This document discusses cost allocation methods and frameworks. It provides 4 types of cost objectives: service departments, producing departments, products/services, and customers. It describes direct and indirect costs and how they are allocated using cost drivers. It also discusses the direct and step-down methods for allocating service department costs and reciprocal services. Finally, it covers allocating costs associated with customers to determine customer profitability.
The document summarizes several common cost estimation methods used in project and cost analyses, including:
1) Account analysis, which involves reviewing accounts to determine fixed and variable costs.
2) The high-low method, which uses historical cost and activity data from multiple periods to estimate a cost equation.
3) The scatter graph method and regression analysis, which involve plotting historical data on a graph to derive a cost estimation equation.
The document provides examples of how to apply the account analysis and high-low methods to estimate fixed and variable production costs for a company.
Ss 03 CCP- AACE.org cost engineering management training- 2017 - dr. mousta...Moustafa Ismail Abu Dief
This document summarizes a lecture on activity-based cost management. It discusses how activity-based costing (ABC) can provide insights into indirect expenses by assigning costs to activities and tracing them to final cost objects. ABC expresses activities using verbs and links expenses to outputs. It also discusses how ABC can identify value-adding versus non-value-adding activities and be used for both local process improvement and enterprise-wide strategic decision-making. More advanced ABC systems integrate with other decision support systems for automated data collection and reporting.
Akuntansi Manajemen Edisi 8 oleh Hansen & Mowen Bab 7Dwi Wahyu
This document discusses cost allocation methods for support and producing departments. It begins by defining key terms like allocation, common costs, causal factors, and budgeted vs actual costs. It then explains the direct, sequential, and reciprocal methods for allocating support department costs to producing departments. Multiple charging rates and departmental overhead rates are also covered. Finally, it discusses allocating joint costs between products using physical units, sales value at split-off, or net realizable value methods.
Business process and financial reengineeringkwikshubh
This document discusses cost modeling in business process reengineering (BPR), activity-based costing (ABC), and executive information systems (EIS). It defines a cost model as rules for allocating expenses to accounts. It describes ABC as assigning indirect costs to activities based on resource consumption. EIS provides executives with integrated internal and external data in graphical formats to aid trend analysis and decision making.
ACCT 2220 Group Discussion 2 Part IABC Company uses two depa.docxannetnash8266
ACCT 2220 Group Discussion 2
Part I
ABC Company uses two departments to make its products. Department I is a cutting department that is machine intensive and uses very few employees. Machines cut and form parts and then place the finished parts on a conveyor belt that carries them to Department II where they are assembled into finished goods. The assembly department is labor intensive and requires many workers to assemble parts into finished goods. The company’s manufacturing facility incurs two significant overhead costs: employee fringe benefits and utility costs. The annual costs of fringe benefits are $320,000 and utility costs are $248,000. The typical consumption patterns for the two departments are as follows.
Department I
Department II
Total
Machine hours used
14,300
5,700
20,000
Direct labor hours used
6,700
9,300
16,000
The supervisor of each department receives a bonus based on how well the department controls costs. The company’s current policy requires using a single allocation base (machine hours or labor hours) to allocate the total overhead cost of $568,000.
Required:
a.
Assume that you are the supervisor of Department I. Choose the allocation base that would minimize your department’s share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected.
b.
Assume that you are the supervisor of Department II. Choose the allocation base that would minimize your department’s share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected.
c.
Assume that you are the plant manager and have the authority to change the company’s overhead allocation policy. Formulate an overhead allocation policy that would be fair to the supervisors of both Department I and Department II. Compute the overhead allocations for each department using your policy.
Part II
Gizmo Gadgets produces gadgets in three market categories, widget, wydot, and wingit. Gizmo Gadgets has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers.
Category
Total Pooled Cost
Types of Costs
Cost Driver
Unit
$
718,900
Indirect labor wages, supplies, depreciation,
machine maintenance
Machine hours
Batch
694,100
Materials handling, inventory storage, labor for setups, packaging, labeling and shipping, scheduling
Number of production orders
Product
210,400
Research and development
Time spent by research department
Facility
416,000
Rent, utilities, maintenance, admin. salaries, security
Square footage
Additional data for eac.
Advantages and limitations of cost accountingUday Teke
Cost accounting provides several advantages to management, employees, creditors, government, and society. For management, it helps fix responsibility, measure economic performance, set prices, aid decision making, prepare interim accounts, minimize waste, facilitate comparisons, and increase profitability. Employees benefit through better wages, job security, and merit rating. Creditors gain increased confidence and knowledge of business solvency. The government uses cost data for policymaking, taxation, and national planning. Society benefits from cost reduction sharing lower prices, and new employment opportunities. However, cost accounting also has limitations as it can be expensive, complex, not universally applicable, lack precision, and exclude social accounting.
This document contains the presentation slides for a group project on apportionment of overheads. It discusses the types of apportionment including primary and secondary distribution. Methods for secondary distribution like service or use, analysis or survey, and ability to pay are outlined. Direct distribution, step, and reciprocal service methods for re-apportionment are also described. Illustrations with numerical examples of overhead analysis sheets and apportionment calculations are provided. Absorption of overheads and formulas for actual, pre-determined, blanket, and multiple overhead rates are defined.
This document discusses cost allocation methods and frameworks. It provides 4 types of cost objectives: service departments, producing departments, products/services, and customers. It describes direct and indirect costs and how they are allocated using cost drivers. It also discusses the direct and step-down methods for allocating service department costs and reciprocal services. Finally, it covers allocating costs associated with customers to determine customer profitability.
The document summarizes several common cost estimation methods used in project and cost analyses, including:
1) Account analysis, which involves reviewing accounts to determine fixed and variable costs.
2) The high-low method, which uses historical cost and activity data from multiple periods to estimate a cost equation.
3) The scatter graph method and regression analysis, which involve plotting historical data on a graph to derive a cost estimation equation.
The document provides examples of how to apply the account analysis and high-low methods to estimate fixed and variable production costs for a company.
Ss 03 CCP- AACE.org cost engineering management training- 2017 - dr. mousta...Moustafa Ismail Abu Dief
This document summarizes a lecture on activity-based cost management. It discusses how activity-based costing (ABC) can provide insights into indirect expenses by assigning costs to activities and tracing them to final cost objects. ABC expresses activities using verbs and links expenses to outputs. It also discusses how ABC can identify value-adding versus non-value-adding activities and be used for both local process improvement and enterprise-wide strategic decision-making. More advanced ABC systems integrate with other decision support systems for automated data collection and reporting.
Akuntansi Manajemen Edisi 8 oleh Hansen & Mowen Bab 7Dwi Wahyu
This document discusses cost allocation methods for support and producing departments. It begins by defining key terms like allocation, common costs, causal factors, and budgeted vs actual costs. It then explains the direct, sequential, and reciprocal methods for allocating support department costs to producing departments. Multiple charging rates and departmental overhead rates are also covered. Finally, it discusses allocating joint costs between products using physical units, sales value at split-off, or net realizable value methods.
Business process and financial reengineeringkwikshubh
This document discusses cost modeling in business process reengineering (BPR), activity-based costing (ABC), and executive information systems (EIS). It defines a cost model as rules for allocating expenses to accounts. It describes ABC as assigning indirect costs to activities based on resource consumption. EIS provides executives with integrated internal and external data in graphical formats to aid trend analysis and decision making.
ACCT 2220 Group Discussion 2 Part IABC Company uses two depa.docxannetnash8266
ACCT 2220 Group Discussion 2
Part I
ABC Company uses two departments to make its products. Department I is a cutting department that is machine intensive and uses very few employees. Machines cut and form parts and then place the finished parts on a conveyor belt that carries them to Department II where they are assembled into finished goods. The assembly department is labor intensive and requires many workers to assemble parts into finished goods. The company’s manufacturing facility incurs two significant overhead costs: employee fringe benefits and utility costs. The annual costs of fringe benefits are $320,000 and utility costs are $248,000. The typical consumption patterns for the two departments are as follows.
Department I
Department II
Total
Machine hours used
14,300
5,700
20,000
Direct labor hours used
6,700
9,300
16,000
The supervisor of each department receives a bonus based on how well the department controls costs. The company’s current policy requires using a single allocation base (machine hours or labor hours) to allocate the total overhead cost of $568,000.
Required:
a.
Assume that you are the supervisor of Department I. Choose the allocation base that would minimize your department’s share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected.
b.
Assume that you are the supervisor of Department II. Choose the allocation base that would minimize your department’s share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected.
c.
Assume that you are the plant manager and have the authority to change the company’s overhead allocation policy. Formulate an overhead allocation policy that would be fair to the supervisors of both Department I and Department II. Compute the overhead allocations for each department using your policy.
Part II
Gizmo Gadgets produces gadgets in three market categories, widget, wydot, and wingit. Gizmo Gadgets has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers.
Category
Total Pooled Cost
Types of Costs
Cost Driver
Unit
$
718,900
Indirect labor wages, supplies, depreciation,
machine maintenance
Machine hours
Batch
694,100
Materials handling, inventory storage, labor for setups, packaging, labeling and shipping, scheduling
Number of production orders
Product
210,400
Research and development
Time spent by research department
Facility
416,000
Rent, utilities, maintenance, admin. salaries, security
Square footage
Additional data for eac.
Advantages and limitations of cost accountingUday Teke
Cost accounting provides several advantages to management, employees, creditors, government, and society. For management, it helps fix responsibility, measure economic performance, set prices, aid decision making, prepare interim accounts, minimize waste, facilitate comparisons, and increase profitability. Employees benefit through better wages, job security, and merit rating. Creditors gain increased confidence and knowledge of business solvency. The government uses cost data for policymaking, taxation, and national planning. Society benefits from cost reduction sharing lower prices, and new employment opportunities. However, cost accounting also has limitations as it can be expensive, complex, not universally applicable, lack precision, and exclude social accounting.
This document contains the presentation slides for a group project on apportionment of overheads. It discusses the types of apportionment including primary and secondary distribution. Methods for secondary distribution like service or use, analysis or survey, and ability to pay are outlined. Direct distribution, step, and reciprocal service methods for re-apportionment are also described. Illustrations with numerical examples of overhead analysis sheets and apportionment calculations are provided. Absorption of overheads and formulas for actual, pre-determined, blanket, and multiple overhead rates are defined.
This document provides an overview of activity-based costing (ABC). It discusses the limitations of traditional costing systems and the need for ABC. It describes ABC as focusing on identifying activities associated with making products and linking resource costs to activities and products. The document outlines the key steps in an ABC system: 1) tracing costs to activities, 2) selecting cost drivers, and 3) tracing costs from activities to products. It also provides an example comparing product costs and profits under traditional and ABC systems.
Proposal For Energy Management Gold Standard (REV).pptxMohamadRazin2
1. Hospital Sungai Buloh is a major public hospital in Selangor, Malaysia that provides a wide range of medical services including emergency care and specialized services using modern facilities.
2. The hospital consumed 32,379,113 kWh of power in 2023, exceeding the threshold that requires compliance with EMEER 2008 energy efficiency regulations.
3. The regulations require the hospital to appoint an energy manager, submit energy management plans and reports, and achieve at least 5% annual energy savings over the next two years to obtain a 2-star rating under the energy efficiency accreditation scheme.
This document is a project completion report for a department level wage accounting system created for Raymond Limited. The system allows daily and monthly wage entries by department, calculates average wages, and generates daily, monthly, and yearly reports. It addresses issues around date validation and allows an administrator to manage master data like departments, designations, and lock dates. The system was created using HTML, CSS, ASP, SQL, and hosted on IIS.
managing reward/copensation with the help of computersAswini Ssb
This document discusses how computers can help with employee reward processes. It describes how computers can provide an employee reward database to store and report on employee pay and benefit data. It also explains how computers can assist with pay review modeling by running "what if" scenarios to estimate the costs of different pay increase levels and distributions. Finally, it discusses how computers can help with job evaluation by maintaining evaluation records and speeding up the evaluation process.
This document discusses how computers can help with employee reward processes. It describes how computers can provide an employee reward database to store and report on employee pay and benefit data. It also explains how computers can assist with pay review modeling by running "what if" scenarios to estimate the costs of different pay increase levels and distributions. Finally, it discusses how computers can help with job evaluation by maintaining evaluation records and speeding up the evaluation process.
The document discusses activity-based costing (ABC) and activity-based management (ABM). It provides details on how Aerotech, a company that produces circuit boards, implemented ABC to more accurately assign overhead costs. ABC identified multiple cost pools associated with different activities. This revealed that the traditional costing system understated the costs of complex, low volume products. ABM focuses on managing activities to reduce costs by eliminating non-value added activities. Customer profitability analysis and just-in-time inventory systems are also discussed.
Overhead costs are indirect costs that cannot be directly traced to specific products or services. Absorption costing and activity-based costing (ABC) are two approaches to allocating overhead costs. Absorption costing uses cost centers and predetermined overhead rates to allocate overhead, while ABC identifies activities causing overhead and assigns costs based on cost drivers. ABC aims to improve cost accuracy but requires more resources and its outputs still involve subjective allocations. Both methods allocate fixed overhead costs that may remain even if a product is discontinued.
Here are the allocations using the specified allocation bases:
b. The allocation bases used are reasonable for the costs allocated. Employee benefits and telecommunications are allocated based on headcount, which is a reasonable driver for those costs. Rent is allocated based on square footage occupied, which reasonably drives the rental costs. General and administrative costs are allocated based on sales, which is also reasonable since these costs support sales activities.
P2. a. Cost Pools:
Maintenance $120,000
Utilities $80,000
Security $60,000
b. Allocation Bases:
Maintenance: Machine hours
Utilities: Square footage
Security: Number of employees
c. Department A:
Machine
Costing is the process of determining the cost of manufacturing a product or providing a service. Cost accounting is the formal process of recording costs and preparing financial statements to ascertain and control costs. Cost accountancy applies costing and cost accounting principles to control costs and determine profitability. The main objectives of cost accounting are determining selling prices, controlling costs, providing information for decision making, ascertaining costs and profits, and preparing financial statements. Cost accounting provides useful information to management, employees, consumers, creditors, and benefits the national economy. It helps classify and analyze costs, formulate business policies, enable budgeting, and ensure best use of limited resources.
1. ACC was an early adopter of automation and information technology in India, starting in 1968.
2. They have continuously upgraded their systems over the decades, transitioning from basic keypunch machines to modern online systems and infrastructure.
3. This included moving from older batch processing systems on IBM 1401 and Data General machines to current Linux/UNIX and Windows platforms.
4. ACC's longstanding commitment to progress through technology demonstrates a practice of harnessing relevant innovations to improve applications and infrastructure.
This document provides information on activity-based costing (ABC), including:
- The key concepts of ABC including cost objects, activities, cost pools, and cost drivers.
- The steps involved in the ABC process, such as identifying activities, calculating activity costs, determining cost drivers, and assigning costs to products.
- An example problem demonstrating the calculation of product costs per unit using both traditional costing and ABC.
- The benefits of ABC including a focus on cost behaviors and value-added activities to provide better cost information for pricing and profitability decisions.
Cost allocation provides managers with information to make strategic and operational decisions by assigning indirect costs to cost objects like products, departments, or activities. There are three main reasons for allocating costs: 1) to provide information for economic decision making, 2) to motivate managers and employees, and 3) to compute income and asset valuation. Costs can be allocated between organizational units, from service departments to other units, or within a unit to activities, products, or customers. Allocation methods include single or dual rates that allocate variable and fixed costs separately using a cost driver like space occupied or direct costs.
This document discusses cost allocation methods for support departments. It begins by defining support and producing departments, and the objectives of cost allocation. It then describes three methods for allocating support department costs to producing departments: direct, sequential, and reciprocal. Examples are provided to illustrate how each method is applied. The document concludes by explaining how to calculate departmental overhead rates using the allocated support department costs.
The document discusses activity-based costing (ABC), a method that assigns costs to products and services based on the activities consumed by each. It provides a 4-step process for ABC implementation: 1) identify activities, 2) assign resource costs to activities, 3) identify outputs, and 4) assign activity costs to outputs using cost drivers. ABC aims to more accurately determine costs by tracing them to specific causes like production activities rather than allocating overhead broadly.
The document discusses cost allocation methods for service departments. It covers:
1. The single-rate and dual-rate methods for allocating service department costs, with the dual-rate method treating fixed and variable costs separately.
2. The benefits of allocating costs, including encouraging efficient use of resources and providing accurate cost data for decision making.
3. Examples of allocation bases for different service departments, and the pitfalls to avoid like allocating fixed costs using a variable base.
The Clean Air Act was passed in 1970 to regulate air pollution in the United States. It established national standards for air quality and emissions. The law aimed to reduce air pollution through enforcement of stricter standards for coal plants, factories, and vehicles. It has been amended several times to address economic and technological feasibility concerns while still pursuing air quality goals. Overall, the Clean Air Act has significantly improved air quality in the U.S. since its passage.
This document discusses different methods for allocating joint costs across multiple products or divisions. It begins by defining joint costs as those incurred to produce two or more outputs from the same input. The key methods discussed are:
1) Allocating joint costs based on the net realizable value of each product after the split-off point.
2) Allocating joint costs based on the weight or other physical measures of each product.
3) Calculating the profitability of each product both with and without an allocation of joint costs to demonstrate how allocation impacts perceived profitability.
This document summarizes a student project on developing a Gym Management System. It includes sections on the cover page, candidate's declaration, dedication, acknowledgements, abstract, list of figures, and table of contents. The project aims to automate the manual gym management process. It allows admins to manage member profiles, payments, and schedules. It also provides users a platform to view schedules, payments history, and exercise plans. The system is designed to save time for both admins and users while making gym management more efficient.
A Medical Price Prediction System using Boosting Algorithms through Machine L...IRJET Journal
This document presents research on using machine learning algorithms to predict medical insurance costs. The researchers trained and tested various regression algorithms on health insurance data to predict premium costs, including linear regression, random forest, and gradient boosting. Random forest regression performed best with an r2 score of 0.862533. Comparing actual and predicted costs through algorithms can help insurance companies choose the most accurate model for predicting customer premiums and improving medical access. The researchers conclude random forest was the best algorithm identified for accurately predicting health insurance costs.
The document discusses budgetary control, which is the process of preparing budgets for future periods, comparing actual performance to the budgets, and taking corrective actions for any variances. It defines budgetary control and lists its essential elements, which include support from top management, participation from responsible executives, clear objectives, and adequate accounting systems. The document also explains different types of budgets such as operating, capital, master, and flexible budgets.
This document provides an overview of activity-based costing (ABC). It discusses the limitations of traditional costing systems and the need for ABC. It describes ABC as focusing on identifying activities associated with making products and linking resource costs to activities and products. The document outlines the key steps in an ABC system: 1) tracing costs to activities, 2) selecting cost drivers, and 3) tracing costs from activities to products. It also provides an example comparing product costs and profits under traditional and ABC systems.
Proposal For Energy Management Gold Standard (REV).pptxMohamadRazin2
1. Hospital Sungai Buloh is a major public hospital in Selangor, Malaysia that provides a wide range of medical services including emergency care and specialized services using modern facilities.
2. The hospital consumed 32,379,113 kWh of power in 2023, exceeding the threshold that requires compliance with EMEER 2008 energy efficiency regulations.
3. The regulations require the hospital to appoint an energy manager, submit energy management plans and reports, and achieve at least 5% annual energy savings over the next two years to obtain a 2-star rating under the energy efficiency accreditation scheme.
This document is a project completion report for a department level wage accounting system created for Raymond Limited. The system allows daily and monthly wage entries by department, calculates average wages, and generates daily, monthly, and yearly reports. It addresses issues around date validation and allows an administrator to manage master data like departments, designations, and lock dates. The system was created using HTML, CSS, ASP, SQL, and hosted on IIS.
managing reward/copensation with the help of computersAswini Ssb
This document discusses how computers can help with employee reward processes. It describes how computers can provide an employee reward database to store and report on employee pay and benefit data. It also explains how computers can assist with pay review modeling by running "what if" scenarios to estimate the costs of different pay increase levels and distributions. Finally, it discusses how computers can help with job evaluation by maintaining evaluation records and speeding up the evaluation process.
This document discusses how computers can help with employee reward processes. It describes how computers can provide an employee reward database to store and report on employee pay and benefit data. It also explains how computers can assist with pay review modeling by running "what if" scenarios to estimate the costs of different pay increase levels and distributions. Finally, it discusses how computers can help with job evaluation by maintaining evaluation records and speeding up the evaluation process.
The document discusses activity-based costing (ABC) and activity-based management (ABM). It provides details on how Aerotech, a company that produces circuit boards, implemented ABC to more accurately assign overhead costs. ABC identified multiple cost pools associated with different activities. This revealed that the traditional costing system understated the costs of complex, low volume products. ABM focuses on managing activities to reduce costs by eliminating non-value added activities. Customer profitability analysis and just-in-time inventory systems are also discussed.
Overhead costs are indirect costs that cannot be directly traced to specific products or services. Absorption costing and activity-based costing (ABC) are two approaches to allocating overhead costs. Absorption costing uses cost centers and predetermined overhead rates to allocate overhead, while ABC identifies activities causing overhead and assigns costs based on cost drivers. ABC aims to improve cost accuracy but requires more resources and its outputs still involve subjective allocations. Both methods allocate fixed overhead costs that may remain even if a product is discontinued.
Here are the allocations using the specified allocation bases:
b. The allocation bases used are reasonable for the costs allocated. Employee benefits and telecommunications are allocated based on headcount, which is a reasonable driver for those costs. Rent is allocated based on square footage occupied, which reasonably drives the rental costs. General and administrative costs are allocated based on sales, which is also reasonable since these costs support sales activities.
P2. a. Cost Pools:
Maintenance $120,000
Utilities $80,000
Security $60,000
b. Allocation Bases:
Maintenance: Machine hours
Utilities: Square footage
Security: Number of employees
c. Department A:
Machine
Costing is the process of determining the cost of manufacturing a product or providing a service. Cost accounting is the formal process of recording costs and preparing financial statements to ascertain and control costs. Cost accountancy applies costing and cost accounting principles to control costs and determine profitability. The main objectives of cost accounting are determining selling prices, controlling costs, providing information for decision making, ascertaining costs and profits, and preparing financial statements. Cost accounting provides useful information to management, employees, consumers, creditors, and benefits the national economy. It helps classify and analyze costs, formulate business policies, enable budgeting, and ensure best use of limited resources.
1. ACC was an early adopter of automation and information technology in India, starting in 1968.
2. They have continuously upgraded their systems over the decades, transitioning from basic keypunch machines to modern online systems and infrastructure.
3. This included moving from older batch processing systems on IBM 1401 and Data General machines to current Linux/UNIX and Windows platforms.
4. ACC's longstanding commitment to progress through technology demonstrates a practice of harnessing relevant innovations to improve applications and infrastructure.
This document provides information on activity-based costing (ABC), including:
- The key concepts of ABC including cost objects, activities, cost pools, and cost drivers.
- The steps involved in the ABC process, such as identifying activities, calculating activity costs, determining cost drivers, and assigning costs to products.
- An example problem demonstrating the calculation of product costs per unit using both traditional costing and ABC.
- The benefits of ABC including a focus on cost behaviors and value-added activities to provide better cost information for pricing and profitability decisions.
Cost allocation provides managers with information to make strategic and operational decisions by assigning indirect costs to cost objects like products, departments, or activities. There are three main reasons for allocating costs: 1) to provide information for economic decision making, 2) to motivate managers and employees, and 3) to compute income and asset valuation. Costs can be allocated between organizational units, from service departments to other units, or within a unit to activities, products, or customers. Allocation methods include single or dual rates that allocate variable and fixed costs separately using a cost driver like space occupied or direct costs.
This document discusses cost allocation methods for support departments. It begins by defining support and producing departments, and the objectives of cost allocation. It then describes three methods for allocating support department costs to producing departments: direct, sequential, and reciprocal. Examples are provided to illustrate how each method is applied. The document concludes by explaining how to calculate departmental overhead rates using the allocated support department costs.
The document discusses activity-based costing (ABC), a method that assigns costs to products and services based on the activities consumed by each. It provides a 4-step process for ABC implementation: 1) identify activities, 2) assign resource costs to activities, 3) identify outputs, and 4) assign activity costs to outputs using cost drivers. ABC aims to more accurately determine costs by tracing them to specific causes like production activities rather than allocating overhead broadly.
The document discusses cost allocation methods for service departments. It covers:
1. The single-rate and dual-rate methods for allocating service department costs, with the dual-rate method treating fixed and variable costs separately.
2. The benefits of allocating costs, including encouraging efficient use of resources and providing accurate cost data for decision making.
3. Examples of allocation bases for different service departments, and the pitfalls to avoid like allocating fixed costs using a variable base.
The Clean Air Act was passed in 1970 to regulate air pollution in the United States. It established national standards for air quality and emissions. The law aimed to reduce air pollution through enforcement of stricter standards for coal plants, factories, and vehicles. It has been amended several times to address economic and technological feasibility concerns while still pursuing air quality goals. Overall, the Clean Air Act has significantly improved air quality in the U.S. since its passage.
This document discusses different methods for allocating joint costs across multiple products or divisions. It begins by defining joint costs as those incurred to produce two or more outputs from the same input. The key methods discussed are:
1) Allocating joint costs based on the net realizable value of each product after the split-off point.
2) Allocating joint costs based on the weight or other physical measures of each product.
3) Calculating the profitability of each product both with and without an allocation of joint costs to demonstrate how allocation impacts perceived profitability.
This document summarizes a student project on developing a Gym Management System. It includes sections on the cover page, candidate's declaration, dedication, acknowledgements, abstract, list of figures, and table of contents. The project aims to automate the manual gym management process. It allows admins to manage member profiles, payments, and schedules. It also provides users a platform to view schedules, payments history, and exercise plans. The system is designed to save time for both admins and users while making gym management more efficient.
A Medical Price Prediction System using Boosting Algorithms through Machine L...IRJET Journal
This document presents research on using machine learning algorithms to predict medical insurance costs. The researchers trained and tested various regression algorithms on health insurance data to predict premium costs, including linear regression, random forest, and gradient boosting. Random forest regression performed best with an r2 score of 0.862533. Comparing actual and predicted costs through algorithms can help insurance companies choose the most accurate model for predicting customer premiums and improving medical access. The researchers conclude random forest was the best algorithm identified for accurately predicting health insurance costs.
The document discusses budgetary control, which is the process of preparing budgets for future periods, comparing actual performance to the budgets, and taking corrective actions for any variances. It defines budgetary control and lists its essential elements, which include support from top management, participation from responsible executives, clear objectives, and adequate accounting systems. The document also explains different types of budgets such as operating, capital, master, and flexible budgets.
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FA II - Chapter 4; Part II, Leases.pptx bestKalkaye
This document outlines the key concepts and accounting treatments related to lease accounting. It discusses lease accounting from the perspectives of both the lessee and the lessor. For lessees, it describes how to classify and account for operating and capital leases. For lessors, it distinguishes between operating, direct financing, and sales-type leases. It also discusses special topics that can complicate lease accounting, such as residual values, bargain purchase options, and initial direct costs. The document uses illustrations and journal entries to demonstrate how to apply lease accounting standards.
Abhay Bhutada Leads Poonawalla Fincorp To Record Low NPA And Unprecedented Gr...Vighnesh Shashtri
Under the leadership of Abhay Bhutada, Poonawalla Fincorp has achieved record-low Non-Performing Assets (NPA) and witnessed unprecedented growth. Bhutada's strategic vision and effective management have significantly enhanced the company's financial health, showcasing a robust performance in the financial sector. This achievement underscores the company's resilience and ability to thrive in a competitive market, setting a new benchmark for operational excellence in the industry.
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1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
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Laura Adkins-Hackett, Economist, LMIC, and Sukriti Trehan, Data Scientist, LMIC, presented their research exploring trends in the skills listed in OJPs to develop a deeper understanding of in-demand skills. This research project uses pointwise mutual information and other methods to extract more information about common skills from the relationships between skills, occupations and regions.
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
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2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
2. Cost Allocation
is the process of assigning costs in a Cost
Pool to the appropriate Cost Objects!
A Cost Pool is a collection of costs that are to
be allocated to Cost Objects!
Instructor: Kassaye Tuji 1/8/2023
Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
5.1. Cost Allocation & Cost Object
Lincoln University, California-USA; Western University College; Extension Ethiopia
Cost Object is anything for which cost
data are desired.
Example:
Products,
Product Lines,
Customers,
Jobs,
Departments,
Sub-units
3. Instructor: Kassaye Tuji 1/8/2023
Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
1.To provide information for economic decisions!
2.To motivate managers and other employees!
3.To justify costs or compute reimbursement!
4.To measure income & assets for reporting to
external parties!
5.2. Purposes of Cost Allocation
4. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
5. 5.3 Cost Allocation Methods
Instructor: Kassaye Tuji 1/8/2023
Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
▓ Single-Rate and Dual-Rate Methods
1.The Single-Rate Allocation Method
Pools all costs in one cost pool &
Allocates theses costs to cost objects using the
same rate per unit of the single allocation base!
There is no distinction between costs in a
cost pool in terms of cost behavior, such
as fixed costs versus variable costs!
6. Cost Allocation Methods…
Instructor: Kassaye Tuji 1/8/2023
Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
▓ Single-Rate and Dual-Rate Methods…
2. The Dual-Rate Cost Allocation Method
Classifies costs in each cost pool into sub
cost pools:
a variable cost pool &
a fixed cost pool.
Each of these pools uses a different cost
allocation base!
7. Single-Rate and Dual-Rate Methods…
Instructor: Kassaye Tuji 1/8/2023
Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
Example:
Sand Hill Co. has a Central Computer Department; the department has two
users, Microcomputer Division & Peripheral Equipment Division.
The following data apply to the coming budget year
Fixed Costs of operating the computer facility in the
6,000-18,000 hrs relevant range Br. 3, 000,000/year
Total Capacity Available: 18,000 hrs.
Budgeted Long-Run Usage
Microcomputer Division 8,000 hrs
Peripheral Equipment Division 4,000 hrs
Total 12,000 hrs
Budgeted Variable Cost per hour $200/hour used
Assume during the year the:
Microcomputer used 9,000 hrs and
Peripheral Equipment used 3,000 actual hours.
8. Single Rate Allocation Method
Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
Total Cost Pool =3,000,000+ (200*12,000) = 5,400,000
Budgeted Usage (8,000 + 4,000) = 12,000hrs
Budgeted Totals Rate per Hour = 5,400,000 = Br.450/hr.
12,000hrs
Allocation rate for Microcomputer Division Br. 450/hr
Allocation rate for Peripheral Division Br. 450/hr
Microcomputer =9000*450 = Br. 4,050,000
Peripheral Equipment = 3000*450 = Br. 1,350,000
9. Dual-Rate Allocation Method
Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
Allocation of Fixed Costs to:
Microcomputer Division = 8000/12000 hrs * 3,000,000 = Br. 2,000,000/year
Peripheral Equipment Division=4000/12000 hrs * 3,000,000= Br. 1,000,000/year
Allocation of Total Costs to:
Microcomputer: 2,000,000 + (200*9000) = Br. 3,800,000
Peripheral Equipment: 1,000,000 + (200*3000) = Br. 1,600,000
10. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
11. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
Operating and Support Departments
Operating Department (Production Department)
adds value to a product or service that is
observable by a customer.
Support Departments (Service Department)
provide the service that assists other internal
departments.
Methods of Support Department Cost Allocation:
1. Direct Allocation Method
2. Step-Down Allocation Method
3. Reciprocal Allocation Method
12. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
Example:
ABC Engineering has Two Support Departments
and Two Operating Departments.
Costs are accumulated in each department for
planning and control purposes.
Support Departments Operating Departments
Plant Maintenance Machining
Information Systems Assembly
The two support departments provide reciprocal
support to each other as well as to the two operating
departments.
13. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
Support Departments Operating Departments
Plant Main. Infon. Sym. Machining Assembly Total
Budgeted MOH Costs
Before any Inter-Dep’t
Cost Allocations $600,000 $116,000 $400,000 $200,000 1,316,000
Support Work Furnished
By Plant Maintenance:
Budgeted Labor Hrs. - 1,600 2,400 4,000 8,000
Percentage - 20% 30% 50% 100%
By Information Sym:
Budgeted Computer Hrs. 200 - 1600 200 2000
Percentage 10% - 80% 10% 100%
14. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
Required:
Allocate costs using the three methods:
Plant Maintenance Machining
Information Systems Assembly
1. Direct Allocation Method
This method is the most widely used method of allocating
support department costs.
This method allocates each support department costs
directly to the operating departments.
15. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
Support Departments Operating Departments
Plant Main. Infon. Sym. Machining Assembly Total
Budgeted MOH Costs
Before any Inter-Dep’t
Cost Allocations $600,000 $116,000 $400,000 $200,000 1,316,000
Allocation by Plant
Maintenance: (600,000) 0 225,000 375,000
(2400/6400, 4000/6400)
Allocation by
Information System: 0 (116,000) 103,111 12,889
(1600/1800, 200/1800)
Total Budgeted MOH of
Operating Departments 0 $728,111 $587,889 $1,316,000
1. Direct Allocation Method…
16. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
Advantage:
Simplicity!
No need to predict the usage of support
department service by other support
departments!
Disadvantage:
Failure to recognize reciprocal services
provided among support departments.
1. Direct Allocation Method…
17. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
2. Step-Down Allocation Method (Sequential Allocation Method)
Allows the partial recognition of the service
rendered by support departments to other support
departments.
This method requires the support departments to be
ranked (sequenced) in order that the step-down
allocation is to proceed.
Begins with the support department that renders
the highest percentage of its total services to other
support departments (in comparison)!
Plant Maintenance Machining
Information Systems Assembly
18. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
Support Departments Operating Departments
Plant Main. Infon. Sym. Machining Assembly Total
Budgeted MOH Costs
Before any Inter-Dep’t
Cost Allocations $600,000 $116,000 $400,000 $200,000 1,316,000
Allocation by Plant
Maintenance: (600,000) 120,000 180,000 300,000
(1600/8000, 2400/8000, 4000/8000) 236,000
Allocation by
Information System: 0 (236,000) 209,778 26,222
(1600/1800, 200/1800)
Total Budgeted MOH of
Operating Departments 0 $789,778 $526,222 $1,316,000
Note: The step-down method does not recognize the total services
that all support departments provide to each other!
2. Step-Down Allocation Method (Sequential Allocation Method)…
19. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
3. Reciprocal Allocation Method
Allocates cost by explicitly including the mutual
services provided among all support
departments!
More accurate when the support departments
provide service to another reciprocally!
The reciprocal method enables us to incorporate
interdepartmental relationships fully!
20. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
3. Reciprocal Allocation Method…
Implementing the reciprocal allocation method requires 3 steps:
Step 1
Express Support Department Costs & Support
Department reciprocal relationship in the form
of Linear Equation.
(Y= a + bx)
Let PM be the complete reciprocated costs of
Plant Maintenance and IS be the complete
reciprocated costs to Information Systems.
PM = $600,000 + 0.1 IS
IS = $116,000 + 0.2 PM
21. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
3. Reciprocal Allocation Method…
Step 2
Solve the cost of Linear Equation to obtain the
complete Reciprocated Costs of each Support
Departments.
PM = 600,000 + 0.1 (116,000 + 0.2 PM)
PM = 600,000 + 11,600 + 0.02 PM
0.98 PM = 611,600
PM = $ 624,082
IS = 116,000 + 0.2(624,082)
IS = $ 240,816
22. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
3. Reciprocal Allocation Method…
Step 3
Allocate the complete reciprocated costs of
each department to all other departments
(both support and operating departments).
Plant Maintenance Machining
Information Systems Assembly
23. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
3. Reciprocal Allocation Method…
Support Departments Operating Departments
Plant Main. Infon. Sym. Machining Assembly Total
Budgeted MOH Costs
Before any Inter-Dep’t
Cost Allocations $600,000 $116,000 $400,000 $200,000 1,316,000
Allocation by Plant
Maintenance: (624,082) 124,816 187,225 312,041
(1600/8000, 2400/8000, 4000/8000)
Allocation by
Information System 24,082 (240,816) 192,652 24,082
(200/2000 1600/2000, 200/2000)
Total Budgeted MOH of
Operating Departments 0 0 $779,877 $536,123 $1,316,000
24. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
25. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
A common cost is a cost of operating a facility, activity, or like cost object that is
shared by two or more users.
Allocating Common Costs…
Illustration:
Consider Ayele, a senior student in A.A.U who has been invited to an interview with
an employer in Mekele.
The round trip Addis-Mekele airfare costs $.1, 200.
A week prior to leaving, Ayele is also invited to an interview with an employer in Dessie.
The Addis-Dessiee round trip airfare costs $. 800.
Ayele decided to combine the two recurring trips into an Addis-Mekele-Dessie trip
that will cost $1,500 in airfare.
The Br. 1,500 is a common cost that benefits both prospective employers.
Two methods of allocating this common cost are:
i. Stand-Alone Cost-Allocation Method
ii. Incremental Cost Allocation Method
26. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
Allocating Common Costs…
1. Stand-Alone Cost-Allocation Method
This method uses information pertaining to each user of a cost object
as a separate entity to determine the cost-allocation weights.
For the common cost $1,500, information about the separate (stand alone)
round-trip airfares ($1200, & $800) is used to determine the allocation weights.
Mkele’s Journey: $1,200 * 1,500 = 0.60 * 1,500= $900
$1,200 + $ 800
Dessie’s Journey: $800 * 1,500 = 0.4 * 1,500 = $600
$800 + $1,200
Advantage: fairness occurs, because each employer bears a proportionate
share of total costs in relation to their individual stand-alone costs!
27. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
Allocating Common Costs…
2. Incremental Cost Allocation Method
This method ranks:
↗the individual users of a cost object; & then
↗uses this ranking to allocate costs among those users.
The first ranked user of the cost object is termed the Primary User.
The second ranked user is termed the Incremental Party.
Assume in the example the Mekele employer is viewed as the
primary party.
Ayele’s rational is that he had already committed to go to
Mekele before accepting the invitations to interview in Dessie.
28. Sunday, January 8, 2023 Cost & Management Accounting - I Instructor: Kassaye Tuji
Allocating Common Costs…
The cost allocation would be:
Party Cost Allocated Costs remaining to be
Allocated to other parties
Mekele (Primary) $1,200 $300 ($1,500 - $1,200)
Dessie (Incremental) 300 0
Had the Dessie employer been chosen as
the primary party, the cost allocations
would have been Dessie $800 and Mekele
$700(1500-800)
2. Incremental Cost Allocation Method…