1. Read chapter 5 & 6
2. Give Analytical Summary of Ch 5 & 6 and answer : As a manager, discuss how you would use or have used the concepts presented in chapters 5 and 6. Provide numerical examples to support your discussion.
3. Answer to three articles post
Please find instructions in the word document for more detail.
1. Read Chapter 5 and 6:
Chapter 5 Link: https://saylordotorg.github.io/text_managerial-accounting/s09-how-doorganizations-identify-.html
Chapter 6 Link: https://saylordotorg.github.io/text_managerial-accounting/s10-how-is-costvolume-profit-anal.html
Write an analytical summary of your learning outcomes from chapters 5 and 6. In addition to
your analytical summary, address the following:
As a manager, discuss how you would use or have used the concepts presented in chapters 5
and 6. Provide numerical examples to support your discussion.
Be sure to support your work with specific citations using APA format
2. Read a selection of your colleagues’ postings (given below) using one or more of the
following ways:
·
Share an insight from having read your colleagues’ postings, synthesizing the information
to provide new perspectives.
·
Offer and support an alternative perspective using readings from the class materials or
from your own research.
·
Validate an idea with your own experience and additional research.
·
Make a suggestion based on additional evidence drawn from readings or after synthesizing
multiple postings.
·
Expand on your colleagues’ postings by providing additional insights or contrasting
perspectives based on readings and evidence.
·
Return to this Discussion several times to read the responses to your initial posting. Note
what you have learned and/or any insights you have gained as a result of the comments your
colleagues made.
Article 1. by Rohit Pant
Process Costing & Cost Behavior
Process Costing
Process Costing is an accounting concept of tracking the direct costs and allocating the indirect
costs of the process. It tracks the production of products usually in large batches. The volume of
production and the goods produced during the defined time duration are used for the reporting
purposes through the balance sheet and income statement. The cost allocation of inventory
involves various steps. They are: the flow of the units (this is the volume at the beginning and at
production); calculate output (produced and in production goods at the end); the cost of
manufacturing; the per-unit cost of manufacturing; and manufacturing cost balance (allocating
the costs of manufacturing to the volume produced and volume in production). (Charles,
Srikant & Madhav, 2015)
As a manager, I would use the concept of Process Costing to track the costs of production. This
will help in the proper allocation of the resources and will make the process and business
operations more streamlined. By eliminating any wastage, will also help in keeping the
production costs to a lower value.
As an example, a company produces Product X. Department cost is equal to $40,000, this is the
cost of direct materials. Conversion cost is $80,000, and the number of units produced is 5000.
Per unit costing for that month: for the cost of conversion = $16 and for direct materials = $8.
Therefore, when Product X will move to the next stage for processing, per unit costs along with
any additional costs will also be added to the same.
Cost Behavior
Cost Behavior indicates the change in the total costs as a result of a change in some activity. It
determines how the changes in business or operations related activities have a proportional
effect on the costs associated with it. Some examples of such costs associated are material &
labor costs, production, advertising, etc. There are three types of cost behavior: fixed costs,
variable costs, and mixed costs. (Mark, Rajiv, Rong & Surya, 2007)
As a manager, I would use the concept of Cost Behavior to determine what organizational
activities can have a greater effect on the total cost of production. This will help in a better
strategic decision-making process. Such analysis, of cost variation as a result of other changes
will ensure effective measures in place, and hence profitability to the organization.
As an example, if the per unit cost of Product A is $10, therefore, for four different volume of
production i.e. 1000, 2000, 3000, and 4000; total cost will be:
Total cost for $1000 units = $10 x $1000 = $10,000
Total cost for $2000 units = $10 x $2000 = $20,000
Total cost for $3000 units = $10 x $3000 = $30,000
Total cost for $4000 units = $10 x $4000 = $40,000
Article 2 by FNU Mohammed Mohsin Uddin
Cost Behavior
Cost behavior is an indicator of how a cost will change in total when there is a change in
some activity. In cost accounting and managerial accounting, three types of cost
behavior are usually discussed:
1. Variable costs. The total amount of a variable cost increases in proportion to the
increase in an activity. The total amount of a variable cost will also decrease in
proportion to the decrease in an activity.
2. Fixed costs. The total amount of a fixed cost will not change when an activity
increases or decreases.
3. Mixed or semi variable costs. These costs are partially fixed and partially variable.
Understanding how costs behave is important for management’s planning and
controlling of its organization’s costs, and for cost-volume-profit analyses. (Horngren,
Datar & Rajan, 2015).
The cost difference is divided by the activity difference to determine the variable cost for
each additional unit of activity. The fixed cost can be calculated by subtracting variable
cost from total cost.
Process Costing
Process costing is a term used in cost accounting to describe one method for collecting
and assigning manufacturing costs to the units produced. A processing cost system is
used when nearly identical units are mass produced. Process costing segregates the
cost associated at every level of production as work in progress, cost of goods sold, and
finished goods. These make the costing of the product more accurate and also help in
making a production decision. (Ali, 2010).
Learning the cost of each process is simple and inexpensive, it is easy to allocate costs
for processing to be precise costs, and production cost is standard in process cost.
Thus, management control and monitoring become easier. There are different types of
process costing. Standard process costing, weighted average, and first-in, first-out.
Process costing aggregates manufacturing costs by departments and total
manufacturing costs are accumulated under direct materials and conversion costs
categories.
As a manager I would use several concepts presented in the two chapters of this
module, including equivalent units, production cost reports, cost behavior patterns, cost
structure, and contribution margin income statements.
Article 3 by Gaurav Phadke
There are various methods of costing finished goods. Job order costing, process costing
are different methods of costing the finished goods. In both methods, the direct material,
labor and overheads are assigned to the final product. However, process costing is
used for the products that are homogenous in nature. Job order costing is used for each
product that is unique.
Rajiv D. Banker; Dmitri Byzalov; Shunlan Fang; Yi Liang (Nov 2017), Process costing is
used for single products that goes through different processes and hence costs are
allocated by the department in process costing. Hence costs are calculated by units of
production in department but in job order costing costs are calculated per job in job
sheet. Process costing considers the process of how direct material, labor and
overheads are converted in work in progress which is ultimately converted in finished
goods. Let’s look at following example.
Suppose the cost of production department for one month was – Material – $10000,
labor $15000, and overheads $20000. Units produced are 1000. WIP is 1000 with (50%
on material and 50% on labor& overheads)
So here, the total cost of department for month is $45,000. Units produced = (1000 +
500) because WIP is only 50 % complete. These are called as equivalent units of
production. Even if total units produced are 1000 but the cost was also spent on the
WIP that was finished 50%. Hence to calculate equivalent units of production, WIP is
also considered.
Hence 45000 would be divided by 1500 to arrive at cost per unit.
Cost per unit = 45000/1500 = $30
Mustafa Ciftci; Raj Mashruwala; Dan Weiss (Feb 2015), For simplicity purposes, WIP is
considered as 50% complete for material, labor and overheads. But it could be possible
that WIP is 40% complete for material and 60 % complete for labor and overheads. In
that case the equivalent goods would be calculated accordingly.
On the other hand, the same costs for job order costing would be compared for each job
and each product separately and not all finished products produced will have a same
cost per unit.
This is how the account managers can consider different cost behavior for different
goods and use concepts of management accounting in arriving at cost per unit. For
example, for further analysis costs can be divided as variable vs fixed and calculated
per unit cost accordingly.
Purchase answer to see full
attachment
