employees
Provides a basis for
evaluating performance
Khalid Aziz-0322-3385752
26. Budget Committee
Budget Committee
Consists of managers from all departments
of the organization
Provides central guidance
→to insure that individual budgets submitted from all
departments are realistic and coordinated.
Khalid Aziz-0322-3385752
27. Budget Committee
Top Management
Middle Middle
Management Management
Supervisor Supervisor Supervisor Supervisor
Flow of budget data is a bottom-up process.
Khalid Aziz-0322-3385752
28. Budget Cycle
Budget horizons are usually for one year
may extend for several years.
but
Operating Budget
2005 2006 2007 2008
The annual operating budget
may be divided into quarterly
or monthly budgets.
Khalid Aziz-0322-3385752
29. Rolling Budgets
Continuous or
Rolling Budget
2005 2006 2007 2008
The budget may be a twelve-month
budget that rolls forward one month
as the current month is completed.
Khalid Aziz-0322-3385752
30. Master Budget
Master Budget
A formal, comprehensive plan
→for the future of a company
consists of several budgets linked together
→to form a coordinated plan for the organization
Khalid Aziz-0322-3385752
31. Master Budget
Prepare
manufacturing
Prepare Develop budgets:
sales production material
budget budget labour
overhead
Prepare Prepare
financial Prepare
selling and
budgets: capital
cash
general
expenditure
income
administrative
budget
balance sheet budgets
Khalid Aziz-0322-3385752
32. Sales Budget
Sales budget
the starting point in the budgeting process.
Most of the other budgets are linked to the sales
budget.
Sales personnel are often involved in developing
the sales budgets.
Khalid Aziz-0322-3385752
33. Sales Budget
Sales Budget
Estimated Unit Price
Estimated Unit Sales
Analysis of economic and market conditions
+
Forecasts of customer needs from marketing personnel
Khalid Aziz-0322-3385752
34. Merchandise Purchases Budget
Merchandise Purchases Budget
Provides detailed information about the
purchases
necessary to fulfill the sales budget and provide
adequate inventories.
Merchandise
inventory to =
Budgeted
ending +
Budgeted
sales for the
_ Budgeted
beginning
be purchased inventory period inventory
Khalid Aziz-0322-3385752
35. Merchandise Purchases Budget
The quantity purchased is affected by:
Just-in-time inventory systems
→enable purchases of smaller, frequently delivered
quantities.
Safety stock inventory systems
→provide protection against lost sales caused by
delays in supplier shipments.
Khalid Aziz-0322-3385752
36. Selling Expense Budget
Selling Expense Budget
lists the types and amounts of selling expenses
Predictions of expenses are based on the sales
budget and past experience.
Khalid Aziz-0322-3385752
37. General and Administrative
Expense Budget
General and Administrative Expense
Budget
lists the predicted operating expenses not listed
in the sales budget
Includes both cash and non-cash expenses
Often prepared by the office
manager or person responsible
for general administration
Khalid Aziz-0322-3385752
38. Capital Expenditures Budget
Capital Expenditures Budget
lists the cash inflows or outflows
pertaining to the disposal or acquisition
of capital equipment.
usually affected by the organization’s
is
long-term plans.
Khalid Aziz-0322-3385752
39. Cash Budget
Cash Budget
lists the expected cash inflows and
outflows for the period
a tool used by management to
avoid excess cash balances or
cash shortages
Information from other budgets is used in its
preparation
Information from the cash budget is used to
prepare the budgeted income statement and
balance sheet
Khalid Aziz-0322-3385752
40. Production and Manufacturing Budgets
Manufacturing companies need to prepare
additional budgets that include:
Production budgets
Direct materials purchase budgets
Direct labour budgets
Manufacturing overhead budgets
Khalid Aziz-0322-3385752
41. Production and Manufacturing Budgets
Production and Manufacturing Budgets
Provides detailed information about the
production necessary to fulfill the sales budget
and provide adequate inventories.
Number of
units to be =
Budgeted
ending +
Budgeted
sales for
_ Budgeted
beginning
produced inventory the period inventory
Khalid Aziz-0322-3385752
42. Production and Manufacturing Budgets
Direct Materials Budget
Provides detailed information about the purchases of
raw materials necessary to fulfill the production budget
and provide adequate inventories.
Units of raw Materials Budgeted Budgeted
materials to = needed for + ending
_ beginning
be purchased production inventory inventory
Cost of raw Units of raw Material price
materials to = materials to × per unit of
be purchased be purchased raw material
Khalid Aziz-0322-3385752
43. Production and Manufacturing Budgets
Direct Labour and Manufacturing Overhead
Budgets
Provides information about the labour and
manufacturing overhead costs given the level of
production for the period.
Khalid Aziz-0322-3385752
44. Preparing Financial Budgets
Cash
Budget Budgeted Budgeted
Expected Income Balance
Receipts Statement Sheet
and
Disbursements
Khalid Aziz-0322-3385752
45. Budgetary Control
Develop the budget
from planned objectives.
Revise Compare
objectives actual with
This is an ongoing
and prepare budget and
process.
a new analyze any
budget. differences.
Take corrective and
strategic actions.
Khalid Aziz-0322-3385752
46. Capital Budgeting
Capital Budgeting
Analyzing alternative long-term investments
and deciding which assets to acquire or sell.
These decisions require careful analysis since:
→ The outcome is uncertain.
→ Large amounts of money are usually
involved.
→ Investment involves a long-term
commitment.
→ Any decision may be difficult or
impossible to reverse.
Khalid Aziz-0322-3385752
47. Zero-based Budgeting
Zero-based Budgeting
are prepared assuming no previous
activities for the activities being
planned
Managers must justify the amounts budgeted
for each activity
is popular among government and non-profit
organizations.
Khalid Aziz-0322-3385752
48. Fixed Budget
Fixed budgets
are prepared for a single, predicted level of
activity
Performance evaluation is difficult when actual
activity differs from the predicted level of
activity.
→Example: How much of the unfavourable cost
variance is due to higher activity, and how much is
due to poor cost control?
→To answer these questions, we must flex the budget
to the actual level of activity.
Khalid Aziz-0322-3385752
49. Flexible (Variable) Budgets
Flexible budgets
are prepared after a period’s activities are
complete.
Show revenues and expenses that should have
occurred at the actual level of activity.
Reveal cost variances due to good cost control or
lack of cost control.
Improve performance evaluation.
Khalid Aziz-0322-3385752
50. Flexible (Variable) Budgets
Flexible budgets
To prepare a budget for different activity levels
→we must know how costs behave with changes in activity levels
Total variable costs change in
direct proportion to
changes in activity.
Total fixed costs remain
unchanged within the
relevant range. Fixed
Khalid Aziz-0322-3385752
51. Standard Costs
Standard Costs
are preset costs for delivering a
product or service under normal
conditions.
are established through personnel,
engineering, and accounting studies
using past experience.
are benchmarks used in evaluating
performance.
are often used in setting budgets.
Khalid Aziz-0322-3385752
52. Standard Costs
Example: A standard cost card
Standard Standard
Quantity Price Standard
Cost factor or Hours or Rate Cost
Direct materials 1 kg $ 25 per kg $ 25.00
Direct labour 2 hours $ 20 per hour 40.00
Variable mfg. overhead 2 hours $ 10 per hour 20.00
Total standard unit cost $ 85.00
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53. Variance Analysis
Prepare standard
cost performance
reports
Analyze
Take action variances
Investigate
causes
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54. Variance Analysis
Management By Exception
Standard cost accounting provides management
with information about costs that differ from
budgeted amounts (variances).
Management may choose to focus only on
variances that are significant.
This approach is referred to as
Management by Exception.
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55. Variance Analysis
Material Variances
Actual Quantity Actual Quantity Standard Quantity
× × ×
Actual Price Standard Price Standard Price
Price Variance Quantity Variance
AQ(AP - SP) SP(AQ - SQ)
AQ = Actual Quantity SP = Standard Price
AP = Actual Price SQ = Standard Quantity
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56. Variance Analysis
Labour Variances
Actual Hours Actual Hours Standard Hours
× × ×
Actual Rate Standard Rate Standard Rate
Rate Variance Efficiency Variance
AH(AR - SR) SR(AH - SH)
AH = Actual Hours SR = Standard Rate
AR = Actual Rate SH = Standard Hours
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57. Variance Analysis
Variable Overhead Variances
Actual Flexible Budget Applied
Variable for Variable Variable
Overhead Overhead at Overhead at
Incurred Actual Hours Standard Hours
AH × AVR AH × SVR SH × SVR
Spending Efficiency
Variance Variance
AH = Actual Hours of Activity
AVR = Actual Variable Overhead Rate
SVR = Standard Variable Overhead Rate
SH = Standard Hours Allowed
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58. Variance Analysis
Fixed Overhead Variances
Actual Fixed Fixed Fixed
Overhead Overhead Overhead
Incurred Budget Applied
SH × SFR
Spending Volume
Variance Variance
SFR = Standard Fixed Overhead Rate
SH = Standard Hours Allowed
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59. Standard Costs
Standard cost accounting systems
record variances in the accounts
simplify recordkeeping and help in the
preparation of reports
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60. Discussions
ABC Company has the following direct
material standard to manufacture one unit
product:
3.0 kilograms per unit at Rs8.00 per kilogram
Last week 6600 kilograms of material were
purchased and used to make 2000 units. The
material cost a total of Rs53000.
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61. Discussions
What is the actual price per kilogram
paid for the material?
a. Rs7.26 per kilogram.
b. Rs8.13 per kilogram.
c. Rs8.03 per kilogram.
d. Rs8.00 per kilogram.
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62. Discussions
What is the actual price per kilogram
paid for the material?
a. Rs7.26 per kilogram.
b. Rs8.13 per kilogram.
c. Rs8.03 per kilogram.
d. Rs8.00 per kilogram.
AP = Rs53000 ÷ 6600 kg
AP = Rs8.03 per kg
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63. Discussions
ABC’s material price variance (MPV)
for the week was:
a. Rs198 favourable.
b. Rs198 unfavourable.
c. Rs189 favourable.
d. Rs189 unfavourable.
Khalid Aziz-0322-3385752
64. Discussions
ABC’s material price variance (MPV)
for the week was:
a. Rs198 favourable.
b. Rs198 unfavourable.
c. Rs189 favourable.
d. Rs189 unfavourable.
MPV = AQ(AP - SP)
MPV =6600 kg × (Rs8.03 - 8.00)
MPV = Rs198 Rs
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65. Discussions
The standard quantity of material that
should have been used to produce
2000 units is:
a. 6500 kilograms.
b. 6000 kilograms.
c. 7000 kilograms.
d. 5000 kilograms.
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66. Discussions
The standard quantity of material that
should have been used to produce
2000 units is:
a. 6500 kilograms.
b. 6000 kilograms.
c. 7000 kilograms.
d. 5000 kilograms.
SQ = 2000 units × 3 kg per unit
SQ = 6000 kg
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67. Discussions
ABC’s material quantity variance (MQV)
for the week was:
a. Rs4300 unfavourable.
b. Rs4300 favourable.
c. Rs4800 unfavourable.
d. Rs4800 favourable.
Khalid Aziz-0322-3385752
68. Discussions
ABC’s material quantity variance (MQV)
for the week was:
a. Rs4300 unfavourable.
b. Rs4300 favourable.
c. Rs4800 unfavourable.
d. Rs4800 favourable.
MQV = SP(AQ - SQ)
MQV = Rs8.00(6600 kg - 6000 kg)
MQV = Rs4800 unfavourable
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69. Managerial Decision Making
Managerial Decision Making
Cost accounting information is often used by
management for short-term decisions.
Decision making involves five steps:
→ Define the problem.
→ Identify alternatives.
→ Collect relevant information on alternatives.
→ Select the preferred alternative.
→ Analyze decisions made.
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70. Managerial Decision Making
Accepting additional business
should be based on incremental costs and
incremental revenues
Incremental amounts are those that occur if the
company decides to accept the new business
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71. Managerial Decision Making
Make or Buy Decisions
Incremental costs also are important in the
decision to make a product or purchase it from
a supplier
→The cost to produce an item must
include
direct materials
direct labour
incremental overhead
→We should not use the predetermined overhead rate
to determine product cost
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72. Managerial Decision Making
Scrap or Rework Defects
Costs incurred in manufacturing units of
product that do not meet quality standards are
sunk costs and cannot be recovered.
As long as rework costs are recovered through
sale of the product and rework does not
interfere with normal production, we should
rework rather than scrap.
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73. Managerial Decision Making
Sell or Process Further
sell partially completed products vs. process
them to completion
As a general rule, process further only if
incremental revenues exceed incremental costs
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74. Managerial Decision Making
Selecting Sales Mix
When a company sells a variety of products,
some are likely to be more profitable than
others. To make an informed decision
regarding sales mix, management must
consider . . .
→ The contribution margin of each product,
→ The facilities required to produce each
product and any constraints on the facilities, and
→ The demand for each product.
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75. Managerial Decision Making
Eliminating a Segment
A segment is a candidate for
elimination if its
revenues are less than its
avoidable expenses
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76. Managerial Decision Making
Qualitative factors in decisions
Qualitative factors are involved in most all
managerial decisions
→Quality
→Delivery schedule
→Supplier reputation
→Employee morale
→Customer opinions
→……
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77. Summary
Segments may be evaluated as a cost centre, a profit centre,
and an investment centre.
CVP Analysis: break-even analysis, computing income
from expected sales, sales volume needed to earn a target
income, margin of safety, and sensitivity analysis.
Importance of budgeting, master budget, and budgetary
control
Standard costs, variance analysis and standard cost
accounting systems
Managerial decision making: accepting additional business,
make or buy decisions, scrap or rework defects, sell or
process further, selecting sales mix, eliminating a segment
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79. Discussions
Relevant Cost Analysis
Savings in variable expenses
provided by the new machine
($200000 × 5 yrs.) 1000000
Net effect
Rs1000000 - Rs800000 = Rs200000 variable cost savings
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80. Discussions
Relevant Cost Analysis
Savings in variable expenses
provided by the new machine
($200000 × 5 yrs.) 1000000
Cost of the new machine (900000)
Disposal value of old machine 150000
Net effect 250000
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