The document discusses unit based costing (UBC) implemented at Hindustan Petroleum Corporation Ltd. UBC accumulates overhead costs for different organizational units and then assigns costs to products/services based on their use of activities in each unit. The key units considered are Fuel Refinery, Lube Refinery, and Captive Power Plant. UBC aims to provide more accurate product cost estimates for management decision making compared to traditional cost accounting. It involves identifying overhead costs like utilities, employee costs, maintenance etc. and allocating them to units based on cost drivers.
In this slide presentation you will be introduced to the methods of Cost Accounting and why business organizations should follow methods of cost accounting impeccably. In this it is important to establish budget and actual cost of operations, processes, departments or products and the analysis of variances, profitability or social use of funds. This Slideshare will offer insight to entrepreneurs.
To know more about Welingkar School’s Distance Learning Program and courses offered, visit:
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This Slideshare is the sole Property of the Welingkar School of Distance Learning – Reproduction of this material , without prior consent, either wholly or partially will treated as a violation of copyright.
In this slide presentation you will be introduced to the methods of Cost Accounting and why business organizations should follow methods of cost accounting impeccably. In this it is important to establish budget and actual cost of operations, processes, departments or products and the analysis of variances, profitability or social use of funds. This Slideshare will offer insight to entrepreneurs.
To know more about Welingkar School’s Distance Learning Program and courses offered, visit:
http://www.welingkaronline.org/distance-learning/online-mba.html
This Slideshare is the sole Property of the Welingkar School of Distance Learning – Reproduction of this material , without prior consent, either wholly or partially will treated as a violation of copyright.
1.1 identify the elements of costs
1.2 understand various classification of costs
1.3 identify the cost unit
1.4 identify the cost center
1.5 exercise regarding costs concepts
What is job costing? What are its main characteristics?
Characteristics
Features
procedure involve in job order costing.
Applicability
What is BEP? List out the assumption of breakeven analysis
Assumption of BEP analysis
What is Profit Volume (P/V) Ratio
What is CVP analysis? How does it help the management?
What is process costing? What are its main characteristics? Name the industries where process costing can be applied.
Normal Loss
Abnormal Loss
Abnormal Gain
Job Costing & Process Costing
Accounting for losses in process costing
What do you mean by operating costing? Draw a specimen cost sheet for transport costing.
INDUSTRY AND CORRESPONDING COST UNIT
RECONCILIATION STATEMENT
This particular slide contains an introduction to the concepts of Cost Accounting which is unit 1. It provides for only the definitions of the concepts and theory.
Introduction to cost managerial accountingVaradraj Bapat
Cost Accounting.
Cost Accounting Objectives.
Cost Accounting advantages.
what is cost?
Cost Classification:
By elements
By function
As direct and indirect
By variability
By controllability
By normality
By relevance
Elements of cost.
Introduction of costing , its elements & cost sheetKamlesh Shinde
Basically presentation is based on the costing , its various elements, their classification and the illustration on a simple cost sheet and Estimated Cost sheet. It is very useful to beginners in cost accounting , B.Com and M.com Students.
Ppt on Cost accounting and its classifications Susheel Tiwari
Content:
》Cost accounting Meaning.
》Types
》Classifications
Cost accounting is the classifying, recording and appropriate allocation of expenditure for the determination of the costs of products or services, and for the presentation of suitably arranged data for purposes of control and guidance of management.
1.1 identify the elements of costs
1.2 understand various classification of costs
1.3 identify the cost unit
1.4 identify the cost center
1.5 exercise regarding costs concepts
What is job costing? What are its main characteristics?
Characteristics
Features
procedure involve in job order costing.
Applicability
What is BEP? List out the assumption of breakeven analysis
Assumption of BEP analysis
What is Profit Volume (P/V) Ratio
What is CVP analysis? How does it help the management?
What is process costing? What are its main characteristics? Name the industries where process costing can be applied.
Normal Loss
Abnormal Loss
Abnormal Gain
Job Costing & Process Costing
Accounting for losses in process costing
What do you mean by operating costing? Draw a specimen cost sheet for transport costing.
INDUSTRY AND CORRESPONDING COST UNIT
RECONCILIATION STATEMENT
This particular slide contains an introduction to the concepts of Cost Accounting which is unit 1. It provides for only the definitions of the concepts and theory.
Introduction to cost managerial accountingVaradraj Bapat
Cost Accounting.
Cost Accounting Objectives.
Cost Accounting advantages.
what is cost?
Cost Classification:
By elements
By function
As direct and indirect
By variability
By controllability
By normality
By relevance
Elements of cost.
Introduction of costing , its elements & cost sheetKamlesh Shinde
Basically presentation is based on the costing , its various elements, their classification and the illustration on a simple cost sheet and Estimated Cost sheet. It is very useful to beginners in cost accounting , B.Com and M.com Students.
Ppt on Cost accounting and its classifications Susheel Tiwari
Content:
》Cost accounting Meaning.
》Types
》Classifications
Cost accounting is the classifying, recording and appropriate allocation of expenditure for the determination of the costs of products or services, and for the presentation of suitably arranged data for purposes of control and guidance of management.
Confirming Pages CHAPTER OUTLINE Overview of Variab.docxmaxinesmith73660
Confirming Pages
CHAPTER OUTLINE
Overview of Variable and Absorption Costing
• Variable Costing
• Absorption Costing
• Selling and Administrative Expenses
Variable and Absorption Costing—An Example
• Variable Costing Contribution Format Income Statement
• Absorption Costing Income Statement
Reconciliation of Variable Costing with Absorption
Costing Income
Advantages of Variable Costing and
the Contribution Approach
• Enabling CVP Analysis
• Explaining Changes in Net Operating Income
• Supporting Decision Making
• Adapting to the Theory of Constraints
Segmented Income Statements and the Contribution
Approach
• Traceable and Common Fixed Costs and the Segment Margin
• Identifying Traceable Fixed Costs
• Traceable Costs Can Become Common Costs
Segmented Income Statements—An Example
• Levels of Segmented Income Statements
• Segmented Income Statements and Decision Making
Segmented Income Statements—Common Mistakes
• Omission of Costs
• Inappropriate Methods for Assigning Traceable Costs among
Segments
• Arbitrarily Dividing Common Costs among Segments
Income Statements—An External Reporting Perspective
• Companywide Income Statements
• Segmented Financial Information
Variable Costing and
Segment Reporting:
Tools for Management 6
A LOOK AT THIS CHAPTER
This chapter explains how to use
the contribution format to create
variable costing income statements
for manufacturers and segmented
income statements. It also contrasts
variable costing income statements and
absorption income statements.
A LOOK AHEAD
Chapter 7 describes the budgeting
process.
A LOOK BACK
Chapter 5 explained how to compute
a break-even point and how to
determine the sales needed to achieve
a desired profit. We also described
how to compute and use the margin of
safety and operating leverage.
bre25419_ch06_236-281.indd 236bre25419_ch06_236-281.indd 236 12/8/11 3:48 PM12/8/11 3:48 PM
Confirming Pages
237
DECISION FEATURE LEARNING
OBJECTIVES
After studying Chapter 6,
you should be able to:
LO1 Explain how variable
costing differs from absorp-
tion costing and compute
unit product costs under
each method.
LO2 Prepare income
statements using both vari-
able and absorption costing.
LO3 Reconcile variable
costing and absorption
costing net operating
incomes and explain why
the two amounts differ.
LO4 Prepare a segmented
income statement that
differentiates traceable
fixed costs from common
fixed costs and use it to
make decisions.
IBM’s $2.5 Billion Investment in Technology
When it comes to state-of-the-art in automation, IBM’s $2.5 billion semiconductor manufacturing
facility in East Fishkill, New York, is tough to beat. The plant uses wireless networks, 600 miles of cable,
and more than 420 servers to equip itself with what IBM claims is more comput.
Welcome to Chapter 6 of our comprehensive accounting series! In this presentation, we dive into the fascinating world of variable and absorption costing, exploring the principles and techniques behind cost allocation in financial reporting.Through this presentation, we aim to equip students and professionals alike with a solid understanding of variable and absorption costing, enabling them to make informed financial decisions.By examining real-world examples and case studies, we provide practical insights into the application of variable and absorption costing, ensuring students can effectively apply these concepts in their future careers.Whether you're a student seeking clarity on cost allocation methods or a professional looking to enhance your financial acumen, this presentation will serve as a valuable resource. Access the slides now and deepen your understanding of variable and absorption costing!Remember, knowledge is power, and understanding these fundamental accounting principles will contribute to your success in the complex world of finance. Happy learning!
Life Cycle Costing Critical Evaluation ReportAnkur Aggarwal
Life Cycle Costing (LCC) is an important economic analysis used in the selection of alternatives that impact both pending and future costs. It compares initial investment options and identifies the least cost alternatives for a twenty year period.
BBA 2301, Principles of Accounting II 1 Course LeaCicelyBourqueju
BBA 2301, Principles of Accounting II 1
Course Learning Outcomes for Unit VIII
Upon completion of this unit, students should be able to:
7. Explain how financial information influences both short-term and long-term management decisions.
7.1 Describe the use of standard cost manufacturers and service businesses.
8. Discuss operational and capital budgets.
8.1 Describe capital budgeting methods.
8.2 Identify the use of intangible benefits in capital budgeting.
Course/Unit
Learning Outcomes
Learning Activity
7.1
Unit Lesson
Chapter 26, pp. 26-1 to 26-24
Webpage: Balanced Scorecard Basics
Video: What is a balanced scorecard: A simple explanation for anyone
Unit VIII Case Study
8.1
Unit Lesson
Chapter 27, pp. 27-1 to 27-19
Unit VIII Case Study
8.2
Unit Lesson
Chapter 27, pp. 27-1 to 27-19
Unit VIII Case Study
Required Unit Resources
Chapter 26: Standard Costs and Balanced Scorecard, pp. 26-1 to 26-24
Chapter 27: Planning for Capital Investments, pp. 27-1 to 27-19
In order to access the following resources, click the links below.
Balanced Scorecard Institute. (n.d.). Balanced scorecard basics. https://balancedscorecard.org/bsc-basics-
overview/
For the video resource below, a transcript and closed captioning are available upon accessing the video.
Marr, B. (2019, June 24). What is a balanced scorecard: A simple explanation for anyone [Video]. Cielo24.
https://c24.page/2s4pmxpj2kpwnprckg6p8tcjtu
Unit Lesson
Introduction
This final unit will conclude the study of managerial accounting. This lesson will share important content for
managers in manufacturing, merchandising, and service companies. Content includes estimating future costs,
implementing financial and non-financial performance measures, and incorporating capital budgeting.
Costing requires you to make estimates. As noted in a previous unit, many people are uncomfortable with this
task, as they are used to having objective numbers given to them. However, as much as the future is
UNIT VIII STUDY GUIDE
Management: Costs and Capital Investing
https://balancedscorecard.org/bsc-basics-overview/
https://c24.page/2s4pmxpj2kpwnprckg6p8tcjtu
BBA 2301, Principles of Accounting II 2
UNIT x STUDY GUIDE
Title
unpredictable, we are still required to use our experience and judgment to chart a path forward. In this unit,
you will learn about standard costs. Partially based on prior period actual costs, they provide the basis for
budgeting and subsequent evaluation. Management accountants, no matter the title, are integral to the
development of standard costs, implementation of the balanced scorecard, and the capital budgeting process.
Pay attention as you read, review, and evaluate this unit as it is almost wholly transferable to any company.
Consider the following questions and how you would respond to each as you move through this unit.
As the chief accounting officer (CAO) or chief ...
1.This PPT covers Definition of CCost Acccountng, . Scope of cost accounting, Advantages, Limitations of cost accounting, differences between Financial Accounting and Cost Accounting.
1. Unit Based Costing and its Benefits at
Hindustan Petroleum Corporation Ltd.
2. To support compliance with financial reporting requirements.
Typically, costs are allocated for either valuation purposes (i.e.,
financial statements for external users) or decision-making
purposes (i.e., internal uses) or both.
Traditional cost accounting system is often articulated with its
general ledger system
1) Accumulate costs within a production or non-production
department;
2) Allocate non-production department costs to production
department costs;
3) Allocate the resulting (revised) production department costs
to various products, services, or customers.
3. Non Production
Cost
Production Cost
Production Cost
(Revised)
Note: - Cost Derived from this traditional approach suffer from several defects
that can result in distorted costs for decision-making purposes. For example if in
a refinery, a unit is sitting idle than also the cost incurred by that unit will be
allocated to the different products produced by refinery.
4. In order to remedy such distortions, many companies have adopted a different
cost-allocation approach called ACTIVITY-BASED COSTING (ABC).
In retrospect with traditional cost-accounting system,
1. The ABC accumulates overheads cost for different organizational activity, and
2. Then assign the cost to the products, services or customers (cost objects)
causing that activity.
3. Thus it helps in measure of cost of different activities and resources and then
individually assigning their effects on the costs of making a product or
providing a service.
5. •Cost of a product is the sum of the costs of all activities required to manufacture and deliver the
product.
•Products do not consume costs directly
•Money is spent on activities
•Activities are consumed by product/services
•ABC assigns Costs to Products by tracing expenses to “activities”. Each Product is charged based on
the extent to which it used an activity
•The primary objective of ABC is to assign costs that reflect/mirror the physical dynamics of the
business Provides ways of assigning the costs of indirect support resources to activities, business
processes, customers, products.
•It recognizes that many organizational resources are required not for physical production of units of
product but to provide a broad array of support activities.
6. Building an ABC Model
Identify
Resources
Identify
Activities
Identify
Cost Objects
Define
Resource
Drivers
Define
Activity
Drivers
Enter
Resource
Costs
Enter
Resource
Driver Qty.
Enter
Activity
Driver Qty.
Calculate
Costs
7. Current Methodology
• At present the costing done by Mumbai Refinery is absorption costing
cum unit costing.
• The units taken into consideration into here are divided on the basis
of final product.
• The two units which are taken into consideration are Lube Refinery
and Fuel Refinery.
• Then the apportioned ratio of different products are attached to
different cost heads.
8. Steps Involved
The apportioning of different product ratio is obtained by taking into
consideration Sales realization, production and sales value of
production. The ratio is obtained by multiplying sales value of realization
(Per MT) and Total production of that particular product in a period and
dividing it by total sales value of realization.
The weightage is obtained by: -
Sales value of Production/Total Sales Value of Production = Weightage
STEP 1
Note: Sales Value of Production = Production*Sales Realization (Per MT) and
Sales Realization (Per MT) = Sales Realization (Total)/Sales Quantity (Per MT)
9. Steps Involved (Continued…)
In this step the cost is calculated on a whole, under different
overheads. In particulars the cost is accumulated on total. This table is
generated Under Para 5 of cost audit. The cost of different particulars
are based on the actual entries under different sub-sections of general
diary. In calculating costs no assumption is taken. Record for these are
maintained by the finance department in the form of TRIAL BALANCE.
STEP 2
10. Steps Involved (Continued…)
In the second step for assigning cost, these calculated weighted average cost
from the sales value of production are used. The Cost of Sales is calculated
for individual products by assigning these apportions/ratios for different cost
incurred during the process. Each Individual cost is assigned these ratios and
then accordingly the cost is calculated for different products. The Refinery is
divided into two Units. Two separate trial balances are made and Henceforth
these apportions are assigned values.
Summer Internship HPClReferenceCOST AUDIT 12-13 MAIN FILE.XLS
STEP 3
11. Short Comings Of Traditional Cost Accounting
An organization often has no clue about the origin and creation of the
company costs, nor are most particularly concerned about who
implemented the costing strategy. If employees only knew that a better
costing method could save a ton of money, as well as impress the boss
enough to earn that cozy corner office, then they would surely be more
excited. Many companies and many live in the dark ages; they often
use pricing models that were developed decades ago and were never
updated.
NOTE: - When asked with a company how they came up with their pricing methods, the answer is
usually ‘someone who worked here 15 years ago developed it and he’s no longer here’.
12. Unit Based Costing
The accounting performed for this project is based on the Activity
Based Costing. In this different units are taken into considerations and
overhead or indirect costs for these units is calculated. The costs taken
into consideration are some where actual as accounted by different
departments and at some places hypothetical based on a valid and
technically sound apportion done by taking various factors into
consideration.
13. The units taken into consideration are: -
1) Fuel Refinery*
2) Lube Refinery*
3) DHDS
4) Fuel Refinery-Boiler House
5) GFEC
6) Captive Power plant
7) OM&S
8) IETP
9) Lab
10) DHDS-Revamp
11) DHT
Note: -
1) FR consists of 10 units
2) LR consists of 6 Units
3) DHDS Revamp is
modified DHDS
Note: -
The implementation of this costing can be done for
taking management decision to improve efficiency
and ultimately resulting in higher GRM or Gross
Refinery Margin. The implementation of this project
for management decision is covered during later
stages.
14. Goals of Unit Based Costing
Although the general goals of each Units may differ, but Unit wise
cost accounting systems will generally try to satisfy three goals:
• To allocate certain period costs to products so that
financial statements can be prepared monthly, quarterly,
and annually
• To provide process control information to cost center
managers
• To provide product cost estimates to product and
business managers
15. Goals of Unit Based Costing (Continued…)
• First, financial statements are obviously an essential aspect of
illustrating an organization’s yearly operations, expenses, and
revenue. UBC’s goal is to better enhance the reliability of the
financial statements for a proper representation of the yearly
production expenses.
• Second, cost managers rely on the UBC information to provide
detailed information regarding processes and how they affect the
organization.
• Third, product managers are in need of very accurate product cost
estimates. These estimates are generally much more reliable with
an UBC method rather than a traditional cost method.
16. Steps Involved in UBC’s: -
Basic step Involved in UBC’s is accurate data and therefore success of
UBC is highly dependent on accuracy of data available. The more
accurate the data, the more accurate costs. These costs can then be
taken into consideration for process optimization. The Overheads
accounts for a massive 1900 Crores in Mumbai refinery alone.
17. The costs considered as overhead costs
are:-
1. Process Materials/Chemicals
2. Utilities
a) Power
b) Steam
c) Water
3. Direct Employees Expenses
4. Direct Expenses
5. Consumables stores and spares
6. Repairs and Maintenance
7. Quality Control
8. Technical Knowhow
9. Depreciation/Amortization
10. Other Production Overheads
18. The various Overheads: -
• Process Materials/Chemicals: - Process material and chemicals accounts as an
important cost in the refining of petroleum products. The revenue budget
sheet is used as an approximation ratio for calculating costs for the year 2013-
14.
• Utilities: -Utilities costs contain three sub-heads of Power, Steam and water in
its subsection. Utilities are basically the energy consumed by different units in
order to process the crude.
• Direct Employee Cost: - Direct employees cost contains salary and employee
benefits paid to the employee in a given year. The logic behind calculating the
ratio for direct employee ratio was based on the number of employee working
is a given unit. Then this number was multiplied with the average employee
cost incurred for the period 2013-14.
19. The various Overheads (Continued) : -
• Direct Expenses: - Direct expenses accounted for 275,310,501.95 Rs in the year
2013-14. It is very small when compared to other expenses but for the success of
Unit Based Costing that not even the smaller costs are left accounted and they are
also allocated under differ unit heads.
• Consumable Stores and Spares: - The expense for consumable stores and Spares
for the year 2013-14 was nil. Therefore they are making no changes in the overall
cost for the year 2013-14.
• Repairs and maintenance: - Repairs and maintenance form an important part for
FR, LR and CPP. The values of repair and maintenance are actual values and they
are the record maintained by the Maintenance department.
• Quality and Control Expenses: -Approximately 7.2 Million Metric Ton of Crude was
converted in 29+ products in the year 2013-14 in Mumbai Refinery of HPCL. The
apportioning of QC is done by taking the process and chemicals overhead as base
ratio.
20. The various Overheads (Continued) : -
• Technical Knowhow: - There was no cost incurred in the FY 2013-14 for technical
Knowhow. Technical Knowhow is basically for the services of the technology
rendered.
• Depreciation/Amortization: - Depreciation and amortization is done on the straight
line method in HPCL-MR. The values taken into consideration for this overhead is on
actual basis. Project finance department keeps track record of all the depreciated
and amortized assets
• Other Production Overheads: -All other production over head are calculated in this
heading. The rationale behind finding the ratio for this overhead is taking
cumulative average of the ratio of all the other overhead and then assigning these
values to the total cost incurred in this sub-head.
Summer Internship HPClProjectMain ABC Working File.xlsx
21. Application of Unit Based Costing: -
Application of Unit Based Costing: -
There are two broad purposes for using management accounting information:
●Strategic cost management—to determine the right things to do, i.e., selecting
the correct processes, suppliers, products, channels, and customers.
●Operational cost management—to perform well on those things identified as
strategic, improve productivity, and remove waste.