Accounting Question

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Assignment Question(s): (Marks 15)
Q1. Discuss with suitable examples why activity-based costing (ABC) is better than the traditional costing system. Provide a suitable numerical example of ABC in the manufacturing sector and show all the necessary calculations required under the ABC system.
(3 Marks)
Note: Your answer must include suitable numerical examples showing all the calculations of the ABC system. You are required to assume values of numerical examples of your own and they should not be copied from any sources. (Chapter 7)
Answer:
Q2. “A non-routine decision is one that is taken in response to a non-repetitive, operational scenario.” Comment on this statement and explain with suitable examples the various types of non-routine operating decisions that a company makes under such a scenario. Support your answer with numerical examples along with qualitative considerations involved in making such decisions. (4 Marks)
Note: Your answer must include suitable numerical examples for various types of non-routine operating decisions. You are required to assume values of numerical examples of your own and they should not be copied from any sources. (Chapter 4)
Answer:
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Assignment (2)
Deadline: Saturday 11/11/2023 @ 23:59
For Instructor’s Use only
Instructions – PLEASE READ THEM CAREFULLY
The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.
Students must mention question number clearly in their answer.
Late submission will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
All answers must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism.
Submissions without this cover page will NOT be accepted.
Assignment Question(s): (Marks 15)
Q1. Discuss with suitable examples why activity-based costing (ABC) is better than the traditional costing system. Provide a suitable numerical example of ABC in the manufacturing sector and show all the necessary calculations required under the ABC system.
(3 Marks)
                                         
Note: Your answer must include suitable numerical examples showing all the calculations of the ABC system. You are required to assume values of numerical examples of your own and they should not be copied from any sources. (Chapter 7)

Answer:
Q2. “A non-routine decision is one that is taken in response to a non-repetitive, operational scenario.” Comment on this statement and explain with suitable examples the various types of non-routine operating decisions that a company makes under such a scenario. Support your answer with numerical examples along with qualitative considerations involved in making such decisions. (4 Marks)
Note: Your answer must include suitable numerical examples for various types of non-routine operating decisions. You are required to assume values of numerical examples of your own and they should not be copied from any sources. (Chapter 4)
Answer:
© John Wiley & Sons, 2011 Alawi Alshakhouri 140069328 Slide # 1 Cost Management Measuring, Monitoring, and Motivating Performance Chapter 1 The Role of Accounting Information in Management Decision Making يرادلإا رارقلا عنص يف ةيبساحملا تامولعملا رود
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 2 Chapter 1: The Role of Accounting Information in Management Decision Making يرادلإا رارقلا عنص يف ةيبساحملا تامولعملا رود Learning objectives Q1 – What is the process of strategic management and decision making? ام؟رارقلا عنصو ةيجيتارتسلاا ةرادلإا ةيلمع يه Q2 – What types of control systems do managers use? مكحتلا ةمظنأ عاونأ يه ام؟نوريدملا اهمدختسي يتلا Q3 – What is the role of accounting information in strategic management? ام؟ةيجيتارتسلاا ةرادلإا يف ةيبساحملا تامولعملا رود وه Q4 – What information is relevant for decision making? ةلصلا تاذ تامولعملا يه ام؟رارقلا عنصل Q5 – How does business risk affect management decision making? رثؤت فيك؟ةيرادلإا تارارقلا ذاختا ىلع لامعلأا رطاخم Q6 – How do biases affect management decision making? تازيحتلا رثؤت فيك؟ةيرادلإا تارارقلا ذاختا ىلع Q7 – How can managers make higher-quality decisions? ذاختا ءاردملل نكمي فيك؟ةدوجلا ةيلاع تارارق Q8 – What is ethical decision making, and why is it important? رارقلا وه ام؟مهم وه اذاملو ،يقلاخلأا © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 3 Q1: Organizational Vision and Core Competencies ةيساسلأا تاءافكلاو ةيميظنتلا ةيؤرلا •The organizational vision is the core purpose and ideology of the organization. ضرغلا يه ةيميظنتلا ةيؤرلاةمظنملل ةيجولويديلأاو يساسلأا. •Determining the organizational vision precedes all other management decision making. ةيؤرلا ديدحتىرخلأا ةيرادلإا تارارقلا عيمج قبسي ةيميظنتلا. •Management must also isolate the organization’s core competencies – its strengths relative to competitors. ةيساسلأا تاءافكلا لزع اضيأ ةرادلإا ىلع بجي ةمظنملل- نيسفانملل ةبسنلاب اهتوق طاقن. © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 4 Q1: Organizational Vision and Core Competencies ةيساسلأا تاءافكلاو ةيميظنتلا ةيؤرلا Organizational Vision Core Competencies The organizational vision and the core competencies are closely related. طبترتو ةيؤرلا ةيميظنتلا تاءافكلاو ةيساسلأا اطابترا اقيثو. The organization’s strengths should help shape the vision. يغبنيو نأ دعاست طاقن ةوقلا يف ةمظنملا ىلع ليكشت ةيؤرلا. The vision should help locate the organization’s strengths. دعاست نأ يغبنيوةمظنملا يف ةوقلا طاقن ديدحت ىلع ةيؤرلا. If you were starting an accounting practice, what would be your organizational vision? ؟ةيميظنتلا مكتيؤر يه امف ،ةيبساحم ةسرامم تأدب دق تنك اذإ What do you think would be your core competencies? كتاءافك يف كيأر وه ام؟ةيساسلأا © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 5 Q1: Organizational Strategies ةيميظنتلا تايجيتارتسلاا Organizational Vision & Core Competencies Organizational Strategies ةيميظنتلا تايجيتارتسلاا Organizational strategies are the tactics that managers use to work toward the organizational vision while taking advantage of the core competencies. تايجيتارتسلاا ةيميظنتلا يه تاكيتكتلا يتلا اهمدختسي نوريدملا لمعلل وحن ةيؤرلا ةيميظنتلا عم ةدافتسلاا نم تاءافكلا ةيساسلأا. These strategies are long-term in nature. هذهواهتعيبطب لجلأا ةليوط تايجيتارتسلاا. Examples include organization structure, financial structure, and long-term resource allocation strategies. نمو ةلثملأا ىلع كلذ لكيهلا ،يميظنتلا لكيهلاو ،يلاملا تايجيتارتساو صيصخت دراوملا ىلع ىدملا ليوطلا. If you were starting an accounting practice, what would be some of your organizational strategies? ؟كب ةصاخلا ةيميظنتلا تايجيتارتسلاا ضعب يه امف ،ةيبساحم ةسرامم تأدب دق تنك اذإ How do these work toward your organizational vision? ؟ةيميظنتلا كتيؤر لجأ نم هذه لمعت فيك How do they take advantage of your core competencies? ؟كب ةصاخلا ةيساسلأا تاءافكلا نم ديفتست فيك © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 6 Q1: Operating Plans ةيليغشت ططخ Organizational Strategies Operating Plans Operating plans are the short-term implementations of the organizational strategies. لجلأا ريصقلا ذيفنتلا يه ليغشتلا ططخوةيميظنتلا تايجيتارتسلال. Operating plans usually include budgeted goals for revenues and expenses. ام ةداعو ةينازيملا يف ةجردملا فادهلأا ليغشتلا ططخ نمضتتتاقفنلاو تاداريلإل. Examples include schedules for employees and procedures for daily relationship management decisions with suppliers. لمشتو ةلثملأا لوادجلا ةينمزلا نيفظوملل تاءارجإو ذاختا تارارقلا ةيمويلا ةرادلإ ةقلاعلا عم نيدروملا. If you were starting an accounting practice, what would be some of your operating plans? How do these relate to your organizational strategies? © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 7 Q1: Actual Operations Operating Plans ليغشتلا ططخ Actual Operations ةيلعفلا تايلمعلا Actual operations are the actions taken and the results achieved. يه ةيلعفلا تايلمعلاةققحملا جئاتنلاو ةذختملا تاءارجلإا. The organization’s information system measures the results of actual operations. جئاتن ةمظنملا تامولعم ماظن سيقيوةيلعفلا تايلمعلا. Examples include number of units sold, advertising expense, and the wage expense for the period. كلذ ىلع ةلثملأا نمو ،تانلاعلإا تافورصمو ،ةعابملا تادحولا ددعةرتفلل روجلأا تافورصمو. If you had an accounting practice, what would information would you want to collect about the results of your actual operations? كيدل ناك اذإ؟ةيلعفلا كتايلمع جئاتن نع اهعمج ديرت يتلا تامولعملا يه امف ،ةيبساحم ةسرامم © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 8 Q1: Monitoring and Motivating Performance Organizational Vision & Core Competencies تاءافكلاو ةيميظنتلا ةيؤرلاةيساسلأا Actual Operations ةيلعفلا تايلمعلا Managers use the results of actual operations to monitor performance and ensure that it is in line with the organizational vision. جئاتن نوريدملا مدختسيةيميظنتلا ةيؤرلا عم ىشامتي هنأ نم دكأتلاو ءادلأا ةبقارمل ةيلعفلا تايلمعلا. Managers may find that the results of actual operations make them re-think the organizational vision or their view of the organization’s core competencies. مهلعجت ةيلعفلا تايلمعلا جئاتن نأ نوريدملا دجي دقو ةيساسلأا تاءافكلل مهتيؤر وأ ةيميظنتلا ةيؤرلا يف ريكفتلا نوديعيةمظنملل. If you had an accounting practice, can you think of an example of a measure of actual operations and how you would use it to motivate performance? كيدل ناك اذإ؟ءادلأا زيفحتل اهمدختستس فيكو ةيلعفلا تايلمعلا سايقل لاثم يف ريكفتلا كنكمي لهف ،ةيبساحم ةسرامم Can you think of an example of a measure of actual operations that might make you redefine your organizational vision or your view of your core competencies? كنكمي له؟ةيساسلأا كتاءافكل كتيؤر وأ ةيميظنتلا كتيؤر فيرعت ديعت كلعجت دق يتلا ةيلعفلا تايلمعلا سايقل لاثم يف ريكفتلا © John Wiley & Sons, 2011
Q2: Management Control Systems ةيرادلإا مكحتلا ةمظنأ •Belief Systems ةيدئاقعلا مظنلا –Vision, Mission, Core Values Statements ةيساسلأا ميقلا نايب ،ةلاسرلا ،ةيؤرلا •Boundary Systems دودحلا ةمظنأ –Code of Conduct, Procedure Manuals, Compliance Actions دعاوقلاثتملاا تاءارجإ ،تاءارجلإا ةلدأ ،كولسلا •Diagnostic Control Systems ةيصيخشتلا مكحتلا ةمظنأ –Measure, monitor, and motivate employees against preset goals سايقاقبسم ةددحم فادهأ دض نيفظوملا زيفحتو دصرو •Interactive Control Systems ةيلعافتلا مكحتلا ةمظنأ –Recurring information and reports to evaluate performance and direct actions ةرشابملا تاءارجلإاو ءادلأا مييقتل ةرركتملا ريراقتلاو تامولعملا Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 9 © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 10 Q3: Financial, Managerial, and Cost Accounting فيلاكتلا ةبساحمو ،ةيرادلإا ،ةيلاملا Financial accounting prepares reports most frequently used by decision makers external to the organization. ريراقتلا ةيلاملا ةبساحملا دعت جراخ رارقلا يعناص لبق نم امادختسا رثكلأاةمظنملا. Managerial accounting prepares reports most frequently used by decision makers internal to the organization. دعت ةيرادلإا ةبساحملا رارقلا عانص لبق نم امادختسا رثكلأا ريراقتلاةمظنملل ةيلخادلا. Cost accounting includes both financial and nonfinancial information and is used for both financial and managerial accounting. مدختستو ةيلاملا ريغو ةيلاملا تامولعملا فيلاكتلا ةبساحم نمضتتةيرادلإاو ةيلاملا ةبساحملل. © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 11 Q3: Strategic Cost Management and the Balanced Scorecard نزاوتملا ءادلأا ةقاطب و ؟ةيجيتارتسلاا ةفلكتلا ةرادإ •Strategic cost management is an approach to reducing costs while strengthening the organization’s strategic position. فقوملا زيزعت عم فيلاكتلا ضفخل جهن يه ةيجيتارتسلاا ةفلكتلا ةرادإةمظنملل يجيتارتسلاا. •The balanced scorecard can be used to formalize strategic cost management efforts by detailing financial and nonfinancial benchmarks for all segments of the organization. ءادلأا ةقاطب مادختسا نكميو ليصفت للاخ نم فيلاكتلا ةرادلإ ةيجيتارتسلاا دوهجلا ىلع يمسرلا عباطلا ءافضلإ نزاوتملاةمظنملا تاعاطق عيمجل ةيلاملا ريغو ةيلاملا ريياعملا. •Examples of such benchmarks include: يلي ام ريياعملا هذه ةلثمأ نمو: •Personnel can reduce costs by completing all hiring within 20 days of initial interview. نوضغ يف فيظوتلا عيمج لامكتسا للاخ نم فيلاكتلا ضفخ نيفظوملل نكمي20 ةيلولأا ةلباقملا نم اموي. •Production can reduce costs and improve quality if Engineering can reduce the number of processes in the production process. نأ نكمي جاتنلإاجاتنلإا ةيلمع يف تايلمعلا ددع للقت نأ نم تنكمت ةسدنهلا اذإ ةدوجلا نيسحتو فيلاكتلا نم للقت. © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 12 Q4: What Information is Relevant for Decision Making? ؟رارقلا عنصب ةلصلا تاذ تامولعملا يه ام •Information is relevant if: اذإ ةلص تاذ تامولعملا: •Differs across the alternatives, and و ،لئادبلا ربع رشتنت •Is about the future. لبقتسملا لوح وه. •Relevant information can be quantitative or qualitative نكميوةيعون وأ ةيمك ةلصلا تاذ تامولعملا نوكت نأ •Information is irrelevant if: اذإ ةلص تاذ ريغ تامولعملا: •Does not vary with the option chosen or action taken رايخلا عم فلتخي لاهنأشب ءارجا ذخا وأ هرايتخا مت يذلا Irrelevant information is NOT useful in decision making! رارقلا عنص يف ةديفم ريغ تامولعم! © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 13 Q4: Relevant Cash Flows ةلصلا تاذ ةيدقنلا تاقفدتلا •Relevant cash flows are future cash flows that differ across the alternatives. ةلصلا تاذ ةيدقنلا تاقفدتلالئادبلا ربع فلتخت يتلا ةيلبقتسملا ةيدقنلا تاقفدتلا يه. •also called incremental cash flows ةيفاضلإا ةيدقنلا تاقفدتلا اضيأ ىمستو •also called avoidable cash flows اهبنجت نكمي يتلا ةيدقنلا تاقفدتلا اضيأ ىمستو •Irrelevant cash flows are: يه ةسوململا ريغ ةيدقنلا تاقفدتلا: •non-incremental and unavoidable cash flows ريغ ةيدقنلا تاقفدتلاواهبنجت نكمي لا يتلاو ةديازتملا •do not vary among alternatives لئادبلا نيب فلتخت لا •Must look at the cash flow relevance to the decision being made هذاختا متي يذلا رارقلاب ةلصلا تاذ يدقنلا قفدتلا ىلإ رظنن نأ بجي •Electricity costs are relevant to the decision to open a business or not لا مأ ةيراجتلا لامعلأا حتف رارقب ةلصلا تاذ يه ءابرهكلا فيلاكت •Electricity costs are not relevant in the decision to lease or buy a building for your business وأ ريجأت رارق يف ةلص تاذ تسيل ءابرهكلا فيلاكتكلمعل ىنبم ءارش © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 14 Q4: What Information is Relevant for Decision Making? ام؟رارقلا عنصب ةلصلا تاذ تامولعملا يه You have a small computer repair company and are deciding whether to replace your old copy machine or repair it. In the list of information below, identify which data are relevant to this decision and which are irrelevant. رتويبمكلا حلاصإ ةكرش كيدلهحلاصإ وأ ةميدقلا خسنلا ةلآ لادبتسلا ناك اذإ ام ررقتو ةريغصلا . تاذ تانايبلا ددح ،هاندأ تامولعملا ةمئاق يفعوضوملاب اهل ةلص لا يتلاو رارقلا اذهب ةلصلا. •The purchase price of the copy machine was $1200. •The repair costs are $320. •The copy machine can make 20 copies per minute. •If you repair it, the machine will use less toner than it does now. •You make approximately 1000 copies per month. •The repair won’t fix the broken stapler. ةروسكملا ةسابدلا حلصي نل حلاصلإا. •The repair carries a one-year warranty. •The copy machine was a gift from your spouse. نم ةيده خسنلا ةلآ تناككجوز. © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 15 Q4: Relevance of Income Statement Information •Income Statements include: لخدلا مئاوق لمشتو: –Period costs ةرتفلا فيلاكت –Product costs (recorded as cost of goods sold) جتنملا فيلاكت( ةفلكتك ةلجسملاةعابملا عئاضبلا) •Many business decisions require the incremental cost to produce a unit ةدحو جاتنلإ ةيفاضلإا ةفلكتلا لامعلأا تارارق نم ديدعلا بلطتت •Cost per unit on the income statement includes both fixed and variable costs ةتباثلا فيلاكتلا لخدلا نايب يف ةدحولا ةفلكت نمضتتةريغتملاو •Including fixed costs does not represent the true incremental cost of a unit ام ةدحول ةيقيقحلا ةيفاضلإا ةفلكتلا ةتباثلا فيلاكتلا لمشت لاو © John Wiley & Sons, 2011
Q5: Impact of Business Risk on Decision Making •Business Risk is the possibility an event will occur and interfere with the organization’s strategic goals لامعلأا رطاخمةمظنملل ةيجيتارتسلاا فادهلأا يف لخدتلاو ثدح عوقو لامتحا يه •The existence of business risk can cloud management’s decision making process ةرادإ بجحت نأ نكمي لامعلأا رطاخم دوجورارقلا ذاختا ةيلمع Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 16 Economic & Financial ةيلاملاو ةيداصتقلاا People, Legal & Health ،سانلاةحصلاو ةينوناقلا Political and Social ةيسايسلاةيعامتجلااو Reputation ةعمس Weather سقط Criminal and Terrorist ةيباهرلإاو ةيئانجلا Informational & Operational ةيليغشتلاو ةيتامولعملا Environment & Man Made ناسنلإا عنص و ةئيبلا © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 17 Q6: Uncertainties, Biases, and Decision Quality رارقلا ةدوجو ،تازيحتلا ،نيقيلا مدع •Uncertainties are issues and information about which there is doubt. اهيف كش لا تامولعمو اياضق يهف نقيتلا مدع هجوأ امأ. •Biases are preconceived notions adopted without careful thought. قيقد ريكفت نود تدمتعا ةقبسم ميهافم يه تازيحتلا. •Both uncertainty and bias reduce decision quality. رارقلا ةدوج نم للقي زيحتلاو نيقيلا مدع نم لك. •Decision quality refers to the characteristics of a decision that affect the likelihood of achieving a positive outcome. ةجيتن قيقحت لامتحا ىلع رثؤي يذلا رارقلا صئاصخ ىلإ رارقلا ةدوج ريشتةيباجيإ. © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 18 Q6: Uncertainties and Biases in Information تامولعملا يف زيحتلاو نيقيلا مدع •Uncertainties come from many sources and can be exogenous or endogenous. ةديدع رداصم نم نقيتلا مدع هجوأ يتأتوأشنملا ةيلخاد وأ ةيجراخ نوكت نأ نكميو. •Biases can come from many sources. ةديدع رداصم نم تازيحتلا يتأت نأ نكميو. •The future is always uncertain. دكؤم ريغ امئاد وه لبقتسملا. •Managers may be uncertain that the right information was captured in a report. يف اهطاقتلا مت دق ةحيحصلا تامولعملا نأ نم نيدكأتم ريغ نوريدملا نوكي دقوريرقتلا. •The decision maker may be biased towards or against a particular alternative (predisposition bias) هدض وأ نيعم ليدب دض ازيحتم رارقلا ذختم نوكي دقو(دادعتسلاا زيحت) •The methods used to collect information could have introduced bias (information bias) ازيحت تلخدأ دق تامولعملا عمجل ةمدختسملا بيلاسلأا نوكت دقو( زيحتتامولعملا) •The decision maker may exercise an error in judgment or processing information (cognitive bias) تامولعملا ةجلاعم وأ مكحلا يف أطخ رارقلا عناص سرامي دق(يفرعملا زيحتلا) © John Wiley & Sons, 2011
Q6: Motorola’s Iridium Project •How did uncertainties and bias effect Motorola’s decision making process? نيقيلا مدع تلااح ترثأ فيك؟لاوروتوم يف رارقلا عنص ةيلمع ىلع زيحتلاو Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 19 © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 20 Q6: Uncertainties, Biases, and Decision Quality Lori loves to sew and has always made her own clothes. People often tell her that she is the best-dressed person they’ve ever met. She can design and sew a lovely outfit in under 2 days. She is considering opening a store that could sell her home-made fashions. Then she could combine her work with her hobby. Can you identify some of the uncertainties Lori faces? Can you think of any way she can reduce some of these uncertainties? ةصاخلا اهسبلام تلعج امئادو ةطايخل بحي يرول .مهسبلام نودتري صخش لضفأ اهنأب سانلا اهربخي ام ابلاغ . نم لقأ يف ةليمج يزلا ةطايخو ميمصت نكمي اهنا تلاقو2 مايأ . اهتاضوم عيبي نأ نكمي رجتم حتف يف ركفت يهوعنصلا ةيلزنملا .اهتياوه عم اهلمع نيب عمجت نأ نكمي اهنأ مث. ؟كوكشلا هذه ضعب نم للقت نأ عيطتست ةقيرط يأب ريكفتلا كنكمي له ؟يرول نيقيلا مدع هجوأ ضعب ديدحت كنكمي Can you identify any possible personal biases that Lori may have? How could these affect her decision making process? تازيحت يأ ديدحت كنكمي له؟رارقلا عنص ةيلمع ىلع هذه رثؤت نأ نكمي فيك ؟يرول نوكت دق ةلمتحم ةيصخش © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 21 Q7: Characteristics of Higher-Quality Decisions ةيلاعلا ةدوجلا تارارق صئاصخ Higher quality decisions come from a higher quality decision making process. Such a process is thorough, unbiased, focused, strategic, creative, and visionary. عنص ةيلمع نم ةيلاعلا ةدوجلا تارارق يتأتةيلاعلا ةدوجلا تاذ رارقلا . ،ةيجيتارتسا ،ةزكرم ،ةزاحنم ريغ ،ةلماش ةيلمعلا هذه لثمةريصبلاو ،ةيعادبلإا. This process requires reports that are relevant, understandable, and available. ةيلمعلا هذه بلطتتةرفوتمو ةموهفمو ةلص تاذ ريراقت. These reports must contain information that is more certain, complete, relevant, timely and valuable. بجيو يفو ةمءلامو لاامتكاو ةقاثو رثكأ تامولعم ىلع ريراقتلا هذه يوتحت نأةميقو بسانملا تقولا. © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 22 Q8: Components of Ethical Decision Making يقلاخلأا رارقلا عنص تانوكم Identify ethical problems as they arise لكاشملا ديدحتاهروهظ دنع ةيقلاخلأا Consider the well being of others and society ةيهافر يف رظنلاعمتجملاو نيرخلآا Clarify and apply ethical values ميقلا قيبطتو حيضوتةيقلاخلأا Continuously improve your personal ethics تايقلاخأ نيسحترارمتساب ةيصخشلا © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 23 Q8: The IMA’s Code of Ethics ةصاخلا كولسلا دعاوق ةنودم •The Institute of Management Accountants (IMA) has a Code of Ethics that states that IMA members have a responsibility to: نييرادلإا نيبساحملا دهعم ىدلوةيلوؤسم نولمحتي ءاضعلأا نأ ىلع صنت تايقلاخلأل ةنودم: •maintain an appropriate level of professional competence and perform their professional duties in accordance with laws, regulations, and standards; ءادأو ةينهملا ةءافكلا نم بسانم ىوتسم ىلع ظافحلاو؛ريياعملاو ةمظنلأاو نيناوقلل اقفو ةينهملا مهتابجاو •refrain from disclosing confidential information (unless legally obligated), or using (or even appearing to use) confidential information to illegal advantage; ةيرسلا تامولعملا نع حاصفلإا نع عانتملاا(اينوناق امزلم نكي مل ام) مادختسا وأ ،(اهروهظ ىتح وأ ) ريغ ةزيم ىلإ ةيرسلا تامولعملا؛ةينوناق •avoid actual and apparent conflicts of interest; and براضت بنجتوو ؛حضاولاو يلعفلا حلاصملا •communicate information fairly and objectively, and disclose all relevant information to decision makers. لداع لكشب تامولعملا ليصوتورارقلا يعناصل ةلصلا تاذ تامولعملا عيمج نع فشكلاو ،يعوضومو. © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 24 Q8: Ethical Decision Making ةيقلاخلأا تارارقلا ذاختا Suppose you work for the Lee K. Fawcett Plumbing Company as Mr. Fawcett’s administrative assistant. Recently Mr. Fawcett asked you to type some financial statements from his hand-written notes so that he can take them to the bank as part of a loan application. This exercise seems odd to you because the company’s CPA recently delivered the monthly financial statements that she prepares. While typing the financial statements you notice that the building the company rents is listed as an asset. Also, you write checks each month for the monthly payments on two car loans, and these are not listed as liabilities. Do you have an ethical dilemma? Discuss your approach to handling this situation. يل لمعت كنأ ضرتفنل .تيسوف ديسلل يرادإ دعاسمك ةكابسلل تيسوف ةكرش . ةباتك ارخؤم تيسوف ديسلا كنم بلط دقوضرقلا بلط نم ءزجك كنبلا ىلإ اهلقن نم نكمتي ىتح ديلا طخب ةبوتكملا هتاركذم نم ةيلاملا تانايبلا ضعب. اهدعت يتلا ةيرهشلا ةيلاملا تانايبلا ارخؤم تملس دق ةكرشلا نلأ كل ةبسنلاب ابيرغ نيرمتلا اذه ودبي. لصأك جردم ةكرشلا لبق نم هريجأت متي يذلا ىنبملا نأ ظحلات ،ةيلاملا تانايبلا ةباتك ءانثأ . رهش لك تاكيشلا بتكت ،اضيأتامازتلا اهنأ ىلع ةجردم تسيل هذهو ،ةرايس نيضرق ىلع ةيرهشلا تاعوفدملا نع. عضولا اذه عم لماعتلل كجهن شقان ؟ةيقلاخأ ةلضعم كيدل له. © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 1e Slide # 25 Appendix: Steps for Better Thinking لضفلأا ريكفتلا تاوطخ Source: (c) 2002. C. L. Lynch, S. K. Wolcott, and G. E. Huber, “Steps for Better Thinking: A Developmental Problem-Solving Process” )August 5, 2002). Steps for Better Thinking is a process to help address open-ended questions. يه لضفلأا ريكفتلا تاوطخ ةجلاعم يف ةدعاسملل ةيلمعةحوتفملا ةلئسلأا. Open-ended questions have no single correct solution; managers must seek the best solution. لح اهيدل سيل ةحوتفملا ةلئسلأا نيريدملا ىلع بجي ؛حيحص دحاولولحلا لضفأ نع ثحبلا. © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 26 Appendix: Steps for Better Thinking – Foundation (Knowing) لضفأ ريكفت تاوطخ- ةسسؤم(ةفرعم) •Foundation level skills include a knowledge of the terminology and basic concepts that are relevant to the decision at hand. لمشتو تاراهملا ىلع ىوتسم ةسسؤملا ةفرعم تاحلطصملا ميهافملاو ةيساسلأا تاذ ةلصلا رارقلاب يف لوانتم ديلا. •An individual with Foundation level skills can: ىلع تاراهملا عم صخشلل نكميةسسؤملا ىوتسم: •perform calculations to arrive at correct answer ةيباسحلا تايلمعلا ءارجإةحيحصلا ةباجلإا ىلإ لوصولل •define terms in his/her own words هل يف تاحلطصملا ديدحت /ةصاخلا تاملكلا اهل •describe a concept موهفم فصو •list the elements contained in a concept or process ةمئاقةيلمع وأ موهفم يف ةدراولا رصانعلا © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 27 Appendix: Steps for Better Thinking – Identifying لضفلأا ريكفتلا تاوطخ- ديدحت •Step 1 skills include the ability to identify relevant information and uncertainties. ةوطخلا تاراهم لمشتو1 ىلع ةردقلاةلصلا تاذ كوكشلاو تامولعملا ديدحت. •An individual with Step 1 skills can: •create a list of issues related to the decision نم ةمئاق ءاشنإرارقلاب ةقلعتملا اياضقلا •sort information that is relevant ةلصلا تاذ تامولعملا زرف •identify the reasons for the underlying uncertainties ةنماكلا كوكشلا بابسأ ديدحت •perform research to obtain input into the decision ءارجإرارقلا يف تلاخدم ىلع لوصحلل ثوحبلا © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 28 Appendix: Steps for Better Thinking – Exploring لضفلأا ريكفتلا تاوطخ- فاشكتسا •Step 2 skills include the ability to explore interpretations of the information and connections between alternative solutions approaches. جهن نيب طباورلاو تامولعملا تاريسفت فاشكتسا ىلع ةردقلا تاراهملا لمشتوةليدبلا لولحلا. •An individual with Step 2 skills can: •recognize and control for his/her own biases فارتعلااهب ةصاخلا تازيحتلا يف مكحتلاو •articulate assumptions and reasoning associated with alternative points of view طبترملا قطنملاو ةحضاولا تاضارتفلااوةليدب رظن طاقنب •organize information in meaningful ways to encompass problem complexities تاديقعت لمشتل ةيدجم قرطب تامولعملا ميظنتولكاشملا •compare and contrast different approaches to a problem’s solutions ةلكشملا لولحل ةفلتخملا جهنلا نيابتو ةنراقم © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 29 Appendix: Steps for Better Thinking – Prioritizing لضفلأا ريكفتلا تاوطخ- تايولولأا ديدحت •Step 3 skills include the ability to prioritize alternatives, come to a decision, and implement the decision. ةيولولأا ءاطعإ ىلع ةردقلا تاراهملا لمشتورارقلا ذيفنتو ،رارق ذاختاو ،لئادبلل. •An individual with Step 3 skills can: •develop guidelines for prioritizing alternatives ئدابم عضولئادبلا تايولوأ ديدحتل ةيهيجوت •prioritize alternatives after objective analysis ءاطعإيعوضوملا ليلحتلا دعب لئادبلل ةيولولأا •communicate findings in a manner appropriate to the audience روهمجلل ةبسانم ةقيرطب جئاتنلا ليصوتو •describe how the solution or decision might change if priorities change تريغت اذإ رارقلا وأ لحلا ريغتي نأ نكمي فيك فصوتايولولأا © John Wiley & Sons, 2011
Chapter 1: The Role of Accounting Information in Management Decision Making Eldenburg & Wolcott’s Cost Management, 2e Slide # 30 Appendix: Steps for Better Thinking – Envisioning لضفلأا ريكفتلا تاوطخ- روصت •Step 4 skills include the ability to monitor the decision and innovate new strategies to modify the decision when circumstances change. راكتباو رارقلا دصر ىلع ةردقلا تاراهملا لمشتوفورظلا ريغتت امدنع رارقلا ليدعتل ةديدج تايجيتارتسا. •An individual with Step 4 skills can: •explain the limitations of the decision made دويقلا حرشذختملا رارقلا ىلع ةضورفملا •establish a plan for monitoring the performance of the decision رارقلا ءادأ دصرل ةطخ عضو •explain how conditions may change in the future and how this may change the decision ريغتت نأ نكمي فيك حرشورارقلا رييغت اذهل نكمي فيكو لبقتسملا يف فورظلا © John Wiley & Sons, 2011
© John Wiley & Sons, 2011 Alawi Alshakhouri 140069238 Slide # 1 Cost Management Measuring, Monitoring, and Motivating Performance Chapter 2 The Cost Function ةفلكتلا ةفيظو
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 2 Chapter 2: The Cost Function ةفلكتلا ةفيظو Learning objectives •Q1: What are the different ways to describe cost behavior? قرطلا يه ام؟ةفلكتلا كولس فصول ةفلتخملا •Q2: What process is used to estimate future costs? ةمدختسملا ةيلمعلا يه ام؟ةيلبقتسملا فيلاكتلا ريدقتل •Q3: How are engineered estimates, account analysis, and two-point methods used to estimate cost functions? ليلحتو تاريدقتلا ميمصت متي فيك؟ةفلكتلا فئاظو ريدقتل ةمدختسملا طاقنلا قرطو تاباسحلا •Q4: How does a scatter plot assist with categorizing a cost? ططخم دعاسي فيك؟ةفلكتلا فينصت يف راثتنلاا •Q5: How is regression analysis used to estimate a cost function? فيك؟ةفلكتلا ةفيظو ريدقتل رادحنلاا ليلحت مدختسي •Q6: How are cost estimates used in decision making? مادختسا متي فيك؟رارقلا عنص يف ةفلكتلا تاريدقت
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 3 Q1: Different Ways to Describe Costs فيلاكتلا فصول ةفلتخم قرط •Costs can be defined by how they relate to a cost object, which is defined as any thing or activity for which we measure costs. ثيح نم فيلاكتلا فيرعت نكميو هللاخ نم موقن طاشن وأ ءيش يأ هنأب فرعي يذلا ،ةفلكتلا نئاكب اهطابترافيلاكتلا سايقب. •Costs can also be categorized as to how they are used in decision making. اميف فيلاكتلا فينصت اضيأ نكميورارقلا عنص يف اهمادختسا ةيفيكب قلعتي. •Costs can also be distinguished by the way they change as activity or volume levels change. نكميو تايوتسم وأ طاشنلا ريغت عم اهب ريغتت يتلا ةقيرطلاب فيلاكتلا زييمت اضيأمجحلا.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 4 Q1: Assigning Costs to a Cost Object ةفلكتلا رصنع ىلإ فيلاكتلا نييعت Direct costs are easily traced to the cost object. ةلوهسب ةرشابملا فيلاكتلا عبتت متيةفلكتلا ةفلك ىلإ. Determining the costs that should attach to a cost object is called cost assignment. ةفلكتلا نييعت ةفلكتلا نئاك ىلع قلعت نأ بجي يتلا فيلاكتلا ديدحت ىمسيو. Cost Assignment Indirect Costs ريغ فيلاكتلاةرشابملا Cost Object ةفلكتلا Direct Costs ةرشابملا فيلاكتلا Indirect costs are not easily traced to the cost object, and must be allocated. ريغ فيلاكتلا عبتت نكمي لاو ،ةفلكتلا ةفلك ىلإ ةلوهسب ةرشابملااهصيصخت بجيو. cost tracing عبتتلا ةفلكت cost allocation فيلاكتلا عيزوت
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 5 Q1: Direct and Indirect Costs •In manufacturing: عينصتلا يف: •all labor costs that are easily traced to the product are called direct labor costs ةلامعلا فيلاكت جتنملا ىلإ ةلوهسب اهعبتت متي يتلا ةلامعلا فيلاكت عيمج ىمستوةرشابملا •all materials costs that are easily traced to the product are called direct material costs ةرشابملا داوملا فيلاكت جتنملا ىلإ ةلوهسب اهعبتت متي يتلا داوملا فيلاكت عيمج ىمستو •all other production costs are called overhead costs جاتنلإا فيلاكت عيمج ىمستوةماعلا فيلاكتلا ىرخلأا •Whether or not a cost is a direct cost depends upon: ةفلكتلا تناك اذإ ام دمتعيولا مأ ةرشابم ةفلكت: •the technology available to capture cost information طاقتللا ةحاتملا ايجولونكتلاةفلكتلا تامولعم •the definition of the cost object ةفلكتلا نئاك فيرعت •whether the benefits of tracking the cost as direct exceed the resources expended to track the cost يتلا دراوملا زواجتت ةرشابملا فيلاكتلا عبتت دئاوفلا تناك اذإ امةفلكتلا عبتتل تقفنأ •the precision of the bookkeeping system that tracks costs رتافدلا كسم ماظن ةقدوفيلاكتلا عبتتي يذلا •the nature of the operations that produce the product or service تايلمعلا ةعيبطةمدخلا وأ جتنملا جتنت يتلا.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 6 Q1: Linear Cost Behavior Terminology •Total fixed costs are costs that do not change (in total) as activity levels change. ريغتت لا يتلا فيلاكتلا يه ةتباثلا فيلاكتلا عومجم(عومجملا يف ) تايوتسم ريغت عمطاشنلا. •Total variable costs are costs that increase (in total) in proportion to the increase in activity levels. ديزت يتلا فيلاكتلا يه ةريغتملا فيلاكتلا عومجم(لاامجإ ) امبطاشنلا تايوتسم يف ةدايزلا عم بسانتي. •The relevant range is the span of activity levels for which the cost behavior patterns hold. طامنأ اهب ظفتحت يتلا طاشنلا تايوتسم قاطن وه ةلصلا يذ قاطنلافيلاكتلا كولس. •A cost driver is a measure of activity or volume level; increases in a cost driver cause total costs to increase. ببسم يدؤت ةفلكتلا كرحم يف تادايزلا نإف ؛توصلا ىوتسم وأ طاشنلل سايقم وه ةفلكتلاةيلامجلإا فيلاكتلا ةدايز ىلإ. •Total costs equal total fixed costs plus total variable costs. فيلاكتلا عومجمةريغتملا فيلاكتلا عومجم ادئاز ةتباثلا فيلاكتلا عومجم يواسي.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 7 Q1: Behavior of Total (Linear) Costs Total Fixed Costs $ Cost Driver $ Cost Driver Total Costs If costs are linear, then total costs graphically look like this. ،ةيطخ فيلاكتلا تناك اذإاذه لثم اينايب ودبت فيلاكتلا عومجم مث. Total fixed costs do not change as the cost driver increases. عم ةتباثلا فيلاكتلا يلامجإ ريغتي لاةفلكتلا قئاس ةدايز. Higher total fixed costs are higher above the x axis. نم ىلعأ ةيلامجلإا ةتباثلا فيلاكتلا عافتراوس روحملا.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 8 Q1: Behavior of Total (Linear) Costs Total Variable Costs $ Cost Driver $ Cost Driver Total Costs If costs are linear, then total costs graphically look like this. Total variable costs increase as the cost driver increases. A steeper slope represents higher variable costs per unit of the cost driver.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 9 Q1: Total Versus Per-unit (Average) Cost Behavior If total variable costs look like this . . . . . . then variable costs per unit look like this. $ Cost Driver Total Variable Costs $/unit Cost Driver Per-Unit Variable Costs m slope = $m/unit
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 10 Q1: Total Versus Per-Unit (Average) Cost Behavior If total fixed costs look like this . . . . . . then fixed costs per unit look like this. $ Cost Driver Total Fixed Costs $/unit Cost Driver Per-Unit Fixed Costs
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 11 Lari’s Leather produces customized motorcycle jackets. The leather for one jacket costs $50, and Lari rents a shop for $450/month. Compute the total costs per month and the average cost per jacket if she made only one jacket per month. What if she made 10 jackets per month? $50 $450 $500 $50 $450 $500 $500 $450 $950 $50 $45 $95 Q1: Total Versus Per-Unit (Average) Cost Behavior Total variable costs go up Total fixed costs are constant Average variable costs are constant Average fixed costs go down
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 12 When costs are linear, the cost function is: TC = F + V x Q, where F = total fixed cost, V = variable cost per unit of the cost driver, and Q = the quantity of the cost driver. Q1: The Cost Function $ Cost Driver Total Costs F slope = $V/unit of cost driver The intercept is the total fixed cost. The slope is the variable cost per unit of the cost driver. A cost that includes a fixed cost element and a variable cost element is known as a mixed cost.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 13 Sometimes nonlinear costs exhibit linear cost behavior over a range of the cost driver. This is the relevant range of activity. Q1: Nonlinear Cost Behavior Cost Driver Total Costs Relevant Range slope = variable cost per unit of cost driver intercept = total fixed costs
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 14 Some costs are fixed at one level for one range of activity and fixed at another level for another range of activity. These are known as stepwise linear costs. ىوتسم ىلع ةتباثو طاشنلا نم دحاو قاطنل دحاو ىوتسم ىلع فيلاكتلا ضعب تيبثت متيطاشنلا نم ىرخأ ةعومجمل رخآ .ةجردتملا ةيطخلا فيلاكتلا هذه فرعت. Q1: Stepwise Linear Cost Behavior Total Supervisor Salaries Cost in $1000s Number of units produced, in 1000s 100 40 200 80 300 120 Example: A production supervisor makes $40,000 per year and the factory can produce 100,000 units annually for each 8-hour shift it operates.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 15 Some variable costs per unit are constant at one level for one range of activity and constant at another level for another range of activity. These are known as piecewise linear costs. ىوتسم ىلع ةتباث ةدحو لكل ةريغتملا فيلاكتلا ضعبطاشنلا نم رخآ قاطنل رخآ ىوتسم ىلع تباثو طاشنلا نم دحاو قاطنل دحاو . فيلاكتلا هذه فرعتوةيطخلا فيلاكتلاب. Q1: Piecewise Linear Cost Behavior Gallons purchased Total Materials Costs 1000 2000 Example: A supplier sells us raw materials at $9/gallon for the first 1000 gallons, $8/gallon for the second 1000 gallons, and at $7.50/gallon for all gallons purchased over 2000 gallons. slope= $9/gallon slope= $8/gallon slope= $7.50/gallon
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 16 Q1: Cost Terms for Decision Making •In Chapter 1 we learned the distinction between relevant and irrelevant cash flows. ةلصلا تاذ ريغو ةلصلا تاذ ةيدقنلا تاقفدتلا نيب قرفلا انملع لولأا لصفلا يف. •Opportunity costs are the benefits of an alternative one gives up when that alternative is not chosen. متي لا امدنع ىلختي دحاو ليدب دئاوف يه ةصرفلا فيلاكتليدبلا اذه رايتخا. •Sunk costs are costs that were incurred in the past. فيلاكتلا يه ةقراغلا ةفلكتلايضاملا يف اهدبكت مت يتلا. •Opportunity costs are difficult to measure because they are associated with something that did not occur. صرفلا فيلاكت سايق بعصيثدحي مل ءيشب طبترت اهنلأ. •Opportunity costs are always relevant in decision making. فيلاكتورارقلا عنص يف امئاد ةلص تاذ صرفلا. •Sunk costs are never relevant for decision making. تسيل ةقراغلا فيلاكتلاتارارقلا ذاختاب ادبأ ةلص تاذ.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 17 Q1: Cost Terms for Decision Making •Discretionary costs are periodic costs incurred for activities that management may or may not determine are worthwhile. يه ةيريدقتلا فيلاكتلامامتهلااب ةريدج ةرادلإا ددحت لا وأ نوكت دق يتلا ةطشنلأل ةدبكتملا ةيرودلا فيلاكتلا. •These costs may be variable or fixed costs. ةتباث وأ ةريغتم فيلاكتلا هذه نوكت دقوفيلاكتلا. •Discretionary costs are relevant for decision making only if they vary across the alternatives under consideration. تاذ ةيريدقتلا فيلاكتلاورظنلا ديق لئادبلا فلاتخاب فلتخت تناك اذإ طقف تارارقلا ذاختاب ةلص. •Marginal cost is the incremental cost of producing the next unit. ةفلكتلاةيلاتلا ةدحولا جاتنلإ ةفاضلإا فيلاكتلا يه ةيشماهلا. •When costs are linear and the level of activity is within the relevant range, marginal cost is the same as variable cost per unit. ةفلكتلا نإف ،ةلصلا يذ قاطنلا نمض طاشنلا ىوتسمو ةيطخ فيلاكتلا نوكت امدنعةدحو لكل ةريغتملا ةفلكتلا سفن يه ةيدحلا. •Marginal costs are often relevant in decision making. نوكت ام اريثكورارقلا عنص ةيلمعب ةلص تاذ ةيشماهلا فيلاكتلا.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 18 Past costs are often used to estimate future, non-discretionary, costs. In these instances, one must also consider: ةيلبقتسملا فيلاكتلا ريدقتل ةقباسلا فيلاكتلا مدختست ام اريثكوةيريدقتلا ريغو .يف اضيأ رظني نأ بجي ،تلااحلا هذه يفو: Q2: What Process is Used to Estimate Future Costs? يه ام؟ةيلبقتسملا فيلاكتلا ريدقتل ةمدختسملا ةيلمعلا •whether the past costs are relevant to the decision at hand حورطملا رارقلاب ةلص تاذ ةقباسلا فيلاكتلا تناك ءاوس •whether the future cost behavior is likely to mimic the past cost behavior نأ حجرملا نم لبقتسملا يف ةفلكتلا كولس ناك اذإ امةيضاملا ةفلكتلا كولس ديلقت •whether the past fixed and variable cost estimates are likely to hold in the future تاريدقت رمتست نأ حجرملا نم ناك اذإ املبقتسملا يف ةقباسلا ةريغتملاو ةتباثلا فيلاكتلا
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 19 •Use accountants, engineers, employees, and/or consultants to analyze the resources used in the activities required to complete a product, service, or process. نيبساحملا مدختسا و نيفظوملاو نيسدنهملاو / ةطشنلأا يف ةمدختسملا دراوملا ليلحتل نييراشتسلاا وأةيلمعلا وأ ةمدخلا وأ جتنملا لامكتسلا ةبولطملا. Q3: Engineered Estimates of Cost Functions ةفلكتلا فئاظول ةيسدنه تاريدقت •For example, a company making inflatable rubber kayaks would estimate some of the following: ةكرشلا نإف ،لاثملا ليبس ىلعيلي ام ضعب ردقت فوس خفنلل ةلباق ةيطاطم براوق جتنت يتلا: •the amount and cost of the rubber required •the amount and cost of labor required in the cutting department •the amount and cost of labor required in the assembly department •the distribution costs •the selling costs, including commissions and advertising •overhead costs and the best cost allocation base to use
© John Wiley & Sons, 2011 Slide # 20 •Review past costs in the general ledger and past activity levels to determine each cost’s past behavior. فيلاكتلا عجار لكل قباسلا كولسلا ديدحتل ةقباسلا طاشنلا تايوتسمو ماعلا ذاتسلأا رتفد يف ةقباسلاةفلكت. Q3: Account Analysis Method of Estimating a Cost Function ةفلكتلا ةفيظو ريدقتل باسحلا ليلحت ةقيرط •For example, a company producing clay wine goblets might review its records and find: ضارعتساب نيطلا نم باوكأ جتنت ةكرش موقت دق ،لاثملا ليبس ىلعدجتو اهتلاجس: •the cost of clay is piecewise linear with respect to the number of pounds of clay purchased اهؤارش نيطلا نم لاطرلاا ددعب قلعتي اميف ةيطخلا ةميكحلا ةعطق وه نيطلا ةفلكت •skilled production labor is variable with respect to the number of goblets produced ةجتنملا سوؤكلا ددعب قلعتي اميف ةرهاملا ةلامعلا جاتنإ توافتيو •unskilled production labor is mixed, and the variable portion varies with respect to the number of times the kiln is operated ،ةرهملا ريغ جاتنلإا لامع طلتخينرفلا ليغشت اهيف متي يتلا تارملا ددعب قلعتي اميف ريغتملا ءزج فلتخيو •production supervisors’ salary costs are stepwise linear نيفرشملا بتاور فيلاكتةجردتم ةيطخ جاتنلإا •distribution costs are mixed, with the variable portion dependent upon the number of retailers ordering goblets دمتعت ريغتملا ءزجلا عم ،عيزوتلا فيلاكت طلتختوسوؤكلا رمأي ةئزجتلا راجت نم ددع ىلع
Expense Amount Variable Fixed Direct Materials $500,000 Direct Labor 300,000 Rent 25,000 Insurance 15,000 Commissions 200,000 Property Tax 20,000 Telephone 10,000 Depreciation 85,000 Power & Light 30,000 Admin Salaries 100,000 Total 1,285,000 •The table on the right contains the expenditures for Scott Manufacturing during the last year. •100,000 units were produced and sold •$500,000 of sales revenue was recorded Required: 1.Determine the cost function using units produced as the driver 2.Repeat using sales dollars as the driver عينصتلا توكس تاقفن ىلع يوتحي نيميلا ىلع لودجلايضاملا ماعلا للاخ. عيبو جاتنإ مت100،000 ةدحو ليجست مت500،000 $تاعيبملا تاداريإ نم بولطم: 1-قئاسلل ةجتنملا تادحولا مادختساب ةفلكتلا ةفيظو ديدحت 2- قئاسك تاعيبملا رلاود مادختسا ررك © John Wiley & Sons, 2011 Slide # 21 Q3: Example – Account Analysis Method of Estimating a Cost Function لاثم- ةفلكتلا ةفيظو ريدقت ؟باسحلا ليلحت ةقيرط
•Steps in estimating a cost function using account analysis باسحلا ليلحت مادختساب ةفلكتلا ةفيظو ريدقت تاوطخ –Separate fixed and variable costs ةريغتملاو ةتباثلا فيلاكتلاةلصفنملا –Total the fixed costs ةتباثلا فيلاكتلا عومجم –Total the variable costs ةريغتملا فيلاكتلا عومجم –Calculate a variable cost per driver قئاس لكل ةريغتم ةفلكت باسح –Write out the cost function ةفلكتلا ةفيظو بتكا © John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 22 Q3: Example – Account Analysis Method of Estimating a Cost Function لاثم- ةفلكتلا ةفيظو ريدقت ؟باسحلا ليلحت ةقيرط
Expense Amount Variable Fixed Direct Materials $500,000 500,000 Direct Labor 300,000 300,000 Rent 25,000 25,000 Insurance 15,000 15,000 Commissions 200,000 200,000 Property Tax 20,000 20,000 Telephone 10,000 10,000 Depreciation 85,000 85,000 Power & Light 30,000 30,000 Admin Salaries 100,000 100,000 Total 1,285,000 1,000,000 285,000 © John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 23 Q3: Solution – Account Analysis Method of Estimating a Cost Function Cost Function on Units: TC = FC + VC/Unit * Qty TC = $285,000 + ($10/unit) * Qty Cost Function on Dollars: TC = FC + VC/Sales $ * Sales $ TC = $285,000 + ($0.20) * Sales $
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 24 Q3: Two-Point Method of Estimating a Cost Function ةطقنلا ةيئانث ةقيرط ةفلكتلا ةفيظو ريدقتل •Use the information contained in two past observations of cost and activity to separate mixed and variable costs. مادختسا فيلاكتلا لصفل طاشنلاو ةفلكتلا نم ةقباسلا تاظحلاملا يف ةدراولا تامولعملاةريغتملاو ةطلتخملا. •It is much easier and less costly to use than the account analysis or engineered estimate of cost methods, but: نمف ،ةفلكتلا بيلاسلأ يسدنه ريدقت وأ باسحلا ليلحت نم مادختسلال ةفلكت لقأو ريثكب لهسلأانكلو: •it estimates only mixed cost functions, ،ةطلتخملا ةفلكتلا فئاظو طقف ردقي هنإف •it is not very accurate, and و ،ادج ةقيقد تسيل اهنأ •it can grossly misrepresent costs if the data points come from different relevant ranges of activity لكشب فيلاكتلا ريدقت ءيسي نأ نكمي هنإفةلص تاذ ةفلتخم طاشن تاقاطن نم يتأت تانايبلا طاقن تناك اذإ ريبك
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 25 Units $ $58,000 6,200 $40,000 3,200 Q3: Example – Two-Point Method of Estimating a Cost Function In July the Gibson Co. incurred total overhead costs of $58,000 and made 6,200 units. In December it produced 3,200 units and total overhead costs were $40,000. What are the total fixed factory costs per month and average variable factory costs? We first need to determine V, using the equation for the slope of a line. rise/run = $58,000 – $40,000 6,200 – 3,200 units = $18,000/3,000 units Then, using TC = F + V x Q, and one of the data points, determine F. = $6/unit $58,000 = F + $6/unit x 6,200 units $58,000 = F + $37,200 $20,800 = F $20,800
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 26 •The high-low method is a two-point method ةيلاع ةقيرطنيتطقن نم ةقيرط يه ةضفخنم •the two data points used to estimate costs are observations with the highest and the lowest activity levels نيتمدختسملا تانايبلا يتطقن نإفطاشنلا تايوتسم ىندأو ىلعأب تدصر يه فيلاكتلا ريدقتل Q3: High-Low Method of Estimating a Cost Function ةفلكتلا ةفيظو ريدقت ةقيرط ةضفخنم ةيلاع •The extreme points for activity levels may not be representative of costs in the relevant range نوكت لا دقوةلصلا يذ قاطنلا يف فيلاكتلل ةلثمم طاشنلا تايوتسمل ىوصقلا طاقنلا •this method may underestimate total fixed costs and overestimate variable costs per unit, ريدقت نم للقت دق ةقيرطلا هذه نإف،ةدحو لكل ةريغتملا فيلاكتلا ريدقت يف غلابتو ةتباثلا فيلاكتلا •or vice versa. سكعلا وأ.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 27 •A scatterplot shows cost observations plotted against levels of a possible cost driver. فيلاكتلا راثتنلاا ططخم رهظيوةفلكتلا ببسم يف ةلمتحم تايوتسم لباقم ةدوصرملا. Q4: How Does a Scatter plotAssist with Categorizing a Cost? ؟ةفلكتلا فينصت عم راثتنلاا ططخم دعاسي فيك •A scatterplot can assist in determining: دعاسي نأ نكميوديدحت يف راثتنلاا ططخم: •which cost driver might be the best for analyzing total costs, and ليلحتل لضفلأا ةفلكتلا ببسم نوكب دق يتلاوو ،ةيلامجلإا فيلاكتلا •the cost behavior of the cost against the potential cost driver. قئاس لباقم ةفلكتلا ةفلكت كولسةلمتحملا ةفلكتلا.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 28 Q4: Which Cost Driver Has the Best Cause & Effect Relationship with Total Cost? ؟ةيلامجلإا ةفلكتلا عم ةقلاعلا رثأو ببس لضفأ هيدل ةفلكتلا ببسم يأ # units sold $ 8 observations of total selling expenses plotted against 3 potential cost drivers # customers $ # salespersons $ The number of salespersons appears to be the best cost driver of the 3. ةفلكت ببسم لضفأ وه نيعئابلا ددع نأ ودبيوةثلاثلل.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 29 Q4: What is the Underlying Cost Behavior? # units sold $ # units sold $ This cost is probably linear and fixed. ةتباثو ةيطخ ةفلكتلا هذه نوكت امبرو. This cost is probably linear and variable. ةيطخ ةفلكتلا هذه نوكت امبروةريغتمو.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 30 Q4: What is the Underlying Cost Behavior? # units sold $ # units sold $ This cost is probably linear and mixed. ةطلتخمو ةيطخ ةفلكتلا هذه نوكت امبرو. This is likely a stepwise linear cost. هذه نوكت نأ حجرملا نموةجردتم ةيطخلا ةفلكتلا.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 31 Q4: What is the Underlying Cost Behavior? # units sold $ # units sold $ This cost may be piecewise linear. ةددعتم ةلاد ةفلكتلا هذه نوكت دقو. This cost appears to have a nonlinear relationship with units sold. ريغ ةقلاع اهل ةفلكتلا هذه نأ ودبيوةعابملا تادحولا عم ةيطخ.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 32 Q5: How is Regression Analysis Used to Estimate a Mixed Cost Function? ؟ةطلتخملا ةفلكتلا ةفيظو ريدقتل رادحنلاا ليلحت مادختسا متي فيك •Regression analysis estimates the parameters for a linear relationship between a dependent variable and one or more independent (explanatory) variables. ريغتمو عبات ريغتم نيب ةيطخلا ةقلاعلا تاملعم رادحنلاا ليلحت سيقيو ةلقتسملا تاريغتملا نم رثكأ وأ دحاو(ةيريسفتلا.) •When there is only one independent variable, it is called simple regression. طيسبلا رادحنلاا هيلع قلطي ،طقف دحاو لقتسم ريغتم كانه نوكي امدنعو. •When there is more than one independent variable, it is called multiple regression. ددعتملا رادحنلاا هيلع قلطي ،دحاو لقتسم ريغتم نم رثكأ كانه نوكي امدنع. Y = α + β X +  independent variable dependent variable α and β are the parameters;  is the error term (or residual)
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 33 Q5: How is Regression Analysis Used to Estimate a Mixed Cost Function? We can use regression to separate the fixed and variable components of a mixed cost. Yi = α + β Xi + i the slope term is the variable cost per unit the intercept term is total fixed costs i is the difference between the predicted total cost for Xi and the actual total cost for observation i Yi is the actual total costs for data point i Xi is the actual quantity of the cost driver for data point i
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 34 •Goodness of fit مؤلاتلا نسح Q5: Regression Output Terminology: Adjusted R-Square تاحلطصملا جتانلا رادحنلاا : ير ليدعتريوكس •How well does the line from the regression output fit the actual data points? طاقنل رادحنلاا جتان نم طخلا ةمءلام ىدم ام؟ةيلعفلا تانايبلا •The adjusted R-square statistic shows the percentage of variation in the Y variable that is explained by the regression equation. يرلا ءاصحلإا نيبيوريوكس ةبسنلا لدعملارادحنلاا ةلداعم هرسفت يذلا ياو ريغتملا يف ريغتلل ةيوئملا. •The next slide has an illustration of how a regression equation can explain the variation in a Y variable. • يف ريغتلل رادحنلاا ةلداعم ريسفت ةيفيكل حيضوت ىلع ةيلاتلا ةحيرشلا يوتحتياو ريغتم.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 35 Q5: Regression Output Terminology: Adjusted R-Square •We have 29 observations of a Y variable, and the average of the Y variables is 56,700. •If we plot them in order of the observation number, there is no discernable pattern. •ظوحلم طمن دجوي لا ،ةظحلاملا مقر بيترت يف مهل انيع انك اذإ •We have no explanation as to why the observations vary about the average of 56,700. طسوتم نع تاظحلاملا فلاتخا ببسل ريسفت يأ انيدل سيلو700 56.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 36 Q5: Regression Output Terminology: Adjusted R-Square If each Y value had an associated X value, then we could reorder the Y observations along the X axis according to the value of the associated X. Now we can measure how the Y observations vary from the “line of best fit” instead of from the average of the Y observations. Adjusted R-Square measures the portion of Y’s variation about its mean that is explained by Y’s relationship to X.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 37 •Statistical significance of regression coefficients رادحنلاا تلاماعمل ةيئاصحلإا ةيمهلأا Q5: Regression Output Terminology: p-value and t-statistic. رادحنلاا تاجرخم تاحلطصم :ءاصحلإا يتو ةميقلا يب •When running a regression we are concerned about whether the “true” )unknown( coefficients are non-zero. • تلاماعملا تناك اذإ ام لوح قلقلاب رعشن نحن رادحنلاا ليغشت دنع”ةيقيقحلا( “فورعم ريغ )ةيرفص ريغ. •Did we get a non-zero intercept (or slope coefficient) in the regression output only because of the particular data set we used? يرفص ريغ ضارتعا ىلع انلصح له( لماعم وأرادحنلاا ) يتلا ةددحملا تانايبلا ةعومجم ببسب طقف رادحنلاا جتان يف؟اهانمدختسا
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 38 Q5: Regression Output Terminology: p-value and t-statistic. •In general, if the t-statistic for the intercept (slope) term > 2, we can be about 95% confident (at least) that the true intercept (slope) term is not zero. ضارتعلال ةيئاصحلإا يت تناك اذإ ،ماع لكشب(ردحنملا )ىدملا >2 نأ نكمي نحن ، يلاوح نيقثاو نوكن95 ٪(لقلأا ىلع ) حيحص ضارتعا هنأ(ردحنملا )ارفص تسيل ىدملا. •The t-statistic and the p-value both measure our confidence that the true coefficient is non-zero. لماعملا نأب انتقث سيقي امهلاكورفص ريغ يقيقحلا •The p-value is more precise ةقد رثكأ ةميقلا يب •it tells us the probability that the true coefficient being estimated is zero رفص وه ردقي يقيقحلا لماعملا نأ لامتحا انربخي هنإف •if the p-value is less than 5%, we are more than 95% confident that the true coefficient is non-zero. نم لقأ ةميقلا يب تناك اذإ5 نحنو ،٪ نم رثكأ95رفصلا ريغ يقيقح لماعملا نأ نم نوقثاو ٪.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 39 Q5: Interpreting Regression Output The coefficients give you the parameters of the estimated cost function. Predicted total costs = $2,937 + ($5.215/mach hr) x (# of mach hrs) Suppose we had 16 observations of total costs and activity levels (measured in machine hours) for each total cost. If we regressed the total costs against the machine hours, we would get . . . Total fixed costs are estimated at $2,937. Variable costs per machine hour are estimated at $5.215.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 40 Q5: Interpreting Regression Output The regression line explains 76.8% of the variation in the total cost observations. The high t-statistics . . . . . . and the low p-values on both of the regression parameters tell us that the intercept and the slope coefficient are “statistically significant”. (5.26E-06 means 5.26 x 10-6, or 0.00000526)
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 41 Carole’s Coffee asked you to help determine its cost function for its chain of coffee shops. Carole gave you 16 observations of total monthly costs and the number of customers served in the month. The data is presented below, and the a portion of the output from the regression you ran is presented on the next slide. Help Carole interpret this output. Q5: Regression Interpretation Example
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 42 Q5: Regression Interpretation Example What is Carole’s estimated cost function? In a store that serves 10,000 customers, what would you predict for the store’s total monthly costs? Predicted total costs = $4,634 + ($1.388/customer) x (# of customers) Predicted total costs at 10,000 customers $4,634 + ($1.388/customer) x 10,000 customers = $18,514 =
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 43 Q5: Regression Interpretation Example What is the explanatory power of this model? Are the coefficients statistically significant or not? What does this mean about the cost function? The model explains 81.58% of the variation in total costs, which is pretty good. The slope coefficient is significantly different from zero. This means we can be pretty sure that the true cost function includes nonzero variable costs per customer. The intercept is not significantly different from zero. There’s a 9.8% probability that the true fixed costs are zero*. *(Some would say the intercept is significant as long as the p-value is less than 10%, rather than 5%.)
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 44 Q6: Considerations When Using Estimates of Future Costs ةيلبقتسملا فيلاكتلا تاريدقت مادختسا دنع تارابتعا •The future is always unknown, so there are uncertainties when estimating future costs. كانه كلذل ،امئاد فورعم ريغ لبقتسملاةيلبقتسملا فيلاكتلا ريدقت دنع كوكش. •The estimated cost function may have mis-specified the cost behavior. كولس ئطاخ لكشب تددح دق ةردقملا ةفلكتلا ةفيظو نوكت دقوفيلاكتلا. •Future cost behavior may not mimic past cost behavior. دقةقباسلا ةفلكتلا كولس ةيلبقتسملا ةفلكتلا كولس يكاحي لا. •Future costs may be different from past costs. دقوةقباسلا فيلاكتلا نع ةيلبقتسملا فيلاكتلا فلتخت. •The cost function may be using an incorrect cost driver. دقحيحص ريغ ةفلكت ليغشت جمانرب مادختساب ةفلكتلا ةفيظو نوكت.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 45 Q6: Considerations When Using Estimates of Future Costs ةيلبقتسملا فيلاكتلا تاريدقت مادختسا دنع تارابتعا •The data used to estimate past costs may not be of high-quality. ةيلاع ةدوج تاذ ةقباسلا فيلاكتلا ريدقتل ةمدختسملا تانايبلا نوكت لا دقو. •The accounting system may aggregate costs in a way that mis-specifies cost behavior. يبساحملا ماظنلا عمجي دقوئطاخ لكشب فيلاكتلا كولس رسفت ةقيرطب فيلاكتلا. •The true cost function may not be in agreement with the cost function assumptions. فيلاكتلا فيلاكت تاضارتفا عم ةيقيقحلا ةفلكتلا ةفيظو قفتت لا دقو. •For example, if variable costs per unit of the cost driver are not constant over any reasonable range of activity, the linearity of total cost assumption is violated. ليبس ىلع ةتباث تسيل ةفلكتلا ليغشت تادحو نم ةدحو لكل ةريغتملا فيلاكتلا تناك اذإ ،لاثملاةفلكتلا ضارتفا يلامجإ ةيطخ كاهتنا متي ،طاشنلا نم لوقعم قاطن يأ ىلع. •Information from outside the accounting system may not be accurate. ةقيقد يبساحملا ماظنلا جراخ نم ةدراولا تامولعملا نوكت لا دقو.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 46 Appendix 2A: Multiple Regression Example ددعتملا رادحنلاا لاثم We have 10 observations of total project cost, the number of machine hours used by the projects, and the number of machine set-ups the projects used.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 47 Appendix 2A: Multiple Regression Example ددعتملا رادحنلاا لاثم Regress total costs on the number of set-ups to get the following output and estimated cost function: Predicted project costs = $2,926 + ($1,225/set-up) x (# set-ups) The explanatory power is 57.4%. The # of set-ups is significant, but the intercept is not significant if we use a 5% limit for the p-value.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 48 Appendix 2A: Multiple Regression Example ددعتملا رادحنلاا لاثم Regress total costs on the number of machine hours to get the following output and estimated cost function: Predicted project costs = – $173 + ($113/mach hr) x (# mach hrs) The explanatory power is 62.1%. The intercept shows up negative, which is impossible as total fixed costs can not be negative. However, the p-value on the intercept tells us that there is a 93% probability that the true intercept is zero. The # of machine hours is significant.
© John Wiley & Sons, 2011 Slide # 49 Appendix 2A: Multiple Regression Example ددعتملا رادحنلاا لاثم Regress total costs on the # of set ups and the # of machine hours to get the following: The explanatory power is now 89.6%. The p-values on both slope coefficients show that both are significant. Since the intercept is not significant, project costs can be estimated based on the project’s usage of set-ups and machine hours. ةطلسلا ةيريسفتلا يه نلآا 89.6٪. رهظتو يب ةميقلا ىلع لك نم تلاماعم رادحنلاا نأ امهيلك ريبك. امبو نأ ضارتعلاا سيل ،اريبك نكمي ريدقت فيلاكت عورشملا ىلع ساسأ مادختسا عورشملا تاعومجملل تاعاسو ةنيكاملا. Predicted project costs = – $1,132 + ($82/mach hr) x (# mach hrs) + ($857/set-up) x (# set-ups)
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 50 A learning curve is وه ملعتلا ىنحنمو •the rate at which labor hours per unit decrease as the volume of activity increases مجح ةدايز عم ةدحو لكل لمعلا تاعاس هيف ضفخنت يذلا لدعملا وهوطاشنلا •the relationship between cumulative average hours per unit and the cumulative number of units produced. ةدحولل يمكارتلا تاعاس طسوتم نيب ةقلاعلاةجتنملا تادحولل يمكارتلا ددعلاو. Appendix 2B: What is a Learning Curve? A learning curve can be represented mathematically as: يلاتلا وحنلا ىلع ايضاير ملعتلا ىنحنم ليثمت نكمي: Y = α Xr, where X = cumulative number of units produced, r = an index for learning = ln(% learning)/ln(2), and Y = cumulative average labor hours, α = time required for the first unit, ln is the natural logarithmic function.
© John Wiley & Sons, 2011 Chapter 2: The Cost Function Eldenburg & Wolcott’s Cost Management, 2e Slide # 51 Appendix 2B: Learning Curve Example First compute r: Deanna’s Designer Desks just designed a new solid wood desk for executives. The first desk took her workforce 55 labor hours to make, but she estimates that each desk will require 75% of the time of the prior desk )i.e. “% learning” = 75%). Compute the cumulative average time to make 7 desks, and draw a learning curve. r = ln(75%)/ln(2) = -0.2877/0.693 = -0.4152 Then compute the cumulative average time for 7 desks: Y = 55 x 7(-0.4152) = 25.42 hrs In order to draw a learning curve, you must compute the value of Y for all X values from 1 to 7. . . .
© John Wiley & Sons, 2011 Alawi Alshkhouri 140069328 Slide # 1 Cost Management Measuring, Monitoring, and Motivating Performance Chapter 3 Cost-Volume-Profit Analysis حبرلا مجح ةفلكت ليلحت
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 2 Chapter 3: Cost-Volume-Profit Analysis حبرلا مجح ةفلكت ليلحت Learning objectives •Q1: What is cost-volume-profit (CVP) analysis, and how is it used for decision making? •Q2: How are CVP calculations performed for a single product? •Q3: How are CVP calculations performed for multiple products? •Q4: What assumptions and limitations should managers consider when using CVP analysis? •Q5: How are the margin of safety and operating leverage used to assess operational risk?
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 3 units $ Total Costs (TC) Total Revenue (TR) Q1: CVP Analysis and the Breakeven Point لداعتلا ةطقنو حبرلا مجح ةفلكت ليلحت •The breakeven point (BEP) is where total revenue equal total costs. فيلاكتلا عومجم يواسي تاداريلإا يلامجإ ثيح يه لداعتلا ةطقن. •CVP analysis looks at the relationship between selling prices, sales volumes, costs, and profits. نيب ةقلاعلا ليلحت ثحبحابرلأاو فيلاكتلاو تاعيبملا ماجحأو عيبلا راعسأ. BEP in units BEP in sales $
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 4 Q2: How is CVP Analysis Used? •CVP analysis can determine, both in units and in sales dollars: تاعيبملا رلاود يفو تادحو يف ءاوس ،ديدحت نكمي: •the volume required to break even لداعتلا ةطقن بلطتي مجحلا •the volume required to achieve target profit levels مجحلاةفدهتسملا حابرلأا تايوتسم قيقحتل بولطملا •the effects of discretionary expenditures ةيريدقتلا تاقفنلا راثآ •the selling price or costs required to achieve target volume levels قيقحتل ةبولطملا فيلاكتلا وأ عيبلا رعسفدهلا مجح تايوتسم •CVP analysis helps analyze the sensitivity of profits to changes in selling prices, costs, volume and sales mix. ليلحت عيبلا راعسأ يف تاريغتلل حابرلأا ةيساسح ليلحت ىلع دعاسي حبرلا مجح ةفلكتتاعيبملا جيزمو مجحو فيلاكتلاو.
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 5 Q2: CVP Calculations for a Single Product To find the breakeven point in units, set Profit = 0. حبرلا نييعت ،تادحولا يف لداعتلا ةطقن ىلع روثعلل =0. Units required to achieve target pretax profit لبق حبرلا قيقحتل ةبولطملا تادحولابئارضلا مصخ where F = total fixed costs ةتباثلا فيلاكتلا عومجم P = selling price per unit ةدحو لكل عيبلا رعس V = variable cost per unit ةدحو لكل ةريغتملا ةفلكتلا P – V = contribution margin per unit ةدحو لكل ةمهاسملا شماه
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 6 Q2: CVP Calculations for a Single Product To find the breakeven point in sales $, set Profit = 0. Sales $ required to achieve target pretax profit where F = total fixed costs CMR = contribution margin ratio = (P- V)/P Note that CMR can also be computed as
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 7 Bill’s Briefcases makes high quality cases for laptops that sell for $200. The variable costs per briefcase are $80, and the total fixed costs are $360,000. Find the BEP in units and in sales $ for this company. Q2: Breakeven Point Calculations BEP in units BEP in sales $
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 8 units $1000s TC TR 3000 $600 Q2: CVP Graph Draw a CVP graph for Bill’s Briefcases. What is the pretax profit if Bill sells 4100 briefcases? If he sells 2200 briefcases? Recall that P = $200, V = $80, and F = $360,000. $360 4100 2200 Profit at 4100 units = $120 x 4100 – $360,000. $132,000 -$96,000 Profit at 2200 units = $120 x 2200 – $360,000. More easily: 4100 units is 1100 units past BEP, so profit = $120 x 1100 units; 2200 units is 800 units before BEP, so loss = $120 x 800 units.
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 9 How many briefcases does Bill need to sell to reach a target pretax profit of $240,000? What level of sales revenue is this? Recall that P = $200, V = $80, and F = $360,000. Q2: CVP Calculations Units needed to reach target pretax profit Sales $ required to reach target pretax profit Of course, 5,000 units x $200/unit = $1,000,000, too. But sometimes you only know the CMR and not the selling price per unit, so this is still a valuable formula.
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 10 How many briefcases does Bill need to sell to reach a target after-tax profit of $319,200 if the tax rate is 30%? What level of sales revenue is this? Recall that P = $200, V = $80, and F = $360,000. Q2: CVP Calculations First convert the target after-tax profit to its target pretax profit: Units needed to reach target pretax profit Sales $ needed to reach target pretax profit
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 11 Suppose that Bill’s marketing department says that he can sell 6,000 briefcases if the selling price is reduced to $170. Bill’s target pretax profit is $210,000. Determine the highest level that his variable costs can so that he can make his target. Recall that F = $360,000. Q1,2: Using CVP to Determine Target Cost Levels Use the CVP formula for units, but solve for V: Q = 6,000 units If Bill can reduce his variable costs to $75/unit, he can meet his goal.
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 12 Q4: Business Risk in Bill’s Decision •After this analysis, Bill needs to consider several issues before deciding to lower his price to $170/unit. ،ليلحتلا اذه دعب ىلإ هرعس ضفخ ررقي نأ لبق اياضق ةدع يف رظنلا ىلإ نوناقلا عورشم جاتحي170 رلاود /ةدحو. •How reliable are his marketing department’s estimates? ةيقوثوم ىدم ام؟قيوستلا مسق تاريدقت •Is a $5/unit decrease in variable costs feasible? فيلاكتلا ضيفخت نكمي له رادقمب ةريغتملا5 ؟ةيكيرمأ تارلاود •Will this decrease in variable costs affect product quality? اذه رثؤيس له؟جتنملا ةدوج ىلع ةريغتملا فيلاكتلا يف ضافخنلاا •If 6,000 briefcases is within his plant’s capacity but lower than his current sales level, will the increased production affect employee morale or productivity? ناك اذإ6000 ىوتسم نم لقأ نكلو هعنصم ةقاط لخاد ةبيقح ناك اذإ ؟مهتيجاتنإ وأ نيفظوملا تايونعم ىلع جاتنلإا ةدايز رثؤيس له ،يلاحلا هتاعيبم6000 ةبيقح تايونعم ىلع جاتنلإا ةدايز رثؤيس له ،يلاحلا هتاعيبم ىوتسم نم لقأ نكلو هعنصم ةقاط لخاد؟مهتيجاتنإ وأ نيفظوملا
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 13 Q1: Using CVP to Compare Alternatives مادختسا مجح ةفلكت ليلحتحبرلا لئادبلا ةنراقمل •CVP analysis can compare alternative cost structures or selling prices. عيبلا راعسأ وأ ةليدبلا ةفلكتلا لكايه ةنراقم ليلحتلل نكمي. •high salary/low commission vs. lower salary/higher commission for sales persons عفترم بتار / لقأ ةلومع لباقم ةضفخنم ةلومع /تاعيبملل ىلعأ بتار •highly automated production process with low variable costs per unit vs. lower technology process with higher variable costs per unit and lower fixed costs. لباقم ةدحو لكل ةريغتملا فيلاكتلا ضافخنا عم ةيلاع ةتمتؤم جاتنإ ةيلمعةتباثلا فيلاكتلا ضافخناو ةدحو لكل ةريغتملا فيلاكتلا عافترا عم لقأ ايجولونكت ةيلمع. •The indifference point between alternatives is the level of sales (in units or sales $) where the profits of the alternatives are equal. تاعيبملا ىوتسم يه لئادبلا نيب ةلاابملالا ةطقن( تاعيبملا وأ تادحولاب$ )ةيواستم لئادبلا حابرأ نوكت ثيح. •broad advertising campaign with higher selling prices vs. minimal advertising and lower selling prices لباقم عيبلا راعسأ عافترا عم ةعساو ةينلاعإ ةلمحعيبلا راعسأ ضافخناو تانلاعلإا نم ىندلأا دحلا
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 14 Currently Bill’s salespersons have salaries totaling $80,000 (included in F of $360,000) and earn a 5% commission on each unit ($10 per briefcase). He is considering an alternative compensation arrangement where the salaries are decreased to $35,000 and the commission is increased to 20% ($40 per briefcase). Compute the BEP in units under the proposed alternative. Recall that P = $200 and V = $80 currently. Q1,2: Using CVP to Compare Alternatives First compute F and V under the proposed plan: F = $360,000 – $45,000 decrease in salaries = $315,000 V = $80 + $30 increase in commission = $110 Then compute Q under the proposed plan: Units needed to breakeven
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 15 Q1: Determining the Indifference Point Compute the volume of sales, in units, for which Bill is indifferent between the two alternatives. The indifference point in units is the Q for which the profit equations of the two alternatives are equal. Current Plan Proposed Plan Contribution margin per unit $120 $90 Total fixed costs $360,000 $315,000 Profit (current plan) = $120Q – $360,000 Profit (proposed plan) = $90Q – $315,000 $120Q – $360,000 = $90Q – $315,000 $30Q = $45,000 Q = 1,500 units
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 16 Q1,2: CVP Graphs of the Indifference Point Draw a CVP graph for Bill’s that displays the costs under both alternatives. Notice that the total revenue line for both alternatives is the same, but the total cost lines are different. TC-current plan TR units $1000s 3000 $600 $360 3500 $315 TC-proposed plan 1500 BEP for the current plan BEP for the proposed plan indifference point between the plans
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 17 TC-current plan TR units $1000s 3000 $600 Q1,2: Comparing Alternatives $360 3500 $315 TC-proposed plan 1500 The current plan breaks even before the proposed plan. At 1500 units, the plans have the same total cost. Each unit sold provides a larger contribution to profits under the current plan.
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 18 Q4: Business Risk in Bill’s Decision ليب رارق يف لامعلأا رطاخم •Hopefully Bill is currently selling more than 1500 briefcases, because profits are negative under BOTH plans at this point. نم رثكأ ايلاح عيبي ليب لمأن1500 ةلحرملا هذه يف ثوب ططخ تحت ةيبلس يه حابرلأا نلأ ،بئاقح. •Therefore, it seems the current plan is preferable to the proposed plan. ةطخلا نم لضفأ ةيلاحلا ةطخلا نأ ودبي ،كلذلوةحرتقملا. However, . . . •The total costs of the current plan are less than the those of the proposed plan at sales levels past 1500 briefcases. نم لقأ ةيلاحلا ةطخلل ةيلامجلإا فيلاكتلا غلبتو غلبت يتلا تاعيبملا تايوتسم يف ةحرتقملا ةطخلا فيلاكت1500 ةبيقح.
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 19 Q4: Business Risk in Bill’s Decision ليب رارق يف لامعلأا رطاخم . . . this may not be true because the level of future sales is always uncertain. . . . تاعيبملا ىوتسم نلأ احيحص نوكي لا دق اذهوامئاد دكؤم ريغ ةيلبقتسملا. •What if the briefcases were a new product line? تناك ول اذام؟ديدج جاتنإ طخ رفسلا بئاقح •The plans may create different estimates of the likelihood of various sales levels. تايوتسم لامتحلا ةفلتخم تاريدقت ططخلا قلخت دقةفلتخملا تاعيبملا. •Estimates of sales levels may be highly uncertain. تاريدقت نوكت دقريبك دح ىلإ ةدكؤم ريغ تاعيبملا تايوتسم. •The lower fixed costs of the proposed plan may be safer. نوكت دقوانمأ رثكأ ةحرتقملا ةطخلل لقلأا ةتباثلا فيلاكتلا. •Salespersons may have an incentive to sell more units under the proposed plan. تادحولا نم ديزملا عيبل زفاح تاعيبملا باحصأ ىدل نوكي دقوةحرتقملا ةطخلا راطإ يف.
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 20 Q3: CVP Analysis for Multiple Products When a company sells more than one product the CVP calculations must be adjusted for the sales mix. The sales mix should be stated as a proportion تاباسح ليدعت بجي دحاو جتنم نم رثكأ ةكرشلا عيبت امدنعحبرلا مجح ةفلكت ليلحت تاعيبملا جيزمل .ةبسنك تاعيبملا جيزم ركذ يغبنيو •of total units sold when performing CVP calculations for in units. دنع ةعابملا تادحولا يلامجإ نم تاباسح ءارجإحبرلا مجح ةفلكت ليلحت تادحولل. •of total revenues when performing CVP calculations in sales $. ءادأ دنع تاداريلإا يلامجإ نم تاباسححبرلا مجح ةفلكت ليلحت تاعيبملا يف$.
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 21 Q3: Sales Mix Computations •The weighted average contribution margin is the weighted sum of the products’ contribution margins: شماوهل حجرملا غلبملا وه حجرملا ةمهاسملا شماه طسوتموتاجتنملا ةمهاسم where λi is product i’s % of total sales in units, CMi is product i’s contribution margin, and n= the number of products. ثيحλi ،تادحولا يف تاعيبملا يلامجإ نم ٪وه جتنملا وه ن و ،ط جتنملا ةمهاسم شماه وه يمس =تاجتنملا ددع. where i is product i’s % of total sales revenues, CMRi is product i’s contribution margin ratio, and n= the number of products. •The weighted average contribution margin ratio is the weighted sum of the products’ contribution margin ratios: ةمهاسم شماه بسنل حجرملا عومجملا وه حجرملا ةمهاسملا شماه طسوتموتاجتنملا:
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 22 Peggy’s Kitchen Wares sells three sizes of frying pans. Next year she hopes to sell a total of 10,000 pans. Peggy’s total fixed costs are $40,800. Each product’s selling price and variable costs is given below. Find the BEP in units for this company. Q3: Multiple Product Breakeven Point First note the sales mix in units is 20%:50%:30%, respectively; then compute the weighted average contribution margin:
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 23 Q3: Multiple Product Breakeven Point But 6,000 units is not really the BEP in units; the BEP is only 6,000 units if the sales mix remains the same. Next, compute the BEP in terms of total units: Total units needed to breakeven The BEP should be stated in terms of how many of each unit must be sold:
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 24 Find the BEP in sales $ for Peggy’s Kitchen Wares. The total revenue and total variable cost information below is based on the expected sales mix. Q3: Multiple Product Breakeven Point First compute the weighted average contribution margin ratio:
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 25 Q3: Multiple Product Breakeven Point Next compute the BEP in sales $: . . . = 45.6%, of course! Depending on how the given information is structured, it may be easier to compute the CMR as Total contribution margin/Total revenue. BEP in sales $ * * If you sum the number of units of each size pan required at breakeven times its selling price you get $89,400. The extra $74 in the answer above comes from rounding the contribution margin ratio to three decimals.
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 26 Q4: Assumptions in CVP Analysis ليلحت يف تاضارتفلااحبرلا مجح ةفلكت CVP analysis assumes that costs and revenues are linear within a relevant range of activity. يذ قاطن نمض ةيطخ تاداريلإاو فيلاكتلا نأ ليلحتلا ضرتفيةطشنلأا نم ةلص. •Linear total revenues means that selling prices per unit are constant and the sales mix does not change. راعسأ نأ ةيطخلا تاداريلإا يلامجإ ينعيوريغتي لا تاعيبملا جيزم نأو ةتباث ةدحو لكل عيبلا. •If volume discounts are received from suppliers, then variable costs per unit are not constant. مث ،نيدروملا نم مجح تاموصخ يقلت مت اذإةتباث تسيل ةدحو لكل ةريغتملا فيلاكتلا. •Offering volume discounts to customers violates this assumption. مدقتضارتفلاا اذه كهتني ءلامعلا ىلع مجح تاموصخ. •Linear total costs means total fixed costs are constant and variable costs per unit are constant. ةتباثلا فيلاكتلا يلامجإ ينعت ةيطخلا ةيلامجلإا فيلاكتلاةتباث ةدحو لكل ةريغتملا فيلاكتلاو ةتباث. •If worker productivity changes as activity levels change, then variable costs per unit are not constant. ريغت عم لماعلا ةيجاتنإ تريغت اذإةتباث تسيل ةدحو لكل ةريغتملا فيلاكتلا نإف ،طاشنلا تايوتسم.
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 27 Q4: Assumptions in CVP Analysis •These assumptions may induce a small relevant range. دقوةلص تاذ ةريغص ةعومجم ىلإ تاضارتفلاا هذه يدؤت. •Results of CVP calculations must be checked to see if they fall within the relevant range. تاباسح جئاتن نم ققحتلا بجيحبرلا مجح ةفلكت ليلحت ةلصلا يذ قاطنلا نمض عقت تناك اذإ ام ةفرعمل. •Nonlinear analysis techniques are available. ريغ ليلحتلا تاينقت رفوتتةيطخلا. •Linear CVP analysis may be inappropriate if the linearity assumptions hold only over small ranges of activity. ليلحت نوكي دقليلحت حبرلا مجح ةفلكت يطخلاطاشنلا نم ةريغص تاقاطن ىوس زواجتت لا يطخلا تاضارتفا تناك اذإ بسانم ريغ. •For example, regression analysis, along with nonlinear transformations of the data, can be used to estimate nonlinear cost and revenue functions. تلاوحتلا عم بنج ىلإ ابنج ،رادحنلاا ليلحت ،لاثملا ليبس ىلعفئاظو تاداريلإاو ةيطخ لاا فيلاكتلا ريدقتل اهمادختسا نكمي ،تانايبلل ةيطخلا ريغ.
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 28 Q5: Margin of Safety The margin of safety is a measure of how far past the breakeven point a company is operating, or plans to operate. It can be measured 3 ways. ىدمل سايقم وه ةملاسلا شماهلمعلل ططخ وأ ،لمعت ةكرش لداعتلا ىلإ ريشي ام . سايق نكميو3 قرط. margin of safety in units actual or estimated units of activity – BEP in units = margin of safety in $ actual or estimated sales $ – BEP in sales $ = margin of safety percentage =
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 29 Suppose that Bill’s Briefcases has budgeted next year’s sales at 5,000 units. Compute all three measures of the margin of safety for Bill. Recall that P = $200, V = $80, F = $360,000, the BEP in units = 3,000, and the BEP in sales $ = $600,000. Q5: Margin of Safety margin of safety in units = 5,000 units – 3,000 units = 2,000 units margin of safety in $ = $200 x 5,000 – $600,000 = $400,000 margin of safety percentage The margin of safety tells Bill how far sales can decrease before profits go to zero.
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 30 Q5: Degree of Operating Leverage •The degree of operating leverage measures the extent to which the cost function is comprised of fixed costs. ةجرد سيقتوةتباثلا فيلاكتلل ةفلكتلا ةفيظو ةيدأت ىدم يليغشتلا ذوفنلا. •A high degree of operating leverage indicates a high proportion of fixed costs. ةبسن ىلإ ةيليغشتلا ةعفارلا ةجرد عافترا ريشيوةتباثلا فيلاكتلا نم ةيلاع. •Businesses operating at a high degree of operating leverage ةيليغشتلا ةعفارلا نم ةيلاع ةجرد ىلع لمعت يتلا تاكرشلا •but enjoy profits that rise more quickly when sales increase. عتمتلا نكلوتاعيبملا ةدايز دنع ربكأ ةعرسب عفترت يتلا حابرلأا. •face higher risk of loss when sales decrease, ىلعأ رطاخم هجاوت،تاعيبملا ضافخنا دنع ةراسخلا نم
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 31 Q5: Degree of Operating Leverage يليغشتلا ذوفنلا ةجرد The degree of operating leverage can be computed 3 ways. degree of operating = leverage
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 32 Suppose that Bill’s Briefcases has budgeted next year’s sales at 5,000 units. Compute Bill’s degree of operating leverage. Recall that P = $200, V = $80, F = $360,000, and the margin of safety percentage at 5,000 units is 40%. Q5: Degree of Operating Leverage First, compute contribution margin and profit at 5,000 units: Profit = $600,000 – $360,000 = $240,000 Contribution margin = ($200 – $80) x 5,000 = $600,000
© John Wiley & Sons, 2011 Chapter 3: Cost-Volume-Profit Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 33 Q5: Using the Degree of Operating Leverage •The degree of operating leverage shows the sensitivity of profits to changes in sales. ةيساسح ةيليغشتلا ةعفارلا ةجرد رهظتوتاعيبملا يف تاريغتلل حابرلأا. •On the prior slide Bill’s degree of operating leverage was 2.5 and profits were $240,000. * $240,000 x 1.5 = $360,000 •If expected sales were to increase to 6,000 units, a 20% increase, then profits would increase by 2.5 x 20%, or 50%, to $360,000.* •If expected sales were to decrease to 4,500 units, a 10% decrease, then profits would decrease by 2.5 x 10%, or 25%, to $180,000.** ** $240,000 x 0.75 = $180,000
© John Wiley & Sons, 2011 Alawi Alshakhouri 140069328 Slide # 1 Cost Management Measuring, Monitoring, and Motivating Performance Chapter 4 Relevant Information for Decision Making رارقلا عنصل ةلصلا تاذ تامولعملا
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 2 Chapter 4: Relevant Costs for Nonroutine Operating Decisions عبارلا لصفلا :ةينيتورلا ريغ ليغشتلا تارارقل ةلصلا تاذ فيلاكتلا Learning objectives •Q1: What is the process for identifying and using relevant information in decision making? س1 :؟رارقلا عنص يف ةلصلا تاذ تامولعملا مادختساو ديدحت ةيلمع يه ام •Q2: How is relevant quantitative and qualitative information used in special order decisions? س2 : ةلصلا تاذ ةيعونلاو ةيمكلا تامولعملا مادختسا متي فيك؟صاخلا ماظنلا تارارق يف •Q3: How is relevant quantitative and qualitative information used in keep or drop decisions? س3 : وأ تارارقلا ذاختا يف ةمدختسملا ةلصلا تاذ ةيعونلاو ةيمكلا تامولعملا يه ام؟اهطاقسإ •Q4: How is relevant quantitative and qualitative information used in outsourcing (make or buy) decisions? س4 : ذاختا يف ةلصلا تاذ ةيعونلاو ةيمكلا تامولعملا مادختسا متي فيك ةيجراخلا تارارقلا(ءارش وأ عنص)؟ •Q5: How is relevant quantitative and qualitative information used in product emphasis and constrained resource decisions? س5 : ةيمكلا تامولعملا مادختسا متي فيك؟ةديقملا دراوملا تارارقو تاجتنملا ىلع زيكرتلا يف ةلصلا تاذ ةيعونلاو •Q6: What factors affect the quality of operating decisions? س6 :؟ةيليغشتلا تارارقلا ةدوج ىلع رثؤت يتلا لماوعلا يه ام
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 3 Q1: Nonroutine Operating Decisions ةينيتورلا ريغ ليغشتلا تارارق 1- annual budgets and resource allocation decisions ،ةيونسلا تاينازيملادراوملا صيصخت تارارقو •Routine operating decisions are those made on a regular schedule. Examples include: متت يتلا كلت يه ةينيتورلا ليغشتلا تارارقمظتنم لودج ىلع .هلثملاا لمشت: 2- monthly production planning يرهشلا جاتنلإا طيطخت 3- weekly work scheduling issues ةيعوبسلأا لمعلا ةلودج اياضق 1- accept or reject a customer’s special order ليمعلل صاخ رمأ ضفر وأ لوبق •Nonroutine operating decisions are not made on a regular schedule. Examples include: مظتنم لودج ىلع ةينيتورلا ريغ ةيليغشتلا تارارقلا ذاختا متي لا .هلثملاا لمشت: 2- keep or drop business segments اهطاقسإ وأ لامعلأا تاعاطق ىلع ظافحلا 3- insource or outsource a business activity رداصمب ةناعتسلاا وأ ةيجراخ رداصمب ةناعتسلاايراجت طاشنل ةيجراخ 4- constrained (scarce) resource allocation issues (ةردان )دراوملا صيصخت اياضق
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 4 Q1: Nonroutine Operating Decisions ةينيتورلا ريغ ليغشتلا تارارق
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 5 Q1: Process for Making Nonroutine Operating Decisions ةينيتورلا ريغ ةيليغشتلا تارارقلا عنص ةيلمع 1. Identify the type of decision to be made. يذلا رارقلا عون ددحهذاختا نيعتي. 2. Identify the relevant quantitative analysis technique(s). ةلصلا تاذ يمكلا ليلحتلا ةينقت ىلع فرعتلا. 3. Identify and analyze the qualitative factors. ليلحتو ديدحتةيعونلا لماوعلا. 4. Perform quantitative and/or qualitative analyses ءارجإ و ةيمك تلايلحت /ةيعون وأ 5. Prioritize issues and arrive at a decision. ديدحترارق ىلإ لصوتلاو اياضقلا تايولوأ.
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 6 Q1: Identify the Type of Decision 1- Special order decisions ةصاخلا بلطلا تارارق •determine the pricing ريعستلا ديدحت •accept or reject a customer’s proposal for order quantity and pricing ريعستلاو بلطلا ةيمكل ليمعلا حارتقا ضفر وأ لوبق •identify if there is sufficient available capacity يفكي ام كانه ناك اذإ ام ديدحتةحاتملا تاردقلا نم 2- Keep or drop business segment decisions تارارق ىلع ظافحلااهطاقسإ وأ لامعلأا عاطق •examples of business segments include product lines, divisions, services, geographic regions, or other distinct segments of the business قطانملاو ،تامدخلاو ،ماسقلأاو ،جاتنلإا طوطخ لامعلأا تاعاطق ةلثمأ لمشتوةيفارغجلا لامعلأا نم ىرخأ تاعاطق وأ ،ةيراجتلا •eliminating segments with operating losses will not always improve profits حابرلأا نيسحت ىلإ امئاد يدؤي نل ةيليغشتلا رئاسخلا تاذ تاعاطقلا فذح نإف
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 7 Q1: Identify the Type of Decision 3- Outsourcing decisions ةيجراخ رداصمب ةناعتسلاا تارارق •make or buy production components جاتنلإا تانوكم ءارش وأ لعج •perform business activities “in-house” or pay another business to perform the activity ةيراجت ةطشنأب مايقلا”رقملا يف “طاشنلا ءادلأ رخآ لمع عفد وأ 4- Constrained resource allocation decisions صيصخت تارارقةديقملا دراوملا •determine which products (or business segments) should receive allocations of scarce resources تاجتنملا ديدحت(لامعلأا تاعاطق وأ ) يغبني يتلاةحيحشلا دراوملا نم تاصصخم ىقلتت نأ •examples include allocating scarce machine hours or limited supplies of materials to products لمع تاعاس صيصخت كلذ ىلع ةلثملأا نموتاجتنملا ىلإ داوملا نم ةدودحم تادادمإ وأ ةردان •Other decisions may use similar analyses ىرخأ تارارق مدختست دقةلثامم تلايلحت
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 8 Q1: Identify and Apply the Relevant Quantitative Analysis Technique(s) س1 :ةلصلا تاذ يمكلا ليلحتلا ةينقت قبطو ددح •Regression, CVP, and linear programming are examples of quantitative analysis techniques. تاينقت ىلع ةلثمأ يه ةيطخلا ةجمربلاو رادحنلاايمكلا ليلحتلا. •Analysis techniques require input data. تلاخدملا تانايب ليلحتلا تاينقت بلطتت. •Data for some input variables will be known and for other input variables estimates will be required. تاريغتم ضعبب ةقلعتملا تانايبلا فرعتسوىرخلأا تلاخدملا تاريغتم تاريدقت ىلإ ةجاح كانه نوكتسو ،تلاخدملا. •Many nonroutine decisions have a general decision rule to apply to the data. تانايبلا ىلع اهقيبطتل ةماع رارق ةدعاق اهيدل ةينيتورلا ريغ تارارقلا نم ديدعلا. •The results of the general rule need to be interpreted. دب لاوةماعلا ةدعاقلا جئاتن ريسفت نم. •The quality of the information used must be considered when interpreting the results of the general rule. تامولعملا ةيعون ةاعارم بجيوةماعلا ةدعاقلا جئاتن ريسفت دنع ةمدختسملا.
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 9 Q2-Q5 : Identify and Analyze Qualitative Factors ةيعونلا لماوعلا ليلحتو •Qualitative information cannot easily be valued in dollars. رلاودلاب ةيعونلا تامولعملا ريدقت ةلوهسب نكمي لاو. •can be difficult to identify ديدحتلا بعصلا نم نوكي نأ نكمي •Examples of qualitative information that may be relevant in some nonroutine decisions include: ةلص تاذ نوكت دق يتلا ةيعونلا تامولعملا ةلثمأ نمويلي ام ةينيتورلا ريغ تارارقلا ضعبب: •quality of inputs available from a supplier دروملا نم ةحاتملا تلاخدملا ةدوج •can be every bit as important as the quantitative information ةيمكلا تامولعملا لثم ةمهم تب لك نوكي نأ نكمي •effects of decision on regular customers نييداعلا ءلامعلا ىلع رارقلا راثآ •effects of production on the environment or the community جاتنلإا راثآعمتجملا وأ ةئيبلا ىلع •effects of decision on employee morale نيفظوملا تايونعم ىلع رارقلا راثآ
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 10 Q1: Consider All Information and Make a Decision س1 :رارق ذاختاو تامولعملا عيمج يف رظنلا •Before making a decision: رارقلا ذاختا لبق: •Consider all quantitative and qualitative information. ةيعونلاو ةيمكلا تامولعملا عيمج يف رظنلا. •Consider the quality of the information. ةدوج يف رظنلاتامولعملا. •Judgment is required when interpreting the effects of qualitative information. تامولعملا راثآ ريسفت دنع بولطم مكحلاوةيعونلا. •Judgment is also required when user lower-quality information. تاذ تامولعم مدختسملا دنع اضيأ بولطم وه مكحلالقأ ةدوج.
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 11 Q2: Special Order Decisions ةصاخلا بلطلا تارارق •A new customer (or an existing customer) may sometimes request a special order with a lower selling price per unit. دق ديدج ليمع بلطي(يلاح ليمع وأ ) لقأ عيب رعسب نايحلأا ضعب يف صاخ بلطةدحو لكل. •The general rule for special order decisions is: ماظنلا تارارقل ةماعلا ةدعاقلاويه صاخلا: •accept the order if incremental revenues exceed incremental costs, ،ةيفاضلإا فيلاكتلا ةيفاضلإا تاداريلإا تزواجت اذإ ماظنلا لوبق •If the special order replaces a portion of normal operations, then the opportunity cost of accepting the order must be included in incremental costs. لوبقل ةليدبلا ةصرفلا ةفلكت نإف ،ةيداعلا تايلمعلا نم ءزج لحم لحي صاخلا ماظنلا ناك اذإةيفاضلإا فيلاكتلا يف جردت نأ بجي بلطلا. •subject to qualitative considerations. ةيعونلا تارابتعلا عضخت. Price >= Relevant Relevant Opportunity Variable Costs + Fixed Costs + Cost
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 12 RobotBits, Inc. makes sensory input devices for robot manufacturers. The normal selling price is $38.00 per unit. RobotBits was approached by a large robot manufacturer, U.S. Robots, Inc. USR wants to buy 8,000 units at $24, and USR will pay the shipping costs. The per-unit costs traceable to the product (based on normal capacity of 94,000 units) are listed below. Which costs are relevant to this decision? ستيبتوبورتوبورلا يعنصمل ةيسحلا لاخدلإا ةزهجأ لعجي ةكرشو ، . وه يداعلا عيبلا رعس38.00 ةدحو لكل رلاود . مت بارتقاستيبتوبور ءارش ديري رسأ ةكرشو ،تاتوبورلا ةدحتملا تايلاولا ،ةريبك توبورلل ةعنصملا ةكرشلا لبق نم8،000 يف ةدحو24 $نحشلا فيلاكت عفديس رسو ، . جتنملل اهعبتت نكمي ةدحو لكل فيلاكتلا درس متي( نم ةيداعلا ةردقلا ساسأ ىلع94،000 ةدحو )هاندأ .؟رارقلا اذهب ةلصلا تاذ فيلاكتلا يه ام Q2: Special Order Decisions ةصاخلا بلطلا تارارق Relevant? yes $20.00 Relevant? yes Relevant? yes Relevant? no Relevant? yes Relevant? no Relevant? no no
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 13 Suppose that the capacity of RobotBits is 107,000 units and projected sales to regular customers this year total 94,000 units. Does the quantitative analysis suggest that the company should accept the special order? ةردق نأ ضرتفنلستيبتوبور وه107،000 عومجم ماعلا اذه ةيداعلا ءلامعلل ةعقوتملا تاعيبملاو ةدحو94،000 ةدحو . له؟صاخلا ماظنلا لبقت نأ بجي ةكرشلا نأ ىلإ يمكلا ليلحتلا ريشي Q2: Special Order Decisions ةصاخلا بلطلا تارارق First determine if there is sufficient idle capacity to accept this order without disrupting normal operations: ةيفاك لومخلا ةردق كانه ناك اذإ ام ديدحت لاوأةيداعلا تايلمعلا ليطعت نود ماظنلا اذه لوبقل: Projected sales to regular customers 94,000 units Special order 8,000 units 102,000 units RobotBits still has 5,000 units of idle capacity if the order is accepted. Compare incremental revenue to incremental cost: ستيبتوبور هيدل لازي لا5000 ماظنلا لوبق مت اذإ لومخلا تاردقلا نم ةدحو .ةيفاضلإا ةفلكتلاب ةيفاضلإا تاداريلإا ةنراقم: Incremental profit if accept special order = صاخ بلط تلبق اذإ ةيفاضلإا حابرلأا= ($24 selling price – $20 relevant costs) x 8,000 units = $32,000
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 14 What qualitative issues, in general, might RobotBits consider before finalizing its decision? اهيف رظنلا تاتوبورلل نكمي يتلا ،ماع لكشب ،ةيعونلا اياضقلا يه ام؟اهرارق ىلع ةيئاهنلا تاسمللا عضو لبق •Will USR expect the same selling price per unit on future orders? عقوتي له؟ةيلبقتسملا تابلطلا ىلع ةدحولل هسفن عيبلا رعس •Will other regular customers be upset if they discover the lower selling price to one of their competitors? اذإ بارطضلال نورخلآا نويداعلا ءلامعلا ضرعتيس له؟مهيسفانم دحلأ عيبلا رعس ضافخنا اوفشتكا •Will employee productivity change with the increase in production? ريغتت له؟جاتنلإا ةدايز عم نيفظوملا ةيجاتنإ •Given the increase in production, will the incremental costs remain as predicted for this special order? ةيفاضلإا فيلاكتلا ىقبتس له ،جاتنلإا يف ةدايزلا ىلإ رظنلابو؟صاخلا بلطلا اذهل عقوتم وه امك •Are materials available from its supplier to meet the increase in production? ؟جاتنلإا يف ةدايزلا ةيبلتل اهدروم نم ةحاتملا داوملا له Q2: Qualitative Factors in Special Order Decisions صاخلا بلطلا تارارق يف ةيعونلا لماوعلا
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 15 Suppose instead that the capacity of RobotBits is 100,000 units and projected sales to regular customers this year totals 94,000 units. Should the company accept the special order? ةردق نأ كلذ نم لادب ضرتفنلستيبتوبور وه100،000 يلامجإ غلبي ماعلا اذه ةيداعلا ءلامعلل ةعقوتملا تاعيبملاو ةدحو94،000 ةدحو .؟صاخلا بلطلا ةكرشلا لبقت له Q2: Special Order Decisions and Capacity Issues Here the company does not have enough idle capacity to accept the order: ةيجاتنلاا ةقاطلا نم يفكي ام كلمت لا ةكرشلا انهماظنلا لوبقل ةلغتسم ريغلا: Projected sales to regular customers 94,000 units Special order 8,000 units 102,000 units If USR will not agree to a reduction of the order to 6,000 units, then the offer can only be accepted by denying sales of 2,000 units to regular customers. ىلإ بلطلا ضيفخت ىلع قفاوي مل اذإ6000 مث ،ةدحو تاعيبم ضفر للاخ نم لاإ هلوبق نكمي لا ضرعلا2000 نييداعلا ءلامعلل ةدحو.
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 16 Suppose instead that the capacity of RobotBits is 100,000 units and projected sales to regular customers this year total 94,000 units. Does the quantitative analysis suggest that the company should accept the special order? ةردق نأ كلذ نم لادب ضرتفنلستيبتوبور وه100،000 ماعلا اذه نييداعلا ءلامعلل ةعقوتملا تاعيبملاو ةدحو عومجم94،000 ةدحو .؟صاخلا بلطلا لبقت نأ بجي ةكرشلا نأ ىلإ يمكلا ليلحتلا ريشي له Q2: Special Order Decisions and Capacity Issues CM/unit on regular sales = $38.00 – $22.50 = $15.50. The opportunity cost of accepting this order is the lost contribution margin on 2,000 units of regular sales. Incremental profit if accept special order = $32,000 incremental profit under idle capacity – opportunity cost = Variable cost/unit for regular sales = $22.50. $32,000 – $15.50 x 2,000 = $1,000
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 17 What additional qualitative issues, in this case of a capacity constraint, might RobotBits consider before finalizing its decision? ةيعونلا اياضقلا يه ام لبق رظنت نأ تاتوبورلل نكمي له ،تاردقلا ىلع دويق ىلع يوطنت يتلا ةلاحلا هذه يف ،ةيفاضلإا؟اهرارق ىلع ةيئاهنلا تاسمللا عضو •What will be the effect on the regular customer(s) that do not receive their order(s) of 2,000 units? نم مهتابلط نوقلتي لا نيذلا نييداعلا ءلامعلا ىلع ريثأتلا وه ام2000 ؟ةدحو •What is the effect on the company’s reputation of leaving orders from regular customers of 2,000 units unfilled? نييداعلا ءلامعلا نم جورخلا رماولأ ةكرشلا ةعمس ىلع ريثأتلا وه ام نم2000 ؟ةءولمم ريغ ةدحو •Will any of the projected costs change if the company operates at 100% capacity? له ةردقب لمعت ةكرشلا تناك اذإ ةعقوتملا فيلاكتلا نم يأ ريغتت100؟٪ •Are there any methods to increase capacity? What effects do these methods have on employees and on the community? هذه اهثدحت يتلا راثلآا يه ام ؟ةردقلا ةدايزل قرط يأ كانه له؟عمتجملا ىلعو نيفظوملا ىلع بيلاسلأا •Notice that the small incremental profit of $1,000 will probably be outweighed by the qualitative considerations. ةغلابلا ةريغصلا ةيمكارتلا حابرلأا نأ ظحلا1000 تارابتعلاا اهقوفت امبر رلاودةيعونلا. Q2: Qualitative Factors in Special Order Decisions صاخلا بلطلا تارارق يف ةيعونلا لماوعلا
© John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 18 Q3: Keep or Drop Decisions تارارقلا طاقسإ وأ ءاقبإ •Managers must determine whether to keep or eliminate business segments that appear to be unprofitable. ىلع بجي ريغ ودبت يتلا ةيراجتلا ةطشنلأا تاعاطقب ظافتحلاا متيس ناك اذإ ام ديدحت نيريدملااهتلازإ وأ ةحبرم. •The general rule for keep or drop decisions is: طاقسإ وأ ءاقبلإ ةماعلا ةدعاقلايه تارارقلا: •keep the business segment if its contribution margin covers its avoidable fixed costs, ،اهبنجت نكمي يتلا ةتباثلا هفيلاكت يطغي هتمهاسم شماه ناك اذإ لامعلأا عاطق ىلع ظافحلا •If the business segment’s elimination will affect continuing operations, the opportunity costs of its discontinuation must be included in the analysis. نيمضت بجي ،ةرمتسملا تايلمعلا ىلع رثؤي فوس لامعلأا عاطق ىلع ءاضقلا ناك اذإليلحتلا يف اهفقول ةليدبلا ةصرفلا فيلاكت. •subject to qualitative considerations. ةيعونلا تارابتعلا عضخت. Drop if: Contribution < Relevant Opportunity Margin Fixed Costs + Cost © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 19 Starz, Inc. has 3 divisions. The Gibson and Quaid Divisions have recently been operating at a loss. Management is considering the elimination of these divisions. Divisional income statements (in 1000s of dollars) are given below. According to the quantitative analysis, should Starz eliminate Gibson or Quaid or both? اهيدل ةكرشو ،زرتس3 ماسقأ . نوسبيج اتبعش تناك دقوديواقو ةراسخب ارخؤم نلامعت .بعشلا هذه ةلازإ يف ةرادلإا رظنتو . تانايب هاندأ درتو بعشلا لخد(ةدحتملا تايلاولا تارلاود نم رلاود فلأب .) نوسبيج ىلع ءاضقلا زرتس ىلع بجي له ،يمكلا ليلحتلل اقفو؟امهيلك وأ ديوك وأ Q3: Keep or Drop Decisions تارارقلا طاقسإ وأ ءاقبإ © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 20 Q3: Keep or Drop Decisions تارارقلا طاقسإ وأ ءاقبإ Use the general rule to determine if Gibson and/or Quaid should be eliminated. ام ديدحتل ةماعلا ةدعاقلا مدختسا و نوسبيج ةلازإ بجي ناك اذإ /ديوك وأ. The general rule shows that we should keep Quaid and drop Gibson. ظفحن نأ بجي اننأ نيبت ةماعلا ةدعاقلاديوق نوسبيج طقسنو. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 21 Q3: Keep or Drop Decisions تارارقلا طاقسإ وأ ءاقبإ Using the general rule is easier than recasting the income statements: ةماعلا ةدعاقلا مادختسا نإلخدلا تانايب ةغايص ةداعإ نم لهسأ: Quaid & Russell only Profits increase by $11 when Gibson is eliminated. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 22 Suppose that the Gibson & Quaid Divisions use the same supplier for a particular production input. If the Gibson Division is dropped, the decrease in purchases from this supplier means that Quaid will no longer receive volume discounts on this input. This will increase the costs of production for Quaid by $14,000 per year. In this scenario, should Starz still eliminate the Gibson Division? نوسبيج بعش نأ ضرتفنل & ديوكنيعم جاتنإ لاخدلإ هسفن دروملا نامدختسي . ينعي دروملا اذه نم تايرتشملا يف ضافخنلاا نإف ،نوسبيج مسق طاقسإ مت اذإلخدملا اذه ىلع مجح تاموصخ ىقلتي نل دئاقلا نأ . غلبمب دئاقلا جاتنإ فيلاكت ةدايز ىلإ كلذ يدؤيسو000 14 يف رلاودةنسلا .؟نوسبيج مسق ىلع يضقت زرتس لازتس له ،ويرانيسلا اذه يف Q3: Keep or Drop Decisions تارارقلا طاقسإ وأ ءاقبإ Profits decrease by $3 when Gibson is eliminated. رادقمب حابرلأا ضفخنت3 نوسبيج داعبتسا متي امدنع تارلاود. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 23 What qualitative issues should Starz consider before finalizing its decision? ةيئاهنلا تاسمللا عضو لبق اهيف رظنلا زرتس ىلع بجي يتلا ةيعونلا اياضقلا يه ام؟اهرارق ىلع •What will be the effect on the customers of Gibson if it is eliminated? What is the effect on the company’s reputation? ءاضقلا مت اذإ نوسبيج ءلامع ىلع ريثأت نوكيس ام؟ةكرشلا ةعمس ىلع ريثأتلا وه ام ؟هيلع •What will be the effect on the employees of Gibson? Can any of them be reassigned to other divisions? اهنم يأ بدن ةداعإ نكمي له ؟نوسبيج يفظوم ىلع ريثأتلا وه ام؟ىرخأ بعش ىلإ •What will be the effect on the community where Gibson is located if the decision is made to drop Gibson? مت اذإ نوسبيج عقي ثيح عمتجملا ىلع ريثأتلا نوكيس اذام؟نوسبيج طاقسلإ رارق ذاختا •What will be the effect on the morale of the employees of the remaining divisions? ؟ةيقبتملا ماسقلاا يف نيفظوملا تايونعم ريثأت وه ام Q3: Qualitative Factors in Keep or Drop Decisions © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 24 Q4: Insource or Outsource (Make or Buy) Decisions ةيجراخ رداصمب ةناعتسلاا وأ ةيجراخ رداصمب ةناعتسلاا تارارق(ءارش وأ عنص) •Managers often must determine whether to ام ديدحت بجي نايحلأا نم ريثك يف نيريدملاناك اذإ •make or buy a production input جاتنلإا تلاخدم ءارش وأ لمع •keep a business activity in house or outsource the activity يف يراجت طاشن ىلع ظافحلاطاشنلا ةيجراخ رداصمب ةناعتسلاا وأ لزنملا •The general rule for make or buy decisions is: يه ءارشلا وأ تارارقلا ذاختلا ةماعلا ةدعاقلا: •choose the alternative with the lowest relevant (incremental cost), subject to qualitative considerations ةلص ىندأ عم ليدبلا رايتخا(ةيفاضلإا ةفلكتلا)ةيعونلا تارابتعلاا انهر ، •If the decision will affect other aspects of operations, these costs (or lost revenues) must be included in the analysis. ىرخأ بناوج ىلع رثؤيس رارقلا ناك اذإ فيلاكتلا هذه نيمضت بجي ،تايلمعلا نم(ةدوقفملا تاداريلإا وأ )ليلحتلا يف. Outsource if: Cost to Outsource < Cost to Insource Where: Cost to Relevant Relevant Opportunity Insource = FC + VC + Cost © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 25 Graham Co. currently of our main product manufactures a part called a gasker used in the manufacture of its main product. Graham makes and uses 60,000 gaskers per year. The production costs are detailed below. An outside supplier has offered to supply Graham 60,000 gaskers per year at $1.55 each. Fixed production costs of $30,000 associated with the gaskers are unavoidable. Should Graham make or buy the gaskers? ياسيئرلا جتانملا عيناصت ياف ةمدختاسملا ةواشح ىماسي ءزاج عيناصتب ياسيئرلا اانجتنم نم ايلاح ةكرش ماهارغ . مدختسيو لعجي ماهارغ60،000 ةنسلا يف اياشح .جاتنلإا فيلاكت ليصافت هاندأ درتو . مااهارغ دايروتل يجرااخ دروم ضرع60،000 يف ايونس اياشح1.55 $امهنم لكل . نم ةتباثلا جاتنلإا فيلاكت30،000 $هنم رفم لا رمأ اياشحلا ةطبترملا . لاه؟اياشحلا ءارش وأ عنص ماهارغ ىلع بجي Advantage of “make” over “buy” = [$1.55 - $1.50] x 60,000 = $3,000 The production costs per unit for manufacturing a gasker are: Direct materials $0.65 Direct labor 0.45 Variable manufacturing overhead 0.40 Fixed manufacturing overhead* 0.50 $2.00 *$30,000/60,000 units = $0.50/unit Relevant? yes $1.50 Relevant? yes Relevant? yes Relevant? no Q4: Make or Buy Decisions تارارقلا ءارش وأ لمع © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 26 The quantitative analysis indicates that Graham should continue to make the component. What qualitative issues should Graham consider before finalizing its decision? نوكملا لعج يف رمتسي نأ يغبني ماهارغ نأ ىلإ يمكلا ليلحتلا ريشيو . لئاسملا يه ام؟هرارق ىلع ةيئاهنلا تاسمللا عضو لبق اهتاعارم ماهارغ ىلع بجي يتلا ةيعونلا •Is the quality of the manufactured component superior to the quality of the purchased component? ىلع ةقوفتم ةعنصملا نوكملا ةدوج له؟هؤارش مت يذلا نوكملا ةيعون •Will purchasing the component result in more timely availability of the component? ؟بسانملا تقولا يف تانوكملا رفوت ىلإ نوكملا ءارش يدؤيس له •Would a relationship with the potential supplier benefit the company in any way? نم لكش يأب ةكرشلل لمتحملا دروملا عم ةكرشلا ديفتستس له؟لاكشلأا •Are there any worker productivity issues that affect this decision? ؟رارقلا اذه ىلع رثؤت لماعلا ةيجاتنإ يف لكاشم يأ كانه له Q4: Qualitative Factors in Make or Buy Decisions © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 27 Suppose the potential supplier of the gasker offers Graham a discount for a different sub-unit required to manufacture Graham’s main product if Graham purchases 60,000 gaskers annually. This discount is expected to save Graham $15,000 per year. Should Graham consider purchasing the gaskers? ةوشحلا نم لمتحملا دروملا نأ ضرتفنل ماهارغ ىرتشا اذإ ماهارغ ةكرشل يسيئرلا جتنملا عينصتل ةبولطم ةفلتخم ةيعرف ةدحول امصخ ماهارغ مدقي60،000 ايونس ةوشح . غلبم ماهارغ ذقني نأ عقوتملا نمو15000 ايونس رلاود .؟اياشحلا ءارش ماهارغ رظنت نأ بجي Q4: Make or Buy Decisions تارارقلا ءارش وأ لمع Profits increase by $12,000 when the gasker is purchased instead of manufactured. رادقمب حابرلأا ةدايز $12،000 اهعينصت نم لادب ةوشحلا ءارش دنع. Advantage of “make” over “buy” before considering discount (slide 23) $3,000 Discount 15,000 Advantage of “buy” over “make” $12,000 © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 28 Q5: Constrained Resource (Product Emphasis) Decisions •Managers often face constraints such as •production capacity constraints such as machine hours or limits on availability of material inputs •limits on the quantities of outputs that customers demand •The general rule for constrained resource allocation decisions with only one constraint is: •allocate scarce resources to products with the highest contribution margin per unit of the constrained resource, •subject to qualitative considerations. •Managers need to determine which products should first be allocated the scarce resources. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 29 Regular Deluxe Selling price per unit $40 $110 Variable cost per unit 20 44 Contribution margin per unit $20 $ 66 Contribution margin ratio 50% 60% Required machine hours/unit 0.4 2.0 Urban has only 160,000 machine hours available per year. 0.4R + 2D  160,000 machine hours Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) Urban’s Umbrellas makes two types of patio umbrellas, regular and deluxe. Suppose there is unlimited customer demand for each product. The selling prices and variable costs of each product are listed below. ،ءانفلا تلاظملا نم نيعون لعجي ةيرضحلا قطانملا يف تلاظملاةرخافلاو ةيداعلا .جتنم لكل دودحم ريغ ءلامعلا بلط كانه نأ ضرتفنل . لكل ةريغتملا فيلاكتلاو عيبلا راعسأ يلي اميفجتنم. Write Urban’s machine hour constraint as an inequality. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 30 If D=0, this constraint becomes 0.4R  160,000 machine hours, or R  400,000 units Suppose that Urban decides to make all Regular umbrellas. What is the total contribution margin? Recall that the CM/unit for R is $20. نأ ررقت ةيرضحلا قطانملا نأ ضرتفنلةيداعلا تلاظملا عيمج لعجت . مس نأ ركذأ ؟ةمهاسملا شماه يلامجإ وه ام / وه ل ةدحو $20. The machine hour constraint is: 0.4R + 2D  160,000 machine hours Total contribution margin = $20*400,000 = $8 million Suppose that Urban decides to make all Deluxe umbrellas. What is the total contribution margin? Recall that the CM/unit for D is $66. If R=0, this constraint becomes 2D  160,000 machine hours, or D  80,000 units Total contribution margin = $66*80,000 = $5.28 million Total contribution margin = $66*80,000 = $5.28 million Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 31 In a one constraint problem, a combination of Rs and Ds will yield a contribution margin between $5.28 and $8 million. Therefore, Urban will only make one product, and clearly R is the best choice. نيب ةمهاسم شماه ىلإ سد و ةيبور نيب عمجلا يدؤيس ،ديقلا لكاشم ىدحإ يفو5.28 و8 نييلامرلاود .لضفلاا رايخلا وه حضاو لكشبو ،طقف دحاو جتنم لعج يرضحلا فوس ،كلذلو. make all Ds; get $5.28 million make all Rs; get $8 million If the choice is between all Ds or all Rs, then clearly making all Rs is better. But how do we know that some combination of Rs and Ds won’t yield an even higher contribution margin? عيمج نيب رايتخلاا ناك اذإلضفأ ةيبور لك حوضوب لعج مث ،ةيبور لك وأ سد . و سر نم جيزم ضعب نأ ملعن فيك نكلو؟ىلعأ ةمهاسم شماه نع رفست نل سد Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 32 In Urban’s case, the sole scarce resource was machine hours, so Urban should make only the product with the highest contribution margin per machine hour. The general rule for constrained resource decisions with one scarce resource is to first make only the product with the highest contribution margin per unit of the constrained resource. نوكي يذلا جتنملا لاوأ لعجت نأ يه ردان دحاو دروم عم ةديقملا دراوملا تارارقل ةماعلا ةدعاقلاوةديقملا دراوملا نم ةدحو لكل ةمهاسم شماه ىلعأ. R: CM/mach hr = $20/0.4mach hrs = $50/mach hr D: CM/mach hr = $66/2mach hrs = $33/mach hr Notice that the total contribution margin from making all Rs is $50/mach hr x 160,000 machine hours to be used producing Rs = $8 million. Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 33 •Usually managers face more than one constraint. رثكأ نوريدملا هجاوي ام ةداعدحاو ديق نم. •an algebraic expression of the company’s goal, known as the objective function فدهلا ةفيظو مساب ةفورعملاو ،ةكرشلا فده نع يربج ريبعت •a list of the constraints written as inequalities دويقلاب ةمئاقةاواسم مدع هجوأ اهنأ ىلع ةبوتكملا •Multiple constraints are easiest to analyze using a quantitative analysis technique known as linear programming. مادختساب ليلحتل لهسأ يه ةددعتملا دويقلاةيطخلا ةجمربلا مساب ةفورعملا يمكلا ليلحتلا ةينقت. Q5: Constrained Resource Decisions(Multiple Scarce Resources): ؟ةديقملا دراوملا تارارق(ةددعتم ةحيحش دراوم) •A problem formulated as a linear programming problem contains يوتحتةيطخ ةجمرب ةلكشمك اهتغايص تمت يتلا ةلكشملا •for example “maximize total contribution margin” or “minimize total costs” لاثملا ليبس ىلع"ةيلامجلإا ةمهاسملا شماه ميظعت " وأ" فيلاكتلا ليلقتةيلامجلإا" © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 34 Suppose Urban also need 2 and 6 hours of direct labor per unit of R and D, respectively. There are only 120,000 direct labor hours available per year. Formulate this as a linear programming problem. Max 20R + 66D R,D 0.4R+2D  160,000 2R+6D  120,000 R  0 D  0 subject to: objective function R, D are the choice variables constraints mach hr constraint DL hr constraint nonnegativity constraints )can’t make a negative amount of R or D) Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 35 20,000 Draw a graph showing the possible production plans for Urban. حضوي ينايب مسر ةنكمملا جاتنلإا ططخنيبرولا. 80,000 400,000 60,000 R D Every R, D ordered pair is a production plan. But which ones are feasible, given the constraints? To determine this, graph the constraints as inequalities. 0.4R+2D  160,000 mach hr constraint When D=0, R=400,000 When R=0, D=80,000 2R+6D  120,000 DL hr constraint When D=0, R=60,000 When R=0, D=20,000 Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 36 20,000 80,000 400,000 60,000 R D There are not enough machine hours or enough direct labor hours to produce this production plan. هذه جاتنلإا ةطخ جاتنلإ ةرشابملا لمعلا تاعاس نم يفكي ام وأ ةنيكاملا تاعاس نم يفكي ام كانه سيل. There are enough machine hours, but not enough direct labor hours, to produce this production plan. ،ةرشابملا لمعلا تاعاس نم يفكي ام سيل نكلو ،زاهجلا تاعاس نم يفكي ام كانهجاتنلإا ةطخلا هذه جاتنلإ. This production plan is feasible; there are enough machine hours and enough direct labor hours for this plan. لمعلا تاعاس نم يفكي امو لمعلا تاعاس نم يفكي ام كانه ؛ةنكمم هذه جاتنلإا ةطخةطخلا هذهل ةرشابملا. Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 37 20,000 80,000 400,000 60,000 R D The graph helped us realize an important aspect of this problem – we thought there were 2 constrained resources but in fact there is only one. ةلكشملا هذه نم ماه بناج كاردإ ىلع ينايبلا مسرلا اندعاس- كانه نأ نظن انك2 دراوملا نمطقف دحاو كانه عقاولا يف نكلو ةديقملا. For every feasible production plan, Urban will never run out of machine hours. نارمعلا دفني نل ،ةنكمم جاتنإ ةطخ لكلةنيكاملا تاعاس نم ادبأ. The machine hour constraint is non-binding, or slack, but the direct labor hour constraint is binding. ةعاس ديقوةمزلم ةرشابملا لمعلا تاعاس دويق نكلو ،دوكرلا وأ ،مزلم ريغ ةنيكاملا. We are back to a one-scarce-resource problem. ةلكشم ىلإ دوعن اننإةحيحشلا دراوملا. Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 38 20,000 80,000 400,000 60,000 R D Here direct labor hours is the sole scarce resource. انهديحولا ردانلا دروملا يه ةرشابملا لمعلا تاعاس. Urban should make all deluxe umbrellas. ةكرشلا ىلع بجيةرخافلا تلاظملا عيمج لعج ةيرضحلا. We can use the general rule for one-constraint problems. دحاو دييقت لكاشمل ةماعلا ةدعاقلا مادختسا اننكمي. R: CM/DL hr = $20/2DL hrs = $10/DL hr D: CM/DL hr = $66/6DL hrs = $11/DL hr Optimal plan is R=0, D=20,000. Total contribution margin = $66 x 20,000 = $1,320,000 Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 39 Max 20R + 66D R,D 0.4R+2D  160,000 2R+6D  600,000 R  0 D  0 subject to: mach hr constraint DL hr constraint Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) Suppose Urban has been able to train a new workforce and now there are 600,000 direct labor hours available per year. Formulate this as a linear programming problem, graph it, and find the feasible set. ةرداق يرضحلا دقو ضرتفنل كانه نلآاو ةديدجلا ةلماعلا ىوقلا بيردت ىلع600،000 ةنسلا يف ةحاتملا ةرشابملا لمعلا تاعاس . ةغايصةنكمم ةعومجم ىلع روثعلاو ،ينايبلا مسرلا ،ةيطخلا ةجمربلا ةلكشملا هذه. The formulation of the problem is the same as before; the only change is that the right hand side (RHS) of the DL hour constraint is larger. ؛لبق نم تناك امك اهسفن يه ةلكشملا ةغايص نإ نميلأا بناجلا نأ وه ديحولا رييغتلا نإف(سر )ربكأ لد ةعاس ديقل. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 40 100,000 80,000 400,000 300,000 R D The machine hour constraint is the same as before. ةعاس ديقلبق نم ناك امك هسفن وه زاهجلا. 0.4R+2D  160,000 mach hr constraint 2R+6D  600,000 DL hr constraint When D=0, R=300,000 When R=0, D=100,000 Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 41 100,000 80,000 400,000 300,000 R D Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) There are not enough machine hours or enough direct labor hours for this production plan ةيفاك لمع تاعاس دجوي لاهذه جاتنلإا ةطخل ةيافك ةيفاك لمع تاعاس وأ. This production plan is feasible; there are enough machine hours and enough direct labor hours for this plan. يفكي ام كانه ؛ةنكمم هذه جاتنلإا ةطخةطخلا هذهل ةرشابملا لمعلا تاعاس نم يفكي امو لمعلا تاعاس نم. The feasible set is the area where all the production constraints are satisfied. عيمج اهيف يفوتست يتلا ةقطنملا يه ةيدجملا ةعومجملاوجاتنلإا دويق. There are enough direct labor hours, but not enough machine hours, for this production plan. تاعاس نم يفكي ام كانههذه جاتنلإا ةطخل ،زاهجلا تاعاس نم يفكي ام سيل نكلو ،ةرشابملا لمعلا. There are enough machine hours, but not enough direct labor hours, for this production plan. يفكي ام كانه ةطخل ،ةرشابملا لمعلا تاعاس نم يفكي ام سيل نكلو ،لمعلا تاعاس نمهذه جاتنلإا. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 42 100,000 80,000 400,000 300,000 R D Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) How do we know which of the feasible plans is optimal? وه ةنكمملا ططخلا نم يأ فرعن فيك؟لثملأا We can’t use the general rule for one-constraint problems. ةماعلا ةدعاقلا مادختسا اننكمي لادحاو دييقت لكاشمل. We can graph the total contribution margin line, because its slope will help us determine the optimal production plan. نلأ ،ةمهاسملا شماه يلامجإ طخ مسر اننكميلثملأا جاتنلإا ةطخ ديدحت ىلع اندعاسي فوس هردحنم. The objective “maximize total contribution margin” means that we choose a production plan so that the contribution margin is a large as possible, without leaving the feasible set. If the slope of the total contribution margin line is lower (in absolute value terms) than the slope of the machine hour constraint, then. . . فدهلا"ةيلامجلإا ةمهاسملا شماه ميظعت " ،نكمم ردق ربكأ وه شماهلا شماه ثيحب جاتنلإا ةطخ راتخن اننأ ينعيةنكمم ةعومجم كرت نود . يلامجلإا ةمهاسملا شماه طخ ليم ناك اذإ لقأ(ةقلطملا ةميقلا ثيح نم )ذئدنع ،ةنيكاملا ةعاس ديق ليم نم. . . . . . this would be the optimal production plan . . .لثملأا جاتنلإا ةطخ نوكيس اذهو.. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 43 100,000 80,000 400,000 300,000 R D Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) What if the slope of the total contribution margin line is higher (in absolute value terms) than the slope of the direct labor hour constraint? ىلعأ يلامجلإا ةمهاسملا شماه طخ رادحنا ناك ول اذام( ةميقلا ثيح نمةقلطملا )؟ةرشابملا لمعلا تاعاس دويق ردحنم نم If the total CM line had this steep slope, . . ناك اذإ،داحلا ردحنملا اذه ما يس طخ عومجم. . . . then this would be the optimal production plan. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 44 100,000 80,000 400,000 300,000 R D Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) What if the slope of the total contribution margin line is between the slopes of the two constraints? ةمهاسملا شماه طخ نم ردحنملا ناك ول اذام؟نيديقلا تاردحنم نيب يلامجلإا If the total CM line had this slope, . . . . then this would be the optimal production plan. . . جاتنلإا ةطخ نوكيس اذه مثلثملأا. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 45 100,000 80,000 400,000 300,000 R D Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) The last 3 slides showed that the optimal production plan is always at a corner of the feasible set. This gives us an easy way to solve 2 product, 2 or more scarce resource problems. ةنكمم ةعومجم نم ةيواز يف امئاد يه لثملأا جاتنلإا ةطخ نأ ةريخلأا ةثلاثلا حئارشلا ترهظأو . اذه لحل ةلهس ةليسو انيطعي2 ،جتنملا2 ةردانلا دراوملا لكاشم رثكأ وأ. R=0, D=80,000 The total contribution margin here is 0 x $20 + 80,000 x $66 = $5,280,000. R=300,000, D=0 The total contribution margin here is 300,000 x $20 + 0 x $66 = $6,000,000. R=?, D=? Find the intersection of the 2 constraints. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 46 100,000 80,000 400,000 300,000 R D Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) To find the intersection of the 2 constraints, use substitution or subtract one constraint from the other. دويقلا عطاقت ىلع روثعلل2 مدختسا ،ىرخأ ةهج نم دويقلا دحأ حرط وأ لادبتسا. Total CM = $5,280,000. Total CM = $6,000,000. 0.4R+2D = 160,000 2R+6D = 600,000 2R+10D = 800,000 2R+6D = 600,000 multiply each side by 5 0R+4D = 200,000 D = 50,000 2R+6(50,000) = 600,000 2R = 300,000 R = 150,000 subtract Total CM = $20 x 150,000 + $66 x 50,000 = $6,300,000. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 47 100,000 80,000 400,000 300,000 R D Q5: Constrained Resource Decisions(Two Products; One Scarce Resource) ةديقملا دراوملا تارارق(دحاو حيحش دروم ؛ناجتنم) By checking the total contribution margin at each corner of the feasible set (ignoring the origin), we can see that the optimal production plan is R=150,000, D=50,000. Total CM = $5,280,000. Total CM = $6,000,000. Total CM = $6,300,000. 150,000 50,000 Knowing how to graph and solve 2 product, 2 scarce resource problems is good for understanding the nature of a linear programming problem (but difficult in more complex problems). © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 48 The quantitative analysis indicates that Urban should produce 150,000 regular umbrellas and 50,000 deluxe umbrellas. What qualitative issues should Urban consider before finalizing its decision? جتني نأ يغبني يرضحلا نأ ىلإ يمكلا ليلحتلا ريشيو150،000 و ةمظتنم ةلظم50،000 ةرخاف ةلظم .؟هرارق ىلع ةريخلأا تاسمللا عضو لبق رضحلا اهيف رظني نأ يغبني يتلا ةيعونلا لئاسملا يه ام •The assumption that customer demand is unlimited is unlikely; can this be investigated further? ءارجإ نكمي له ؛دودحم ريغ ءلامعلا بلط نأ ضارتفا لمتحملا ريغ نمو؟قيقحتلا نم ديزملا •Are there any long-term strategic implications of minimizing production of the deluxe umbrellas? ؟ةرخافلا تلاظملا جاتنإ ليلقتل لجلأا ةليوط ةيجيتارتسا راثآ يأ كانه له •What would be the effects of attempting to relax the machine hour or DL hour constraints? ؟لد ةعاس ىلع دويقلا وأ ةنيكاملا ةعاس فيفخت ةلواحم ىلع ةبترتملا راثلآا يه ام •Are there any worker productivity issues that affect this decision? يأ كانه له؟رارقلا اذه ىلع رثؤت لماعلا ةيجاتنإ يف لكاشم Q5: Qualitative Factors in Scarce Resource Allocation Decisions © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 49 •Problems with multiple products, one scarce resource, and one constraint on customer demand for each product are easy to solve. ردان دروم ،ةددعتم تاجتنم عم لكاشملااهلح لهسلا نم جتنم لكل ءلامعلا بلط ىلع دحاو ديقو ،دحاو. Q5: Constrained Resource Decisions (Multiple Products; Multiple Constraints) •The general rule is to make the product with the highest contribution margin per unit of the scarce resource: شماه ىلعأب جتانلا لعج يه ةماعلا ةدعاقلاوةحيحشلا دراوملا نم ةدحو لكل ةمهاسم: –until its customer demand is satisfied ءلامعلا بلط ةيبلت متي ىتح –then move to the product with the next highest contribution margin per unit of the scarce resource, etc. نم ةدحو لكل يلاتلا ةمهاسم شماه ىلعأ عم جتنملا ىلإ لاقتنلاا مثخلا ،ةردانلا دراوملا. •Problems with multiple products and multiple scarce resources are too cumbersome to solve by hand – Excel solver is a useful tool here. ديلاب لحل ادج ةقهرم يه ةددعتم ةردانلا دراوملاو ةددعتم تاجتنم عم لكاشم- لسكإ انه ةديفم ةادأ وه لالاح. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 50 Regular Deluxe Selling price per unit $40 $110 Variable cost per unit 20 44 Contribution margin per unit $20 $ 66 Required machine hours/unit 0.4 2.0 CM/machine hour $50 $33 Urban should first concentrate on making Rs. He can make enough to satisfy customer demand for Rs: 300,000 Rs x 0.4 mach hr/R = 120,000 mach hrs. Q5: Constrained Resource Decisions (Two Products; One Scarce Resource) Urban’s Umbrellas makes two types of patio umbrellas, regular and deluxe. Suppose customer demand for regular umbrellas is 300,000 units and for deluxe umbrellas customer demand is limited to 60,000. Urban has only 160,000 machine hours available per year. What is his optimal production plan? How much would he pay (above his normal costs) for an extra machine hour? ةرخافلاو ةيداعلا ،ءانفلا تلاظملا نم نيعون لعجي ةيرضحلا قطانملا يف تلاظملا . وه ةيداعلا تلاظملل ءلامعلا بلط نأ ضرتفنل300،000 ىلع رصتقي ءلامعلا بلط ةرخافلا تلاظملاو ةدحو60،000 . طقف اهيدل ةيرضحلا160،000 ايونس ةحاتملا ةلآ ةعاس . ام هعفديس يذلا غلبملا وه ام ؟هل لثملأا جاتنلإا ةطخ يه(ةيداعلا هفيلاكت قوف )؟ةنيكاملا نم ةيفاضإ ةعاسل © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 51 Regular Deluxe Selling price per unit $40 $110 Variable cost per unit 20 44 Contribution margin per unit $20 $ 66 Required machine hours/unit 0.4 2.0 CM/machine hour $50 $33 The 40,000 remaining hours will make 20,000 Ds. Q5: Constrained Resource Decisions (Two Products; One Scarce Resource) Here Urban will be producing Ds when he runs out of machine hours so he’d be willing to pay up to $33 for an additional machine hour. If customer demand for Rs exceeded 400,000 units, Urban would be willing to pay up to an additional $50 for a machine hour. The optimal plan is 300,000 Rs and 20,000 Ds. The CM/mach hr shows how much Urban would be willing to pay, above his normal costs, for an additional machine hour. If customer demand for Rs and Ds could be satisfied with the 160,000 available machine hours, then Urban would not be willing to pay anything to acquire an additional machine hour. © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 52 Q7: Impacts to Quality of Nonroutine Operating Decisions ةينيتورلا ريغ ليغشتلا تارارق ةدوج ىلع تاريثأتلا •The quality of the information used in nonroutine operating decisions must be assessed. ريغ ةيليغشتلا تارارقلا يف ةمدختسملا تامولعملا ةدوج مييقت بجيةينيتورلا. •There may be more information quality issues (and more uncertainty) in nonroutine decisions because of the irregularity of the decisions. كانه نوكي دق تامولعملا ةدوج اياضق نم ديزملا(نيقيلا مدع نم ديزملاو ) ماظتنا مدع ببسب ةينيتورلا ريغ تارارقلا يفتارارقلا. 1- Business risk (changes in economic condition, consumer demand, regulation, competitors, etc.) لامعلأا رطاخم( علسلا ىلع بلطلاو ،ةيداصتقلاا ةلاحلا يف تاريغتلاكلذ ىلإ امو ،نيسفانملاو ،ميظنتلاو ،ةيكلاهتسلاا) •Three aspects of the quality of information available can affect decision quality. رارقلا ةدوج ىلع رثؤت نأ نكمي ةحاتملا تامولعملا ةيعون نم بناوج ةثلاث. 2- Information timeliness بسانملا تقولا يف تامولعملا 3- Assumptions in the quantitative and qualitative analyses تلايلحتلا يف تاضارتفلااةيعونلاو ةيمكلا © John Wiley & Sons, 2011 Chapter 4: Relevant Costs for Nonroutine Operating Decisions Eldenburg & Wolcott’s Cost Management, 2e Slide # 53 •Short term decision must align to company’s overall strategic plans ططخلا عم ريصقلا ىدملا ىلع رارقلا قفاوتي نأ بجيةيجيتارتسلإا ةكرشلل ةلماشلا •Must watch for decision maker bias رارقلا عناص زيحت ةدهاشم بجي –Predisposition for specific outcome ةددحم جئاتنلل دادعتسلاا –Preference for one type of analysis without considering other options ىرخأ تارايخ يف رظنلا نود ليلحتلا نم دحاو عونل ليضفت •Opportunity costs are often overlooked فيلاكت لهاجت متي ام ابلاغوصرفلا •Performing sensitivity analysis can help assess and minimize business risk مييقت يف دعاسي نأ نكمي ةيساسحلا ليلحت ءارجإ نإ رطاخم ليلقتولامعلأا •Established control system incentives (performance bonuses, etc.) can encourage sub-obtimal decision making ةأشنملا ةباقرلا ماظن زفاوح عجشت نأ نكميو(كلذ ىلإ امو ،ءادلأا تآفاكم ) ذاختا ىلعلثملأا ىوتسملا نود تارارقلا Q7: Impacts to Quality of Nonroutine Operating Decisions ةينيتورلا ريغ ليغشتلا تارارق ةدوج ىلع تاريثأتلا © John Wiley & Sons, 2011 Alawi Alshakhouri 140069328 Slide # 1 Cost Management Measuring, Monitoring, and Motivating Performance Chapter 5 Job Costing لمعلا ةفلكت © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 2 Chapter 5: Job Costing Learning objectives •Q1: How are costs assigned to customized goods and services? متي فيك؟ةصصخملا تامدخلاو علسلل فيلاكتلا صيصخت •Q2: How is overhead allocated to individual jobs? عيزوت متي فيك؟ةيدرفلا فئاظولا ىلع ةماعلا تاقفنلا •Q3: How does job costing information affect managers’ incentives and decisions? ؟مهتارارقو نيريدملا زفاوح ىلع فئاظولا فيلاكت تامولعم رثؤت فيك •Q4: How are spoilage, rework, and scrap handled in job costing? متي فيك؟لمعلا فيلاكت باسح يف ةدرخلاو لمعلا ةداعإو فلتلا عم لماعتلا •Q5: What are the quality and behavioral implications of spoilage? ؟داسفلل ةيكولسلاو ةيعونلا راثلآا يه ام © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 3 Q1: Job Costing versus Process Costing ةيلمعلا ةفلكت لباقم لمعلا فيلاكت ريدقت •Used when products can be distinguished from one another مدختستضعبلا اهضعب نع تاجتنملا زييمت نكمي امدنع Job Costing لمعلا ةفلكت •Used when similar products are mass produced ةلثامملا تاجتنملا جتنت امدنع مدختست Process Costing فيلاكتلا ريدقت ةيلمع •Includes characteristics of both job and process costing لك صئاصخ لمشتوةيلمعلاو لمعلا فيلاكت نم Hybrid Costing ةنيجهلا فيلاكتلا © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 4 Q1: Job Costing versus Process Costing © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 5 Q1: Assigning Costs to Jobs Cost Assign- ment Indirect Costs ريغلا فيلاكتلاةرشابم Cost Tracing Cost Object (Job) Direct Costs فيلاكتلاةرشابملا Cost Allocation © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 6 Q1: Job Cost Records Each job’s costs are maintained on a job cost record. ةفيظو لك فيلاكتب ظافتحلاا متيلمعلا فيلاكت لجس ىلع. The job cost records form the subsidiary ledger for Work in process inventory. تايلمعلا نوزخم يف لمعلل يعرفلا ذاتسلأا رتفد فئاظولا فيلاكت تلاجس لكشتو. This information comes from Materials Requisition Forms بلط جذامن نم تامولعملا هذه يتأتداوملا This information comes from Labor Time Reports ريراقت نم تامولعملا هذه يتأتولمعلا تقو Overhead costs must be allocated to each job ةماعلا فيلاكتلا صيصخت بجيوةفيظو لكل © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 7 Q2: Allocating Overhead Costs to Jobs فئاظولل ةماعلا فيلاكتلا صيصخت •Direct costs are traced to the individual jobs using source documents. قئاثو مادختساب ةيدرفلا فئاظولا ىلإ ةرشابملا فيلاكتلا عجرتوردصملا. •Overhead costs are indirect and cannot be traced to individual jobs; they must be allocated. ريغ ةماعلا فيلاكتلاواهداجيا بجي ؛ةيدرف فئاظو ىلإ اهعبتت نكمي لاو ةرشابم. •An overhead allocation base must be chosen. رايتخا بجيوةماعلا تاقفنلا صيصخت ةدعاق. •The overhead allocation base should be some measure of activity; it should be a reasonably good cost driver for overhead costs. سيياقم ضعب ينلعلا صيصختلا ةدعاق نوكت نأ يغبنيوةماعلا فيلاكتلل لوقعم لكشب ةديج ةفلكت كرحم نوكي نأ بجي ؛طاشنلا. 1.Identify the relevant cost object. تاذ ةفلكتلا نئاك ديدحتةلصلا. 2.Identify one or more overhead cost pools and allocation bases. فيلاكتلا تاعومجم نم رثكأ وأ دحاو ديدحتصيصختلا سسأو ةماعلا. 3.For each overhead cost pool, calculate an overhead allocation rate. ،ةماعلا فيلاكتلل عمجت لكل ةبسنلابوةماعلا تاقفنلا صيصخت لدعم بسحي. 4.For each overhead cost pool, allocate costs to the cost object. فيلاكتلا صصخت ،ةماعلا فيلاكتلل عمجت لكل ةبسنلابوةفلكتلا نئاكل. © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 8 Q2: Steps in Allocating Overhead ةماعلا تاقفنلا صيصخت يف تاوطخلا © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 9 Q2: Overhead Allocation Rates ةماعلا تاقفنلا صيصخت تلادعم •Companies may use an actual or an estimated overhead allocation rate. ةيريدقت وأ ةيلعف تاصصخم لدعم مادختسا تاكرشلل زوجيوةماعلا تاقفنلل. •The actual allocation rate cannot be computed until the accounting period is over. لدعم باسح نكمي لاوةيبساحملا ةرتفلا ءاهتنا ىتح يلعفلا صيصختلا. •The estimated allocation rate can be computed at the beginning of the accounting period (normal costing). نكميو ةيبساحملا ةرتفلا ةيادب يف ةردقملا تاصصخملا لدعم باسح(ةيداعلا فيلاكتلا.) © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 10 Chausse Manufacturing makes road paving equipment. At the beginning of the year, overhead costs were estimated to be $450,000. However, actual overhead was $504,000. Chausse uses direct labor hours as the cost allocation base. At the beginning of the year, total direct labor hours were estimated at 10,000 hours, but actual direct labor hours for the year totaled 12,000 hours. Compute the actual overhead rate and the estimated overhead rate. Q2: Overhead Allocation Rates © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 11 Q2: Actual and Normal Costing In normal costing, annual budgeted rates are used •smoothing effect on numerator •smoothing effect on denominator © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 12 Serena-Sturm is an architectural firm with a professional staff of 5 architects and a support staff of 7. Some projects are done for a fixed fee, while others are billed for the actual hours spent on the project. You are given the following information for Serena-Sturm (SS) for 2005. What is the estimated indirect cost rate if # of projects is used as the cost allocation base? Is this a good choice for the cost allocation base? Q2: Job Costing Example (Service Sector) Estimated indirect cost rate = $450,000/1,000 projects = $450/project Terrible choice for a cost allocation base; ignores resource consumption of the projects. © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 13 SS has a costing system with a single direct cost pool. If SS uses a single indirect cost pool, determine both the estimated and actual indirect cost rates using (a) number of professional labor hours and (b) number of blueprints prepared as cost allocation bases. Q2: Job Costing Example (Service Sector) $450,000 10,000 hrs = $45/hr $504,000 4,000 bpts = $126/bpt $504,000 12,000 hrs = $42/hr $450,000 3,600 bpts = $125/bpt © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 14 SS was asked to prepare a fixed fee bid for an out-of-town project called The Culebra Complex. The budgeted professional hours for this project was 400, and the job is expected to require the preparation of 7 blueprints. Compute the budgeted project cost using (a) professional labor hours and (b) number of blue prints prepared as a cost driver for indirect costs. Q2: Job Costing Example (Service Sector) $40/hr x 400 hrs = $16,000 $40/hr x 400 hrs = $16,000 $45/hr x 400 hrs = $18,000 $125/bpt x 7 bpts = $875 $34,000 $16,875 © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 15 Why do the different cost allocation bases yield vastly different project costs? Q2: Why Are Costs so Different? If professional labor hours is a good measure of activity, then this project is expected to be 400 hrs/10,000 hrs, or 4% of the year’s activity. If # of blueprints is a good measure of activity, then this project is expected to be 7 bpts/3,600 bpts, or less than 0.2% of the year’s activity. © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 16 Shipping & Receiving Q2: Job Costing in Manufacturing Logo lamps makes desk lamps stamped with the customer’s logo. Materials Storage Sheet Metal Stamping Painting Area Finished Goods Storage Inspection & Packing Assembly Area © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 17 Q2: Journal Entries in Job Costing لمعلا فيلاكت يف ةيمويلا رتفد تلااخدإ •Flow of costs matches flow of the goods through the factory عنصملا للاخ نم عئاضبلا قفدت قباطي فيلاكتلا قفدت •debit Overhead cost control for actual overhead costs فيلاكتلا ةبقارم مصخةيلعفلا ةماعلا فيلاكتلل ةماعلا •credit Overhead cost control when overhead allocated to WIP ةدايزةصصخملا ةماعلا تاقفنلا امدنع ةماعلا فيلاكتلا يف مكحتلا •Source documents used to update accounts for direct costs ةرشابملا فيلاكتلا تاباسح ثيدحتل ةمدختسملا ردصملا قئاثو •Normal costing is used, so overhead is charged to jobs based on estimated overhead rates كلذل ،ةيداعلا ةفلكتلا مادختسا متيةردقملا ةماعلا تاقفنلا تلادعم ساسأ ىلع فئاظولا ىلع ةماعلا تاقفنلا ليمحت متي •Overhead cost control is a temporary account used in normal costing ةيداعلا فيلاكتلا يف مدختسي تقؤم باسح وه ةماعلا فيلاكتلا يف مكحتلا © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 18 Shipping & Receiving Q2: Flow of Costs in Job Costing Materials Storage Sheet Metal Stamping Painting Area Finished Goods Storage Inspection & Packing Assembly Area When raw materials are received, costs are debited to raw materials inventory; no distinction between direct and indirect materials is made at this stage. ملاتسا متي امدنع ىلع فيلاكتلا مصخ متي ،ماخلا داوملاماخلا داوملا درج . نيب زييمت دجوي لا هذه يف ةرشابملا ريغو ةرشابملا داوملاةلحرملا. © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 19 Shipping & Receiving Q2: Flow of Costs in Job Costing Materials Storage Sheet Metal Stamping Painting Area Finished Goods Storage Inspection & Packing Assembly Area When raw materials are sent to the factory floor, direct materials costs (per materials requisition forms) are debited to Work in process inventory. Indirect materials costs are debited to Overhead cost control. مصخ متي ،عنصملا ةيضرأ ىلإ ماخلا داوملا لاسرإ متي امدنع ةرشابملا داوملا فيلاكت(داوملا بلط ةرامتسا لكل ) يف لمعلليلمعلا نوزخملا. ةماعلا فيلاكتلا يف مكحتلا ىلإ ةرشابملا ريغ داوملا فيلاكت ديقتو. © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 20 Shipping & Receiving Q2: Flow of Costs in Job Costing Materials Storage Sheet Metal Stamping Painting Area Finished Goods Storage Inspection & Packing Assembly Area When labor costs are incurred, direct labor costs (per time records) are debited to Work in process inventory. Indirect labor costs are debited to Overhead cost control. ةرشابملا ةلامعلا فيلاكت مصخ متي ،ةلامعلا فيلاكت دبكت متي امدنع(ةينمز تلاجس لكل )ةيلمعلا درج يف لمعلل. ةماعلا فيلاكتلا ةبقارم ىلإ ةرشابملا ريغ ةلامعلا فيلاكت ديقتو. © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 21 Shipping & Receiving Q2: Flow of Costs in Job Costing Materials Storage Sheet Metal Stamping Painting Area Finished Goods Storage Inspection & Packing Assembly Area When a job is completed, costs are removed from WIP inventory and transferred to FG inventory. نوزخم نم فيلاكتلا ةلازإ متت ،ةمهملا لامتكا دنعةعومجملا نوزخم ىلإ اهلقنو بيو. © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 22 Shipping & Receiving Q2: Flow of Costs in Job Costing Materials Storage Sheet Metal Stamping Painting Area Finished Goods Storage Inspection & Packing Assembly Area When a job is shipped to a customer, costs are removed from FG inventory and transferred to CGS; The revenue and the receivable are also recorded. ةلازإ متت ،ليمع ىلإ ةفيظو نحش متي امدنع؛سغك ىلإ اهلقنو غف نوزخم نم فيلاكتلا ضبقلا ةقحتسملا تاباسحلاو تاداريلإا لجستواضيأ. © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 23 Q2: Journal Entries in Job Costing The materials storeroom receives a shipment of direct and indirect materials that cost $12,500. Prepare the journal entry. Materials are sent to the stamping and assembly areas. The cost of the direct materials is $1,400 and the cost of the indirect materials is $800. Prepare the journal entry. Raw materials inventory 12,500 Accounts payable 12,500 Overhead cost control 800 Raw materials inventory 2,200 Work in process inventory 1,400 © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 24 Q2: Journal Entries in Job Costing Wages totaling $2,000 are accrued; 75% of these costs are direct labor and 25% are indirect labor. Prepare the journal entry. Overhead costs are allocated to work in process using an allocation rate of 200% of direct labor costs. Prepare the journal entry. Work in process inventory 3,000 Overhead cost control 3,000 Overhead cost control 500 Wages Payable 2,000 Work in process inventory 1,500 © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 25 Q2: Journal Entries in Job Costing Job #1208, with a total cost of $2,200 is completed. Prepare the journal entry. Job #1208 is shipped to the customer, who is billed for $4,000. Prepare the journal entry. Cost of goods sold 2,200 Finished goods inventory 2,200 Work in process inventory 2,200 Finished goods inventory 2,200 Accounts receivable 4,000 Sales 4,000 © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 26 •Under normal costing, actual overhead is different from allocated overhead. نع ةيلعفلا تاقفنلا فلتخت ،ةيداعلا فيلاكتلا راطإ يفوةصصخملا ةماعلا تاقفنلا. •Misallocated overhead is the difference between actual and allocated overhead. تاقفنلا نيب قرفلا يه ةثولملا ريغ ةماعلا تاقفنلافةصصخملاو ةيلعفلا ةماعلا. •At the end of the year, the Overhead cost control account is closed out to WIP, FG & CGS. ةبقارم باسح قلاغإ متي ،ماعلا ةياهن يف غف ،بيو ىلإ ةماعلا فيلاكتلا &سغك. •Misallocated overhead (if material) is prorated to the 3 accounts based on a ratio of their account balances; if immaterial it is closed to CGS. ةاوسملا ريغ ةماعلا تاقفنلا ميسقت متيو(ةيرهوج تناك اذإ ) اذإ ؛اهتاباسح ةدصرأ ةبسن ىلإ ادانتسا ةثلاثلا تاباسحلا ىلإسغك ىلإ ةقلغم ةيدام ريغ تناك. Q2: Disposition of Misallocated Overhead ةماعلا تاقفنلا نم صلختلا © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 27 Suppose budgeted overhead was $100,000 fixed overhead plus variable overhead of $10/DL hour. Expected DL hours were 50,00, so that the estimated overhead rate was $12/DL hour. Actual DL hours totaled 40,000 for the year and actual overhead was $550,000. At the end of the year, WIP, FG & CGS had the account balances shown below. Prepare the year-end entry to close the Overhead cost control account. Overhead cost control 70,000 Q2: Disposition of Misallocated Overhead WIP $ 100,000 FG 200,000 CGS 1,700,000 $2,000,000 Cost of goods sold 59,500 Finished goods inventory 7,000 Work in process inventory 3,000 5% 10% 85% Overhead cost control $550,000 $480,000 ($12/DL hr x 40,000 DL hrs) $70,000 © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 28 Q3: Uses & Limitations of Job Costing Information •Job cost information is used for ل ةفيظولا ةفلكت تامولعم مادختسا متي •Financial statement preparation ةيلاملا تانايبلا دادعإ •Income tax returns لخدلا ةبيرض تادئاع •Bidding for jobs فئاظولل تاءاطعلا ميدقت •Comparing expected to actual costs (diagnostic control) •Job cost information may not be useful for non-routine short term decision making as allocated fixed costs may not be relevant لا دقو ارظن ريصقلا ىدملا ىلع ةينيتورلا ريغ تارارقلا ذاختا يف ةديفم لمعلا فيلاكت تامولعم نوكتةلص تاذ نوكت لا دق ةصصخملا ةتباثلا فيلاكتلا نلأ •Accountant’s judgment is used to determine: بساحملا مكح مادختسا متيديدحتل: •Direct vs. allocated costs ةصصخملا فيلاكتلا لباقم ةرشابملا فيلاكتلا •Type and number of overhead pools ةماعلا تاقفنلا تاعمجم نم ددعو عون •Type of cost driver ةفلكتلا ببسم نم عون © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 29 •Spoilage – unacceptable units that are discarded or sold for disposal costs فلت- نم صلختلل اهعيب وأ اهنم صلختلا متي ةلوبقم ريغ تادحوفيلاكتلا Q4: Job Costing and Spoilage – Terminology فلتلاو لمعلا فيلاكت- تاحلطصملا •Reworked units - unacceptable units that are reprocessed and sold لمعلا ةداعإ تادحو- اهعيبو اهتجلاعم ةداعإ متي ةلوبقم ريغ تادحو •Scrap – left over direct materials that are discarded or sold for a minimal amount ةدرخلا- وأ اهنم صلختلا متي يتلا ةرشابملا داوملا كرتنكمم ردق لقأب اهعيب –Normal spoilage arises under efficient operating conditions & is treated as an inventoriable cost مستت ليغشت فورظ لظ يف يعيبطلا فلتلا أشنيوةعرتخم فيلاكتك لماعيو ةءافكلاب –Abormal spoilage is not part of normal operations & is treated as a period cost هنأ ىلع هعم لماعتلا متيو ةيداعلا تايلمعلا نم اءزج سيل يعيبطلا ريغ فلتلا نإةرتف ةفلكت © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 30 Q4: Job Costing and Spoilage فلتلاو لمعلا ةفلكت In job costing, spoilage could be normal spoilage that coincidentally occurred on this job, but was not due to any demanding aspects of this job يعيبطلا فلتلا نوكي نأ نكمي ،لمعلا ةفلكت يف هذه بلطتت بناوج يأ ببسب نكي مل نكلو ،ةفيظولا هذه يف ةفدصلا ليبق نم ثدح يذلاةفيظولا –spoilage costs removed from Work in process inventory مت يتلا فلتلا فيلاكتلمعلا يف نوزخملا نم اهتلازإ –spoilage costs are debited to Overhead cost control فلتلا فيلاكت مصخ متيةماعلا فيلاكتلا يف مكحتلا ىلع –in this case a job without spoilage has the same manufacturing cost per unit as a job where spoilage occurred سفن هيدل فلت نود ةفيظو ةلاحلا هذه يففلت ثدح ثيح لمعك ةدحولل عينصتلا ةفلكت © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 31 Q4: Job Costing and Spoilage فلتلاو لمعلا ةفلكت In job costing, spoilage could be abnormal spoilage that coincidentally occurred on this job, but was not due to any demanding aspects of this job افلت فلتلا نوكي نأ نكمي ،لمعلا فيلاكت يف بناوج يأ ببسب نكي مل نكلو ،ةفيظولا هذه يف ةفدصلا ليبق نم ثدحي يعيبط ريغةفيظولا هذه نم بلطت –spoilage costs removed from Work in process inventory يتلا فلتلا فيلاكتلمعلا يف نوزخملا نم اهتلازإ مت –spoilage costs are debited to Loss from abnormal spoilage مصخ متييعيبطلا ريغ فلتلا نم ةراسخلا ىلع فلتلا فيلاكت –in this case a job without spoilage has the same manufacturing cost per unit as a job where spoilage occurred هيدل فلت نود ةفيظو ةلاحلا هذه يففلت ثدح ثيح لمعك ةدحولل عينصتلا ةفلكت سفن © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 32 Q4: Job Costing and Spoilage فلتلاو لمعلا ةفلكت In job costing, spoilage could be spoilage that occurred on this job due to the job’s demanding specifications هذه يف ثدح يذلا فلتلا نوكي نأ نكمي ،لمعلا ةفلكت يفةبولطملا ةفيظولا تافصاوم ببسب ةفيظولا –spoilage costs are not removed from Work in process inventory لمعلا يف نوزخملا نم فلتلا فيلاكت ةلازإ متي لا –in this case a job without spoilage has a lower manufacturing cost per unit than a job where this type of spoilage occurred لقأ عينصتلا ةفلكت هيدل فلت نود ةفيظو ةلاحلا هذه يففلتلا نم عونلا اذه ثدح ثيح ةفيظو نم ةدحولل © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 33 On January 1 Leia Corp. budgeted the following factory overhead: Factory rent $40,000 Leia expected to use 28,000 DL hours this Utilities 10,000 year; overhead is allocated to WIP using Normal spoilage 6,000 DL hours. Job #3 shows total costs of $56,000 $12,200. An inspection reveals that 20% of Job #3 must be scrapped and sold for $100. Prepare the journal entry to record the spoilage and the sale of the scrap if the spoilage is considered normal and is not due to the demanding specifications of Job #3. If Job #3 was originally a batch of 10,000 units, what is the manufacturing cost per unit for the good units in Job #3? Work in process inventory 2,440 (20% x $12,200) Cash 100 Overhead cost control 2,340 Q4: Job Costing and Spoilage Example Mfg cost/unit = ($12,200 - $2,440)/8,000 good units = $1.22/unit. © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 34 On January 1 Leia Corp. budgeted the following factory overhead: Factory rent $40,000 Leia expected to use 28,000 DL hours this Utilities 10,000 year; overhead is allocated to WIP using Normal spoilage 6,000 DL hours. Job #3 shows total costs of $56,000 $12,200. An inspection reveals that 20% of Job #3 must be scrapped and sold for $100. Prepare the journal entry to record the spoilage and the sale of the scrap if the spoilage is considered abnormal. If Job #3 was originally a batch of 10,000 units, what is the manufacturing cost per unit for the good units in Job #3? Work in process inventory 2,440 (20% x $12,200) Cash 100 Loss from abnormal spoilage 2,340 Q4: Job Costing and Spoilage Example Mfg cost/unit = ($12,200 - $2,440)/8,000 good units = $1.22/unit. © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 35 On January 1 Leia Corp. budgeted the following factory overhead: Factory rent $40,000 Leia expected to use 28,000 DL hours this Utilities 10,000 year; overhead is allocated to WIP using Normal spoilage 6,000 DL hours. Job #3 shows total costs of $56,000 $12,200. An inspection reveals that 20% of Job #3 must be scrapped and sold for $100. Prepare the journal entry to record the spoilage and the sale of the scrap if the spoilage occurred to the demanding specifications of Job #3. If Job #3 was originally a batch of 10,000 units, what is the manufacturing cost per unit for the good units in Job #3? Work in process inventory 100 Cash 100 Q4: Job Costing and Spoilage Example Mfg cost/unit = ($12,200 - $100)/8,000 good units = $1.5125/unit. © John Wiley & Sons, 2011 Chapter 5: Job Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 36 Q5: Effect of Spoilage Accounting on Manager Behavior ريدملا كولس ىلع فلتلا ةبساحم ريثأت •If spoilage costs are ignored, there is no incentive for managers to control these costs. فيلاكت لهاجت مت اذإفيلاكتلا هذه ىلع ةرطيسلل نيريدملل زفاح دجوي لا ،فلتلا. •If company has a zero defect policy, all spoilage is considered abnormal; the loss on the income statement may force managers to control spoilage. بيع ةسايس ةكرشلا ىدل ناك اذإ ىلع نيريدملا ربجت دق لخدلا نايب يف ةراسخلا نإف ؛يعيبط ريغ فلت لك ربتعي ،رفصفلتلا ىلع ةرطيسلا. •If rework costs are not accounted for separately, managers may rework units that should be scrapped. باستحا متي مل اذإ بجي يتلا تادحولا ةغايص ةداعإ نيريدملل نكمي ،لصفنم لكشب لمعلا ةداعإ فيلاكتاهنم صلختلا. © John Wiley & Sons, 2011 Alawi Alshakhouri 140069328 Slide # 1 Cost Management Measuring, Monitoring, and Motivating Performance Chapter 6 Process Costing ةيلمعلا ةفلكت © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 2 Chapter 6: Process Costing ةيلمعلا ةفلكت Learning objectives •Q1: How are costs assigned to mass-produced products? صيصخت متي فيك؟مخضلا جاتنلإا تاذ تاجتنملل فيلاكتلا •Q2: What are equivalent units & how do they relate to the production process? ؟جاتنلإا ةيلمعب طبترت فيكو ةئفاكملا تادحولا يه ام •Q3: How is the weighted average method used in process costing? فيک ؟ةيلمعلا ةفلكت يف حجرملا طسوتملا ةقيرط مادختسا مت •Q4: How is the FIFO method used in process costing? ةقيرط مادختسا متي فيكوفيف ؟فيلاكتلا باسح يف •Q5: What alternative methods are used for mass production? قرطلا يه ام؟مخضلا جاتنلإا يف ةمدختسملا ةليدبلا •Q7: How are spoilage costs handled in process costing? عم لماعتلا متي فيك؟فيلاكتلا باسح ةيلمع يف فلتلا فيلاكت •Q8: How does process costing information affect managers’ incentives and decisions? زفاوح ىلع ةيلمعلا ةفلكت تامولعم رثؤت فيك؟مهتارارقو نيريدملا •Q6: How is process costing performed for multiple production departments? ؟ةددعتملا جاتنلإا تارادلإ تايلمعلا فيلاكت باستحا متي فيك © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 3 Q1: Job Order versus Process Costing ةيلمعلا ةفلكت لباقم لمعلا بلط © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 4 Q1: Job Order versus Process Costing ةيلمعلا ةفلكت لباقم لمعلا بلط © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 5 WIP Inventory - Units BI Units started EI Units completed & transferred out WIP Inventory - $ BI DM CC EI Units completed & transferred out Q1: Introduction to Process Costing Process costing is a method of averaging costs over the units of production. This is necessary to determine the cost of the units transferred out of a department, as well as the cost of the department’s ending WIP inventory. جاتنلإا تادحو ىلع طسوتملا ةفلكتل ةقيرط يه فيلاكتلا باسح ةيلمع . يرورض اذهونوزخملا يف لمعلا مسق نم ءاهتنلاا ةفلكت نع لاضف ،مسق نم ةلوحملا تادحولا ةفلكت ديدحتل This information is all known Unlike job costing, there are no job cost records to give us this information © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 6 Riker Co. had June costs for Department 1 as follows: DM $60,000 CC 30,000 $90,000 There were no units in beginning or ending WIP inventory in June. During June Department 1 started 45,000 units, and all 45,000 were completed in June. What is the manufacturing cost/unit? Q1: Process Costing with all Units Completed WIP Inventory - Units 0 45,000 0 45,000 WIP Inventory - $ 0 90,000 0 90,000 The manufacturing cost/unit is $90,000/45,000 units = $2/unit. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 7 Suppose that 30,000 units were completed in June, and the units in ending WIP were 1/3 complete. What is the manufacturing cost/unit? The 15,000 units taken to 1/3 completion are counted as 5,000 equivalent whole units, or 5,000 equivalent units of production (EUP). Q2: The Concept of Equivalent Units In order to value partially complete units of inventory, we measure units in equivalent whole units rather than actual units. The manufacturing cost/unit = $90,000/[30,000 + 5,000]EUP = $2.57143/EUP. WIP Inventory - Units 0 45,000 15,000 30,000 WIP Inventory - $ 0 90,000 © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 8 Using the cost/EUP of $2.57143 from the prior slide, compute the costs attached to the 30,000 completed units and the costs attached to the 15,000 units in ending WIP inventory. Q2: The Concept of Equivalent Units 30,000 units x $2.57143 77,143 12,857 5,000 EUP x $2.57143 WIP Inventory - Units 0 45,000 30,000 WIP Inventory - $ 0 90,000 15,000 © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 9 •The prior slide simplified the computation of EUP. ةحيرشلا طيسبت باسح ةقباسلابوي. Q2-Q4: Equivalent Units & Process Costing Methods فيلاكتلا باسح قرطو ةئفاكم تادحو •15,000 units taken to 1/3 completion is equivalent to 5,000 whole units only if costs are incurred evenly. •We will return to this later. قحلا تقو يف اذه ىلإ دوعن فوسو. •The prior slide ignored the different methods of computing EUP. ةفلتخملا قرطلا ةقباسلا ةحيرشلا تلهاجتو باسحلبوي. •The weighted average and FIFO methods compute EUP differently. قرطو حجرملا طسوتملاوفيف باسحبوي فلتخم لكشب. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 10 Q2-Q4: Three Categories of Units In process costing we categorize units according to the time period(s) they were produced. ةينمزلا ةرتفلل اقفو تادحولا فينصت نحن فيلاكتلا باسح ةيلمع يف(ق ) اهنأتجتنأ. Prior months Current month Next month BI units: The units in beginning Work in process inventory were worked on in prior months and (we assume) they will be completed in the current month. يب تادحو : يف لمعلا مت ةيادبلا يف تادحولا و ةقباسلا رهشلأا يف تايلمعلا نوزخم(ضرتفن )يلاحلا رهشلا يف لمتكت فوس اهنأ. EI units: The units in ending Work in process inventory are started (we assume) in the current month and (we assume) they will be completed in the current month. يإ تادحو : ءدبلا متي نوزخملا يف لمعلا ءاهنإ يف تادحولا يف ةيلمع(ضرتفن ) و يلاحلا رهشلا يف(ضرتفن )يلاحلا رهشلا يف لمتكت فوس اهنأ. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 11 Q2-Q4: Three Categories of Units In process costing we categorize units according to the time period(s) they were produced. تجتنأ اهنأ ةينمزلا ةرتفلل اقفو تادحولا فينصت نحن فيلاكتلا باسح ةيلمع يف. Prior months Current month Next month S&C units: Any units that are started in the current month and are totally complete by month end are called started & completed units. تادحولا : يتلا تادحو يأ تادحولا ىمستو رهشلا ةياهن لولحب امامت ةلماك يهو يلاحلا رهشلا يف تأدباهنم ءاهتنلاا مت يتلا. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 12 Q2-Q4: Summarizing the Physical Flow of Production The number of S&C units can be computed as the number of units transferred out less the number of BI units. For example, suppose a department had 5,000 units in beginning WIP and started 50,000 units this month. If 35,000 units were completed, what is the number of S&C units? WIP Inventory - Units 5,000 50,000 35,000 20,000 BI units 5,000 S&C units 30,000 Completed units 35,000 © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 13 Q2-Q4: Two Process Costing Methods The weighted average and FIFO methods of process costing methods compute EUP differently. Prior months Current month Next month The weighted average (WA) method gives credit for work performed in the current & prior months. This means that under the WA method, the EUP for BI units and S&C units is the same as the physical number of units in each category. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 14 Q2-Q4: Two Process Costing Methods The weighted average and FIFO methods of process costing methods compute EUP differently. Prior months Current month Next month The weighted average (WA) method gives credit for work performed in the current & prior months. The EUP for EI units and is based on the stage of completion of the EI units – only the portion of the work done in the current month is included. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 15 Q2-Q4: Two Process Costing Methods The weighted average and FIFO methods of process costing methods compute EUP differently. Prior months Current month Next month The FIFO method gives credit only for work performed in the current month. This means that the EUP for BI units is based on the completion of these units during the current month. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 16 Q2-Q4: Two Process Costing Methods The weighted average and FIFO methods of process costing methods compute EUP differently. Prior months Current month Next month The FIFO method gives credit only for work performed in the current month. The EUP for EI units and is based on the stage of completion of the EI units – only the portion of the work done in the current month is included. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 17 Q2-Q4: Equivalent Units of Production Example In July, Rita Corp. had 30,000 units in beginning WIP that were 60% complete and 20,000 units in ending WIP that were 80% complete. There were 100,000 units completed and transferred to FG inventory. Compute EUP for July using both the weighted average and FIFO methods. WIP Inventory - Units 30,000 100,000 20,000 BI units 30,000 S&C units 70,000 Completed units 100,000 90,000 First, summarize the physical flow of the units and compute S&C. © John Wiley & Sons, 2011 Slide # 18 Q2-Q4: Equivalent Units of Production Example In July, Rita Corp. had 30,000 units in beginning WIP that were 60% complete and 20,000 units in ending WIP that were 80% complete. There were 100,000 units completed and transferred to FG inventory. Compute EUP for July using both the weighted average and FIFO methods. BI units 30,000 S&C units 70,000 Completed units 100,000 WIP Inventory - Units 30,000 100,000 20,000 90,000 Then, convert the physical units to EUP. © John Wiley & Sons, 2011 Slide # 19 Q2-Q4: Equivalent Units of Production Example In July, Rita Corp. had 30,000 units in beginning WIP that were 60% complete and 20,000 units in ending WIP that were 80% complete. There were 100,000 units completed and transferred to FG inventory. Compute EUP for July using both the weighted average and FIFO methods. BI units 30,000 S&C units 70,000 Completed units 100,000 WIP Inventory - Units 30,000 100,000 20,000 90,000 Then, convert the physical units to EUP. (1-60%) © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 20 •The prior slides simplified the computation of EUP Q2-Q4: Equivalent Units & Process Costing Methods •20,000 units started and taken to 80% completion is equivalent to 16,000 whole units only if costs are incurred evenly. •We usually assume that conversion costs are incurred evenly throughout production, but direct materials costs may not be incurred evenly. •Direct materials costs may be incurred at the beginning of processing or in some other uneven manner. •Because costs are incurred at different times, separate EUP computations are done for DM & CC. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 21 Q2-Q4: Separate EUP for DM & CC You are given the information below about the physical flow of the units in Department 1. The BI units were 25% complete and the EI units were 40% complete. Compute EUP for DM and CC if DM costs are incurred at the beginning of production. WIP Inventory - Units 5,000 20,000 17,000 8,000 BI units 5,000 S&C units 12,000 Completed units 17,000 (1-25%) © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 22 Q2-Q4: Separate EUP for DM & CC Use the same information from the prior slide; recall that the BI units were 25% complete and the EI units were 40% complete. Compute EUP for DM and CC if 20% of DM costs are incurred at the beginning of processing and the rest of the DM costs are incurred when the units pass the 60% stage of completion. (1-20%) No Change © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 23 •The EUP calculations provide the denominator in the cost per EUP computation. Q2-Q4: Cost per Equivalent Unit •The numerator for the WA cost per EUP includes total costs (current costs plus the BI costs). •The numerator for the FIFO cost per EUP includes only current costs. •A cost per EUP is computed for each cost category. •The WA and FIFO methods use different numerators in the cost per EUP computation. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 24 You are given the information below about May’s production and costs for Slocik Co. The units in ending WIP were 1/3 complete. Direct materials are added at the beginning of processing. What is the manufacturing cost per EUP under both methods? 0 45,000 WIP Inventory - Units 30,000 15,000 0 DM 65,250 CC 28,000 WIP Inventory - $ Q3&4: Process Costing Example, no BI First, compute the EUP for DM & CC. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 25 0 45,000 WIP Inventory - Units 30,000 15,000 0 DM 65,250 CC 28,000 WIP Inventory - $ Q3&4: Process Costing Example, no BI When there is no BI, WA and FIFO have the same EUP, and hence the same costs/EUP. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 26 0 45,000 WIP Inventory - Units 30,000 15,000 0 DM 65,250 CC 28,000 WIP Inventory - $ Q3&4: Process Costing Example, no BI Now, compute the costs/EUP for DM & CC. DM cost/EUP = $65,250/45,000 EUP = $1.45/EUP CC/EUP = $28,000/35,000 EUP = 0.80/EUP Total manufacturing cost/EUP $2.25/EUP © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 27 0 45,000 WIP Inventory - Units 30,000 15,000 0 DM 65,250 CC 28,000 WIP Inventory - $ Q3&4: Process Costing Example, no BI The last step is a process cost report that breaks the “total costs to account for” into: total units to account for = 45,000 total costs to account for = $93,250 $ assigned to completed units $ assigned to EI units •the portion that is assigned to the units in ending WIP inventory •the portion that is assigned to the completed units, and © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 28 Q3&4: Process Costing Example, no BI 0 0 30,000 x $2.25 67,500 30,000 67,500 30,000 45,000 93,250 15,000 21,750 4,000 25,750 15,000 x $1.45 5,000 x $0.80 The journal entry to record the costs transferred out is: FG inventory 67,500 WIP inventory 67,500 © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 29 Colors R Us, Inc. uses a process costing system for its sole processing department. There were 6,200 units in beginning WIP inventory for February and 57,500 units were started in February. The beginning WIP units were 60% complete and the 5,000 units in ending WIP were 45% complete. All materials are added at the start of processing. Compute the EUP for DM and CC using both methods. 58,700 Q3&4: Process Costing Example, with BI First, compute the # of units started & completed: 6,200 WIP Inventory - Units 5,000 57,500 BI units 6,200 S&C units 52,500 Completed units 58,700 © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 30 Q3&4: Process Costing Example, with BI 58,700 6,200 WIP Inventory - Units 5,000 57,500 BI units 6,200 S&C units 52,500 Completed units 58,700 Now, compute the EUP for DM & CC (recall that BI & EI were 60% & 45% complete, respectively, and all DM are added at the start of processing). © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 31 Beginning WIP inventory was valued at $42,896 [DM costs of $12,850 plus CC of $30,046]. During February Colors incurred DM costs of $178,250, and CC of $274,704. Compute the cost of the goods transferred out the the costs assigned to ending WIP inventory for February, using both methods. BI 42,896 DM 178,250 CC 274,704 WIP Inventory - $ Q3&4: Process Costing Example, with BI Under FIFO, the numerator includes only current costs: The EUP from the prior slide: DM cost/EUP = $178,250/57,500 EUP = $3.10/EUP CC/EUP = $274,704/57,230 EUP = 4.80/EUP Total manufacturing cost/EUP $7.90/EUP © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management,2e Slide # 32 Beginning WIP inventory was valued at $42,896 [DM costs of $12,850 plus CC of $30,046]. During February Colors incurred DM costs of $178,250, and CC of $274,704. Compute the cost of the goods transferred out the the costs assigned to ending WIP inventory for February, using both methods. BI 42,896 DM 178,250 CC 274,704 WIP Inventory - $ Q3&4: Process Costing Example, with BI Under WA, the numerator includes BI and current costs: The EUP from the prior slide: DM cost/EUP = $191,100/63,700 EUP = $3.00/EUP CC/EUP = $307,750/60,950 EUP = 5.00/EUP Total manufacturing cost/EUP $8.00/EUP © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 33 6,200 57,500 WIP Inventory - Units 58,700 5,000 42,896 DM 178,250 CC 274,704 WIP Inventory - $ Q3&4: Process Costing Example, with BI The last step is a process cost report that breaks the “total costs to account for” into: total units to account for = 63,700 total costs to account for = $495,850 $ assigned to completed units $ assigned to EI units •the portion that is assigned to the units in ending WIP inventory •the portion that is assigned to the completed units, and © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 34 Q3&4: WA Process Costing Example, with BI Under the WA method, there is no distinction between the 6,200 BI units and the 52,500 S&C units. Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 35 Q3&4: FIFO Process Costing Example, with BI Under the FIFO method, the cost assigned to the 6,200 BI units is computed separately from the cost of the 52,500 S&C units. = 2,480 * $4.80 = 52,500 * $7.90 = 5,000 * $3.10 = 2,250 * $4.80 © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 36 Q6: Accounting for Transferred-in Costs •“Transferred-in costs” )TI( is merely another cost category like DM or CC •When preparing a process cost report for a department with TI costs: •All processing departments except the first will account for TI costs •Compute EUP for TI costs; all TI costs are incurred at the start of processing •Compute cost/EUP for TI costs •Assign TI costs to EI units © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 37 Crusher Drugs manufactures a pain medication in a two-process cycle. In Department 2, direct materials are added as follows: 20% are added at the beginning of processing, and the rest at the 60% stage. There were 5,000 units in Dep’t 2’s beginning WIP inventory that were 40% complete, and 20,000 units were transferred in to Dep’t 2 in May. The Dep’t 2 ending WIP inventory of 6,000 units was 55% complete. Compute the May EUP for all cost categories for Department 2 using both methods. Q6: Process Costing Example, with TI Costs First, compute the # of units started & completed: 5,000 Dep’t 2 WIP Inventory - Units 6,000 20,000 BI units 5,000 S&C units 14,000 Completed units 19,000 19,000 © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 38 Q6: Process Costing Example, with TI Costs 19,000 5,000 Dep’t 2WIP Inventory - Units 6,000 20,000 BI units 5,000 S&C units 14,000 Completed units 19,000 Now, compute the EUP for DM & CC (recall that BI & EI were 40% & 55% complete, respectively; 20% of DM costs are incurred at the start of processing, and the rest are incurred at the 60% stage). © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 39 You are given the cost information below. Compute the cost per EUP under both methods. Under WA, the numerator includes BI and current costs: Q6: Process Costing Example, with TI Costs DM cost/EUP = $79,537.50/20,200 EUP =$3.9375/EUP CC/EUP = $35,122.50/22,300 EUP = 1.5750/EUP Total manufacturing cost/EUP $10.7625/EUP TI cost/EUP = $131,250/25,000 EUP = 5.2500/EUP © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 40 You are given the cost information below. Compute the cost per EUP under both methods. Under FIFO, the numerator includes only current costs: Q6: Process Costing Example, with TI Costs DM cost/EUP = $72,240/19,200 EUP = $3.7625/EUP CC/EUP = $31,262/20,300 EUP = 1.5400/EUP Total manufacturing cost/EUP $10.9025/EUP TI cost/EUP = $112,000/20,000 EUP = 5.6000/EUP Next, complete the process cost report using both methods…. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 41 Q6: Process Costing Example, with TI Costs Given $ 4,000 * 3,000 * 14,000 * * 19,000 1,200 * $3.7625 = 3,300 * $1.5400 = 6,000 * $5.6000 = 1,200 * $3.9375 = 3,300 * $1.5750 = 6,000 * $5.2500 = © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 42 Q5: What Alternative Methods are Used for Mass Production? ؟مخضلا جاتنلإا يف ةمدختسملا ةليدبلا قرطلا يه ام •Adaptations to Traditional Process Costing عم فيكتلاةيديلقتلا تايلمعلا فيلاكت –Match equivalent units calculations more closely to actual production processes ةيلعفلا جاتنلإا تايلمعل قثوأ لكشب ةئفاكملا تادحولا تاباسح قباطت –Separate conversion costs into multiple pools ىلإ ليوحتلا فيلاكت لصفاةددعتم تاعومجم •Standard costs simplify the accounting ةيسايقلا فيلاكتلاةبساحملا طيسبت •Just-in-time production جاتنلإا تقو يف طقف •Hybrid costing, or operation costing وأ ،نيجهلا ةفلكتفيلاكتلا ةيلمع © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 43 Q7: Accounting for Spoilage in Process Costing فيلاكتلا ريدقت ةيلمع يف فلتلا نع ةبساحملا •Costs of normal spoilage are absorbed by the good units transferred out. لبق نم يعيبطلا فلتلا فيلاكت باعيتسا متياهلقن ةديج تادحو. •Costs of abnormal spoilage are charged to a Loss from abnormal spoilage account. فلت فيلاكت ليمحت متيفلت يعيبط ريغ باسح نم ةراسخ ىلع يعيبط ريغ. •Costs attach to spoilage depending on when spoilage is detected. ىلع ادامتعا فلتلا ىلع فيلاكتلا قلعتفلتلا نع فشكلا هيف متي يذلا تقولا. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 44 Hollidaze makes molded plastic party decorations. In June, there were 800 units in beginning WIP inventory that were 40% complete and the 500 units in ending WIP were 30% complete. The company completed 3,000 units in June, but 200 of these were defective and were discarded. The defective units are located upon inspection before transfer to finished goods. It was determined that 50 of these defective units should be considered normal spoilage. The remaining spoilage occurred because of a rare machine malfunction and should be considered abnormal spoilage. All direct materials are added at the beginning of processing. Compute the June EUP for DM and CC using both methods. Q7: Process Costing & Spoilage Example First, compute the # of units started & completed: 2,700 BI units 800 S&C units 2,200 Completed units 3,000 800 WIP Inventory - Units 500 3,000 this includes 200 defective units © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 45 Q7: Process Costing & Spoilage Example Now, compute the EUP for DM & CC (recall that BI & EI were 40% & 30% complete, respectively; DM costs are incurred at the start of processing). BI units 800 S&C units 2,200 Completed units 3,000 2,700 800 WIP Inventory - Units 500 3,000 © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 46 You are given the cost information below. Compute the cost per EUP under both methods. Under WA, the numerator includes BI and current costs: Q7: Process Costing & Spoilage Example DM cost/EUP = $11,375/3,500 EUP = $3.25/EUP CC/EUP = $7,245/3,150 EUP = 2.30/EUP Total manufacturing cost/EUP $5.55/EUP © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 47 You are given the cost information below. Compute the cost per EUP under both methods. Q7: Process Costing & Spoilage Example DM cost/EUP = $8,640/2,700 EUP = $3.20/EUP CC/EUP = $5,943/2,830 EUP = 2.10/EUP Total manufacturing cost/EUP $5.30/EUP Under FIFO, the numerator includes only current costs: Next, complete the process cost report using both methods…. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Q7: WA Process Costing & Spoilage Example The WA journal entry to record the costs transferred out is: FG inventory 15,81.50 Loss from abnormal spoilage 832.50 WIP inventory 16,650.00 Note the total good units accounted for is the total units to account for less the spoiled units. © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 49 Q7: FIFO Process Costing & Spoilage Example The FIFO journal entry to record the costs transferred out is: FG inventory 15,910 Loss from abnormal spoilage 795 WIP inventory 16,705 © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management 2e Slide # 50 Q8: Process Costing Uses for Decision Making تارارقلا ذاختلا مادختسلاا فيلاكت باسح ةيلمع •Used to determine valuation for inventory and cost of goods sold at the end of each period علسلا ةفلكتو نوزخملا مييقت ديدحتل مدختستةرتف لك ةياهن يف ةعابملا •Required for financial statements and income tax returns لخدلا ةبيرض تارارقإو ةيلاملا تانايبلل بولطم •Helps managers evaluate if the production processes are operating as expected تايلمع تناك اذإ ام مييقت ىلع نيريدملا دعاسيعقوتم وه امك لمعت جاتنلإا •Compare actual results to budget, standards, or prior periods ةقباسلا تارتفلا وأ ريياعملا وأ ةينازيملاب ةيلعفلا جئاتنلا ةنراقم •Identify areas for process improvements تانيسحتلا تلااجم ديدحتةيلمعلا •Analyze benefits of quality improvements تانيسحت دئاوف ليلحتةدوجلا © John Wiley & Sons, 2011 Chapter 6: Process Costing Eldenburg & Wolcott’s Cost Management, 2e Slide # 51 Q8: Process Costing Limitations & Impacts on Managers’ Decision Making نيريدملل تارارقلا ذاختا ىلع راثلآاو دويقلا فيلاكتلا ديدحت ةيلمع •Process cost information is generally not useful for many short-term decisions because unavoidable fixed costs are allocated to the products. دملأا ةريصق تارارقلا نم ديدعلل ةديفم ريغ ةيلمعلا فيلاكت تامولعم نوكت ام ةداعوتاجتنملل اهصيصخت متي اهبنجت نكمي لا يتلا ةتباثلا فيلاكتلا نلأ. •Need to determine incremental or marginal costs فيلاكتلا ديدحت ىلإ جاتحتةيشماهلا وأ ةيفاضلإا •Separating conversion costs into fixed and variable pools would help ةريغتمو ةتباث تاعمجم يف ليوحتلا فيلاكت لصف دعاسيس •Requires use of estimates: تاريدقتلا مادختسا بلطتي: •The point of the production process when DM costs or CC are incurred. يسيس وأ مد فيلاكت دبكت امدنع جاتنلإا ةيلمع نم ةطقن. •Stage of completion for all units in beginning and ending WIP inventories ةصاخلا لمعلا تحت درجلا مئاوق ءاهنإو ةيادب يف تادحولا عيمجل زاجنلإا ةلحرم جمانربلاب © John Wiley & Sons, 2011 Alawi Alshakhouri 140069328 Slide # 1 Cost Management Measuring, Monitoring, and Motivating Performance Chapter 7 Activity-Based Costing and Management ةرادلإاو طاشنلا ىلع ةمئاقلا فيلاكتلا © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 2 Chapter 7: Activity-Based Costing and Management ةرادلإاو طاشنلا ىلع ةمئاقلا فيلاكتلا Learning objectives •Q1: What is activity-based costing (ABC)? ىلع ةمئاقلا ةفلكتلا يه ام؟طاشنلا •Q2: What are activities and how are they identified? ةطشنلأا يه ام؟اهديدحت متي فيكو •Q3: What process is used to assign costs in an ABC system? ام؟؟طاشنلا ىلع ةمئاقلا ةفلكتلا ماظن يف فيلاكتلا صيصختل ةمدختسملا ةيلمعلا يه •Q5: What are GPK and RCA? •Q4: What is activity-based management? ؟طاشنلا ىلع ةمئاقلا ةرادلإا يه ام •Q6: How does information from ABC, GPK, and RCA affect managers’ incentives and decisions? © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 3 Q1: Activity-Based Costing (ABC) •ABC is a method of cost system refinement. ةفلكتلا ماظن ريركتل ةقيرط وه. •Indirect costs are divided into “sub-pools” of costs of activities. مسقنتو ىلإ ةرشابملا ريغ فيلاكتلا"ةيعرف تاعومجم "ةطشنلأا فيلاكت نم. •Activity costs are then allocated to the final cost objects using a cost allocation base (more commonly called cost drivers in ABC). متي مث فيلاكتلا صيصخت ةدعاق مادختساب ةيئاهنلا ةفلكتلا رصانع ىلع طاشنلا فيلاكت عيزوت( قلطي يتلاطاشنلا ىلع ةمئاقلا فيلاكتلا يف ةفلكتلا لماوع ةداع اهيلع.) •Activities are measurable, making it more likely that cost drivers can be found so that a final cost object will absorb indirect costs in proportion to its use of the activity. ةيلامتحا نم ديزي امم ،سايقلل ةلباق ةطشنلأاف امب ةرشابملا ريغ فيلاكتلا فيلاكتلل يئاهنلا نئاكلا بعوتسي ثيحب ةفلكتلا تازفحم ىلع روثعلاطاشنلل همادختسا عم بسانتي. © John Wiley & Sons, 2011 Slide # 4 Q1: Traditional Costing vs. ABC طاشنلا ىلع ةمئاقلا فيلاكتلا لباقم ةيديلقتلا فيلاكتلا Product A Product B Product C Traditional costing systems: ةيديلقتلا فيلاكتلا مظن: Indirect Costs Direct Costs Direct Costs Direct Costs Direct costs are traced to the individual products. فيلاكتلا ىزعتو تاجتنملا ىلإ ةرشابملاةيدرفلا. The individual products are the final cost objects. يه ةيدرفلا تاجتنملاةيئاهنلا ةفلكتلا تانئاك. Indirect costs are grouped into one (or a small number) of cost pools; a cost allocation base assigns costs to the individual products ةعومجم يف ةرشابملا ريغ فيلاكتلا عمجتو ةدحاو(ريغص ددع وأ ) تاعومجم نم فيلاكتلا صيصخت ةدعاق موقت ؛فيلاكتلاةيدرفلا تاجتنملل فيلاكت صيصختب Q1: Traditional Costing Systems ةيديلقتلا فيلاكتلا مظن © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 5 © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 6 Q1: Traditional Costing vs. ABC Activity-based costing systems: طاشنلا ىلع ةمئاقلا فيلاكتلا ةمظنأ: Indirect Costs Product A Product B Product C Direct Costs Direct Costs Direct Costs The individual products are the final cost objects & direct costs are traced to the individual products. فيلاكتلا ةفلكت يه ةيدرفلا تاجتنملا ةرشابملا فيلاكتلا ىزعتو ةيئاهنلاةيدرفلا تاجتنملا ىلإ. Indirect costs are assigned (traced & allocated) to various pools of activity costs. نييعت متي ةرشابملا ريغ فيلاكتلا( اهعبتتاهصيصختو ) ةفلتخم تاعومجم ىلإطاشنلا فيلاكت نم. Activity 1 Activity 2 Activity 3 Activity costs are allocated to products صصختوتاجتنملل طاشنلا فيلاكت Q1: ABC Costing Systems © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 7 © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 8 Q2: What are Activities and How are They Identified? ؟اهديدحت متي فيكو ةطشنلأا يه ام The ABC cost hierarchy includes the following activities: لمشيوةيلاتلا ةطشنلأا طاشنلا ىلع مئاقلا فيلاكتلا ةفلكتل يمرهلا لسلستلا: •organization-sustaining – associated with overall organization ةمظنملا ةمادتسا- ةلماشلا ةمظنملاب ةطبترملا •facility-sustaining – associated with single manufacturing plant or service facility قفارملا ةمادتسا- ةأشنم وأ دحاو عنصمب ةطبترملاةدحاو ةمدخ •customer-sustaining – associated with a single customer ظافحلا ءلامعلا ىلع- دحاو ليمع ةطبترملا •product-sustaining – associated with product lien or single product جتنملا ىلع ظافحلا- دحاو جتنم وأ جتنملا زايتما عم ةطبترملا •batch-level – associated with each batch of product ىوتسمةعفدلا :تاجتنملا نم ةعفد لكب طبترم •unit-level – associated with each unit produced ةدحولا ىوتسم :ةجتنم ةدحو لكب طبترم © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 9 Q2: ABC Cost Hierarchy Example Some of the costs incurred by the Dewey Chargem law firm are listed below. This firm specializes in immigration issues and family law. For each cost, identify whether the cost most likely relates to a(n) (1) organiz-ation-sustaining, (2) facility-sustaining, (3) customer-sustaining, (4) product-sustaining, (5) batch-level, or (6) unit-level activity and explain your choice. يتلا فيلاكتلا ضعباهتدبكت يويد ةكرشمجراشت هاندأ ةجردم ةينوناقلا .ةرسلأا نوناقو ةرجهلا اياضق يف ةصصختم ةكرشلا هذه . لكلو ب حجرلأا ىلع قلعتت ةفلكتلا تناك اذإ ام ددح ،ةفلكت(n) (1) ،ةمادتسلاا معدت يتلا ةمظنملا(2 ) ،قفارملا ىلع ةظفاحملا(3 ) ظافحلا ،ءلامعلا ىلع(4 ) ،جتنملا ىلع ةظفاحملا(5 ) وأ ،ةدحولا ىوتسم ىلع ةعفد(6 )كرايتخا حرشو ةدحولا ىوتسم ىلع طاشنلا. © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 10 Q3: What Process is Used to Assign Costs in an ABC system? ؟طاشنلا ىلع مئاقلا فيلاكتلا ماظن يف فيلاكتلا نييعتل ةمدختسملا ةيلمعلا يه ام 1.Identify the relevant cost object. تاذ ةفلكتلا نئاك ديدحتةلصلا. 2.Identify activities and group homogeneous activities. ةسناجتملا ةيعامجلا ةطشنلأاو ةطشنلأا ديدحت. 3.Assign costs to the activity cost pools. فيلاكتلا نييعتةطشنلأا فيلاكت تاعومجمل. 4.Choose a cost driver for each activity cost pool. طاشنلا ةفلكت عمجت لكل ةفلكتلا ليغشت جمانرب رايتخا. 5.Calculate an allocation rate for each activity cost pool. طاشن ةفلكت عمجت لكل صيصخت لدعم بسحا. 6.Allocate activity costs to the final cost object. ةيئاهنلا ةفلكتلا نئاكل طاشنلا فيلاكت صيصخت. © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 11 Q3: How Are Cost Drivers Selected for Activities? متي فيك؟ةطشنلأل ةفلكتلا ليغشت جمارب رايتخا •For each activity, determine its place in the ABC cost hierarchy. يف هناكم ددح ،طاشن لكلةفلكتلا ىلع مئاقلا طاشنلا ةفلكتل يمرهلا لسلستلا. •Look for drivers that have a good cause-and-effect relationship with the activities’ costs. و ببس ةقلاع مهيدل نيذلا ةفلكتلا نيببسم نع ثحباةطشنلأا فيلاكت عم ديج ريثأت. •Use a reasonable driver when there is no cause-and-effect relationship. ببسم مادختساةجيتنلاو ببسلا ةقلاع كانه نوكي لا امدنع لوقعم ةفلكت. © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 12 Q3: ABC in Manufacturing Example Alphabet Co. makes products A & B. Product A is a low-volume specialty item and B is a high-volume item. Estimated factory- wide overhead is $800,000, and the number of DL hours for the year is estimated to be 50,000 hours. DL costs are $10/hour. Each product uses 2 DL hours. Compute the traditional cost of each product if Products A & B use $25 and $10 in direct materials, respectively. First, compute the estimated overhead rate: Estimated overhead rate = $800,000/50,000 hours = $16/hour. Product A Product B Direct materials $25 $10 Direct labor (2hrs @ $10) 20 20 Overhead (2 hrs @ $16) 32 32 $77 $62 © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 13 Q3: ABC in Manufacturing Example Alphabet Co. is implementing an ABC system. It estimated the costs and activity levels for the upcoming year shown below. First, compute the estimated overhead rate for each activity: © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 14 Q3: ABC in Manufacturing Example © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 15 Q3: ABC in Manufacturing Example Alphabet recently completed a batch of 100 As and a batch of 100 Bs. Direct material and labor costs were as budgeted. Information about each batch’s use of the cost drivers is given below. Compute the overhead allocated to each unit of A and B. © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 16 Q3: ABC in Manufacturing Example Compute the total cost of each product and compare it to the costs computed under traditional costing. Traditional costing assigned $77 to a unit of Product A and $62 to a unit of Product B. •The only difference between the two costing systems is that Product A is assigned more overhead costs under ABC. •The additional overhead assigned to Product A reflects Product A’s consumption of resources. © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 17 •ABM is the process of using ABC information to evaluate opportunities for improvements in an organization. ةمئاقلا ةرادلإا صرف مييقتل طاشنلا ىلع ةمئاقلا فيلاكتلا تامولعم مادختسا ةيلمع يه طاشنلا ىلعةسسؤملا يف تانيسحتلا. Q4: Activity-Based Management (ABM) طاشنلا ىلع ةمئاقلا ةرادلإا •Examples include managing & monitoring كلذ ىلع ةلثملأا نمومكحتلاو ةرادلإا •customer profitability ليمعلا ةيحبر •product and process design ميمصتلا ةيلمعو جتنملا •environmental costs ةيئيبلا فيلاكتلا •Quality ةدوجلا •constrained resources ةديقملا دراوملا © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 18 •Activities can be defined so that different costs of servicing customers are accumulated. فيلاكت مكارتت ثيحب ةطشنلأا فيرعت نكميوءلامعلا ةمدخل ةفلتخم. Q4: ABM & Customer Profitability ليمعلا ةيحبرو طاشنلا ىلع ةمئاقلا ةرادلإا •Examples include لمشت ةلثملأا •analyzing the types of bank transactions used by various categories of customers ةمدختسملا ةيفرصملا تلاماعملا عاونأ ليلحتءلامعلا نم ةفلتخم تائف لبق نم •comparing the costs of servicing insurance contracts sold to married versus single individuals دوقع ةمدخ فيلاكت ةنراقمدارفلأا لباقم نيجوزتملا دارفلأل ةعابملا نيمأتلا •comparing the costs of different distribution channels ةفلتخملا عيزوتلا تاونق فيلاكت ةنراقم © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 19 •Activities can be defined so that the costs of stages of production or of a business process are accumulated. نكميوةيراجتلا لامعلأا ةيلمع وأ جاتنلإا لحارم فيلاكت مكارتت ثيحب ةطشنلأا ديدحت. Q4: ABM & Product/Process Improvements جتنملا تانيسحتو طاشنلا ىلع ةمئاقلا ةرادلإا /ةيلمعلا •Examples include لمشت ةلثملأا •determining the costs of non-value-added activities so the most costly can be reduced or eliminated فيلاكت ديدحتو رثكلأا فيلاكتلا ةلازإ وأ ضيفخت نكمي ثيحب ةفاضملا ةميقلا تاذ ريغ ةطشنلأاةفلكت •changing the steps in the accounts payable function to reduce the number of personnel ةفيظو يف تاوطخلا رييغتونيفظوملا نم ددع نم دحلل عفدلا ةقحتسملا تاباسحلا •determining the most costly stages of product development so that the time to market is reduced ديدحتوقوسلا ىلإ تقولا ليلقت متي ثيحب تاجتنملا ريوطت نم ةفلكت رثكلأا لحارملا © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 20 •Activities can be defined so that types of environmental costs are accumulated. مكارتت ةيئيبلا فيلاكتلا عاونأ نأ ثيحب ةطشنلأا ديدحت نكميو. Q4: ABM & Environmental Costs ةيئيبلا فيلاكتلاو طاشنلا ىلع ةمئاقلا ةرادلإا •Examples include لمشت ةلثملأا •capturing the costs of contingent liabilities for waste disposal site remediation فيلاكت ليصحتوتايافنلا نم صلختلا عقوم ةجلاعمل ةئراطلا تامازتللاا •comparing the cost of recycling packaging to the cost of disposal ىلإ فيلغتلاو ةئبعتلا ريودت ةداعإ ةفلكت ةنراقماهنم صلختلا ةفلكت •computing the costs of treating different kinds of emissions تاثاعبنلاا نم ةفلتخم عاونأ ةجلاعم فيلاكت باسح © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 21 •Activities can be defined so that categories of costs of managing quality are accumulated. ثيحب ةطشنلأا فيرعت نكميوةدوجلا ةرادإ فيلاكت تائف مكارتت. Q4: ABM & Quality Costs ةدوجلا فيلاكتو طاشنلا ىلع ةمئاقلا ةرادلإا •Common categories of quality costs are فيلاكت نم ةعئاشلا تائفلايه ةدوجلا •costs of prevention activities ةياقولا ةطشنأ فيلاكت •costs of appraisal activities مييقتلا ةطشنأ فيلاكت •costs of production activities جاتنلإا ةطشنأ فيلاكت •costs of postsales activities عيبلا دعب ام ةطشنأ فيلاكت Q5: What are GPK and RCA? •Costing approaches similar to ABC because they involve multiple pools and multiple drivers ىلع ةمئاقلا ةرادلإل ةلثامم ةفلكتلا جهنةددعتم نيقئاسلاو ةددعتم تامامح ىلع يوطنت اهنلأ طاشنلا •GPK can be described as marginal planning and cost accounting فيلاكتلا ةبساحمو يشماهلا طيطختلا اهنأب هيك يب يج فصو نكميو –Each cost is traced to a cost center (smaller than a department) which performs a single repetitive activity, and is the responsibility of one manager) ةفلكتلا زكرم ىلإ ةفلكت لك ىزعتو(مسق نم رغصأ ) ،دحاو رركتم طاشن يدؤي يذلادحاو ريدم قتاع ىلع عقتو) –Output measures tracks the volume of resource use تاجرخملا ريبادت عبتتودراوملا مادختسا مجح –Costs are segregated into proportional (change with volume in resource use) and fixed ةيبسن ىلإ فيلاكتلا مسقنتو(دراوملا مادختسا مجح عم ريغتلا )ةتباثلاو –Practical capacity is used for estimated allocation rate volumes مادختسا متيةردقملا صيصختلا لدعم ماجحلأ ةيلمعلا ةردقلا © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 22 Q5: Capacity Definitions تاردقلا تافيرعت •Theoretical capacity – maximum assuming continuous, uninterrupted operations 365 days/year ةيرظنلا ةردقلا- ىصقأ تايلمعلا عاطقنا نود ،رمتسم ضارتفا365 اموي /ةنس •Practical capacity – typical operating conditions ةيلمعلا ةردقلا- ةيجذومنلا ليغشتلا فورظ •Budgeted capacity – expected volume for the upcoming time period ةينازيملا يف ةجردملا ةردقلا- ةمداقلا ةينمزلا ةرتفلل عقوتملا مجحلا •Idle/excess capacity – difference between activity capacity used and one of the above measures of capacity لومخلا / ةقاطلا ةدئازلا- هلاعأ ةروكذملا ةردقلا ريبادت دحأو ةمدختسملا طاشنلا ةردق نيب قرفلا © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 23 •Resource Consumption Accounting (RCA) دراوملا كلاهتسا ةبساحم •Builds on GPK and ABC principles •Each cost is assigned to a resource cost pool فيلاكت عومجمل ةفلكت لك صصختودراوملا –Labor and machinery are often placed in different cost pools since they are different types of resources فيلاكتلا نم ةفلتخم تاعومجم يف تلالآاو ةلامعلا عضوت ام ابلاغودراوملا نم ةفلتخم عاونأ اهنلأ ارظن –RCA involves a significantly larger number of cost pools than traditional accounting دراوملا كلاهتسا ةبساحم : ةنراقم فيلاكتلا تاعمجم نم ريثكب ربكأ ددع ىلع يوطنتةيديلقتلا ةبساحملاب –Like GPK, segregates proportional and fixed costs لثمكغ ةيبسنلا فيلاكتلا لصفي ،ةتباثلاو –Utilizes theoretical rather than practical capacity for allocating fixed costs ةتباثلا فيلاكتلا صيصختل ةيلمعلا ةردقلا نم لادب ةيرظنلا ةردقلا مدختسي •More likely to focus manager attention on reducing idle and non-productive resource time جتنملا ريغو لومخلا تقو نم دحلا ىلع ريدملا مامتها زكرت نأ حجرملا نم © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 24 Q5: What are GPK and RCA? Q5: Benefits/Drawbacks to GPK/RCA دئاوف / بويع •Benefits دئاوف –Generates multi-level internal income statements useful for short terms decisions because it focuses on marginal cost لخدلا تانايب دلويةيدحلا ةفلكتلا ىلع زكري هنلأ لجلأا ةريصق تارارقلل ةديفم تايوتسملا ةددعتم يلخادلا –Increases cause & effect awareness among managers ببسلا يعولا ةدايزنيريدملا نيب ةجيتنلاو –Categorizes costs (and generates profit margin) at the product, product group, division, and company level فيلاكتلا فنصي( شماه دلويوحبرلا )ةكرشلا ىوتسمو ،ميسقت ،تاجتنملا ةعومجم ،جتنملا ىلع –Avoids arbitrary allocations of fixed costs فيلاكتلل ةيفسعتلا تاصصخملا بنجتيةتباثلا •Drawbacks بويع –Can be costly to implement ذيفنتل ةفلكم نوكت نأ نكمي –Can result in a large number of variances to analyze ىلإ يدؤي نأ نكميليلحتلل قورفلا نم ريبك ددع © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 25 Q5: Comparison of ABC, GPK, and RCA نيب ةنراقم ABC GPK RCA Character of cost accounting system فيلاكتلا ةبساحم ماظن صئاصخ Full costing ةلماكلا ةفلكتلا Marginal costing ةيشماهلا فيلاكتلا باسح Full and marginal costing ةيشماهلاو ةلماكلا ةفلكتلا Location of data تانايبلا عقوم Database separate from general ledger نع ةلصفنم تانايب ةدعاقماعلا ذاتسلأا رتفد Comprehensive accounting system لماشلا ةبساحملا ماظن Comprehensive accounting system لماشلا ةبساحملا ماظن Primary decision relevance يساسلأا رارقلا ةيمهأ Mid- to long-term Short-term Short-, Mid-, and Long term Allocation of overhead based on تاقفنلا صيصختساسأ ىلع ةماعلا Activities ةطشنأ Cost Centers ةفلكتلا زكارم Resources and/or activities و دراوملا /ةطشنلأا وأ Cost Drivers ةفلكتلا عفاود Activity –Based طاشنلا ساسأ Resource Output related ةلصلا تاذ دراوملا جارخإ Resource output or activity related تاذ طاشنلا وأ دراوملا جاتنإةلصلا Fixed cost allocation rate denominator ةفلكتلا صصخم عيزوت لدعمةتباثلا Actual, budgeted, or practical capacity يف ةجردملا وأ ةيلعفلا ةردقلاةيلمعلا وأ ةينازيملا Budgeted or practical capacity ىلع ةردقلاةيلمعلا وأ ةينازيملا Theoretical capacity ةيرظنلا ةردقلا © John Wiley & Sons, 2011 Slide # 26 © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 27 •Benefits دئاوف •more accurate and relevant product cost information ةلصلا تاذو ةقد رثكأتامولعملا جتنملا ةفلكت •employees focus attention on activities ةطشنلأا ىلع مامتهلاا نوفظوملا زكري •measurement of the costs of activities and business processes سايقوةيراجتلا تايلمعلاو ةطشنلأا فيلاكت •identify non-value-added activities and reduce costs ريغ ةطشنلأا ديدحتوفيلاكتلا ضفخو ،ةفاضملا ةميقلا تاذ Q6: Decision Making with ABC, GPK, and RCA •Costs فيلاكتلا •systems can be difficult to design and maintain نم نوكي نأ نكمي ةمظنأةنايصو ميمصت بعصلا •more information must be captured تامولعملا نم ديزم طاقتلا بجي •decision makers may not use the information appropriately زوجي لابسانم لكشب تامولعملا مادختسا رارقلا يعناصل © John Wiley & Sons, 2011 Chapter 7: Activity-Based Costing and Management Eldenburg & Wolcott’s Cost Management, 2e Slide # 28 •Judgment is required when determining activities. ةطشنلأا ديدحت دنع بولطم مكحلا. Q6: Uncertainties in ABC and ABM Implementation هجوأ ذيفنتنقيتلا مدع •Judgment is required when selecting cost drivers. ةفلكتلا يببسم رايتخا دنع مكحلا بولطم. •Denominator levels for cost drivers are estimates. تاريدقت يه ةفلكتلا تاكرحمل تاموقملا تايوتسم. •ABC information includes unitized fixed costs, so decision makers must use ABC information correctly. ىلع بجي كلذل ،ةدحوم ةتباث فيلاكت تامولعملا لمشتوحيحص لكشب كبأ تامولعملا مادختسا رارقلا عانص. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 1 Cost Management Measuring, Monitoring, and Motivating Performance Alawi Alshakhouri 140069328 Chapter 8 Measuring and Assigning Support Department Costs فيلاكتلا معد ةرادإ نييعتو سايق © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 2 Chapter 8: Measuring and Assigning Support Department Costs Learning objectives •Q1: What are support departments, and why are their costs allocated to other departments? ؟ىرخأ ماسقلأ اهفيلاكت صيصخت متي اذاملو ،معدلا تارادإ يه ام •Q2: What process is used to allocate support department costs? ؟معدلا ةرادإ فيلاكت صيصختل ةمدختسملا ةيلمعلا يه ام •Q3: How is the direct method used to allocate support costs to operating departments? معدلا فيلاكت صيصختل ةرشابملا ةقيرطلا مادختسا متي فيك؟ليغشتلا ماسقلأ •Q4: How is the step-down method used to allocate support costs to operating departments? یلإ معدلا فيلاکت صيصختل صيصختلا ةقيرط مادختسا متي فيک؟ةيليغشتلا تارادلإا •Q5: How is the reciprocal method used to allocate support costs to operating departments? ماسقلأ معدلا فيلاكت صيصختل ةلدابتملا ةقيرطلا مادختسا متي فيك؟ليغشتلا •Q6: What is the difference between single- and dual-rate allocations? ؟ةجودزملاو ةيدرفلا تاصصخملا نيب قرفلا وه ام •Q7: How do support cost allocations affect decisions and managerial incentives? ؟ةيرادلإا زفاوحلاو تارارقلا ىلع معدلا فيلاكت تاصصخم رثؤت فيك © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 3 Q1: Support versus Operating Departments •The support department costs are common costs that are shared between two or more other departments. نم رثكأ وأ نينثا نيب اهمساقت متي ةكرتشم فيلاكت يه معدلا مسق فيلاكتىرخلأا تارادلإا. •The operating departments of an organization produce products or services that generate revenue. تاداريإ دلوت تامدخ وأ تاجتنم ةمظنملا يف ةلماعلا تارادلإا جتنتو. •The support departments of an organization produce products or provide services to the operating and other support departments. ةمظنملا يف معدلا تارادإ ىلوتتو تارادإ نم اهريغو ليغشتلا تارادإ ىلإ تامدخلا ميدقت وأ تاجتنم جاتنإمعدلا. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 4 Q1: Reasons for Allocating Support Department Costs •External reporting ةيجراخلا ريراقتلا •Decision making رارقلا ذاختا •product pricing تاجتنملا ريعست •make or buy decisions اهئارش وأ تارارقلا ذاختا •Motivation زيفحتلا لماع •appropriate consumption of support department resources معدلا مسق دراوملل بسانملا كلاهتسلااو •efficiency of support department معدلا مسق ةءافك •monitor consumption of support department services معدلا مسق تامدخ كلاهتسا دصر © John Wiley & Sons, 2011 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 2e Slide # 5 Q1: Support Department Allocation Process © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 6 Q2: Process for Allocating Support Department Costs معدلا ةرادإ فيلاكت صيصخت ةيلمع 1.Clarify allocation purpose صصخملا ضرغلا حيضوت 2.Identify cost pools فيلاكتلا تاعومجم ديدحت 3.Assign costs to cost pools ةفلكتلا تاعومجم ىلإ فيلاكتلا نييعت 4.Choose allocation bases for each cost pool سسأ رتخاةفلكت عمجت لكل صيصختلا 5.Choose allocation method; allocate support department costs صيصختلا ةقيرط رايتخا .معدلا مسق فيلاكت صيصخت 6.Allocate updated operating department costs to units of goods or services, if relevant ليغشتلا ةرادإ فيلاكت صيصختابسانم كلذ ناك اذإ ،تامدخلا وأ علسلا تادحول ةثدحملا © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 7 Q2: Process for Allocating Support Department Costs 1.Clarify allocation purpose صصخملا ضرغلا حيضوت •if the purpose is to motivate the use of the services of a newly formed department, perhaps no costs should be allocated ناك اذإ يغبني لا امبرو ،اثيدح ةلكشملا ةرادلإا تامدخ مادختسا زيفحت وه كلذ نم ضرغلافيلاكت يأ صيصخت •if the purpose is to discourage operating department managers from over-use of the services of support departments, then a rate per unit of service might be large and not based on actual costs مادختسا يف طارفلإا نع ةلماعلا تارادلإا يريدم طيبثت وه ضرغلا ناك اذإةيلعفلا فيلاكتلا ىلإ دنتسي لاو اريبك ةمدخ ةدحو لك لدعم نوكي دقف ،معدلا تارادإ تامدخ •if the purpose is to determine the full cost of products or services for long-term pricing decisions, then all support costs should be allocated تامدخلا وأ تاجتنملل ةلماكلا ةفلكتلا ديدحت وه ضرغلا ناك اذإمعدلا فيلاكت عيمج صيصخت بجي ذئدنع ،لجلأا ةليوط ريعستلا تارارقل © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 8 Q2: Process for Allocating Support Department Costs 2.Identify cost pools فيلاكتلا تاعومجم ديدحت •the purpose will determine whether both fixed and variable support department costs should be allocated يغبني ناك اذإ ام ضرغلا ددحيسءاوسلا ىلع ةريغتملاو ةتباثلا معدلا ةرادإ فيلاكت صيصخت •the purpose will determine which costs should be allocated يغبني يتلا فيلاكتلا ضرغلا ددحيساهصيصخت © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 9 Q2: Process for Allocating Support Department Costs 3.Assign costs to cost pools ةفلكتلا تاعومجم ىلإ فيلاكتلا نييعت •some costs will be direct to the cost pool (e.g. toner cartridge costs would be direct to the “variable copying costs” cost pool) ىلإ ةرشابم نوكتس فيلاكتلا ضعب نإف فيلاكتلا عمجم) ةرشابم ربحلا ةشوطرخ فيلاكت نوكتس ،لاثملا ليبس ىلع فيلاكتلا ةعومجم ىلإ"ةريغتملا خسنلا فيلاكت)" •some costs will be indirect to the cost pool (e.g. rent costs for an entire facility would be indirect to the “information technology costs” cost pool) ضعب نإف فيلاكتلا عمجم يف ةرشابم ريغ نوكتس فيلاكتلا) نوكتس ،لاثملا ليبس ىلع فيلاكت فيلاكت عمجم ىلإ ةرشابم ريغ اهلمكأب ةأشنم راجيإ فيلاكتتامولعملا ايجولونكت) © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 10 Q2: Process for Allocating Support Department Costs 4.Choose allocation bases for each cost pool سسأ رتخاةفلكت عمجت لكل صيصختلا •an allocation base with a good cause-and-effect relationship with the cost pool provides a reasonable allocation rate عم ببسلاو ةديجلا ةقلاعلا تاذ صيصختلا ةدعاق نإفلوقعم عيزوت لدعم رفوت فيلاكتلا عمجت •users of support department services will carefully monitor their consumption of the allocation base فوسصيصختلا ةدعاق نم مهكلاهتسا ةيانعب ةبقارم معدلا مسق تامدخ يمدختسم © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 11 Q2: Process for Allocating Support Department Costs 5.Choose allocation method and allocate support department costs معدلا مسق فيلاكت صصخو صيصختلا ةقيرط رتخا •in this chapter we cover three allocation methods يفصيصختلل قرط ثلاث يطغن لصفلا اذه •each of these three methods could be implemented using مادختساب ثلاثلا قرطلا هذه نم لك ذيفنت نكمي •a single- or dual-rate approach (covered later) وأ دحاو جهن لدعملا جودزم)اقحلا يطغي) •actual or budgeted costs and allocation bases (covered later) صيصختلا سسأو ةينازيملا يف ةجردملا وأ ةيلعفلا فيلاكتلا) اهتيطغت مت يتلااقحلا) © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 12 Q2: Process for Allocating Support Department Costs 6.Allocate updated operating department costs to units of goods or services, if relevant صيصخت ناك اذإ ،تامدخلا وأ علسلا تادحول ةثدحملا ليغشتلا ةرادإ فيلاكتابسانم كلذ •for some decisions, this may not be relevant ابسانم كلذ نوكي لا دق ،تارارقلا ضعبل ةبسنلاب •for long-term pricing decisions, this is likely to be relevant نم اذهو ،لجلأا ةليوط ريعستلا تارارقلةلص تاذ نوكت نأ حجرملا © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 13 Q3: The Direct Method of Allocating Support Department Costs •The direct method ignores the fact that support departments use each others’ services. لهاجتتو اهضعب تامدخ مدختست معدلا تارادإ نأ ةقيقح ةرشابملا ةقيرطلاضعبلا. •This method is the easiest computationally and the easiest to explain. لهسأ وه بولسلأا اذهحرشل لهسأو ايباسح. •Each support department’s costs are allocated only to operating departments. متيةلماعلا تارادلإا ىلإ طقف معد ةرئاد لك فيلاكت صيصخت. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 14 Q3: The Direct Method Example Philco Toys makes metal and plastic toys in separate departments. It has two support departments, Accounting and Information Systems. Philco has decided to allocate Accounting department costs based on the number of employees in each department and Information Systems costs based on the number of computers in each department. Given the information below, use the direct method to allocate support department costs. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 15 Q3: The Direct Method Example Plastic Products is allocated 22/(22+16) of Accounting department costs, and Metal Products is allocated 16/(22+16). Notice that the number of employees in the support departments is ignored under the direct method. يف نيفظوملا ددع نأ ظحلاةرشابملا ةقيرطلا تحت اهلهاجت متي معدلا ماسقأ. Plastic and Metal Product share Info Systems costs equally because they have the same number of computers in each department. جتنملا ندعملاو كيتسلابلا مهيدل نلأ ةاواسملا مدق ىلع ةمظنلأا فلكت ةصح تامولعممسق لك يف رتويبمكلا ةزهجأ نم ددعلا سفن. Notice that the number of computers in the support departments is ignored under the direct method. ةزهجأ ددع نأ ظحلا ةقيرطلا تحت اهلهاجت متي معدلا ماسقأ يف رتويبمكلاةرشابملا. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 16 Q4: The Step-Down Method of Allocating Support Department Costs ةرادلإا فيلاكت معد ؟صيصخت ىحنت ةقيرط •The step-down method allocates some (but not all) support department costs to other support departments. ةقيرط صصختو معدلا ةرادإ فيلاكت ضعب يحنتلا)اهلك سيلو )ىرخلأا معدلا تارادإ ىلإ. •Allocation order must be determined. رمأ ديدحت بجيصيصختلا. •The first support department’s costs are allocated to all operating and support departments that use its services. متياهتامدخ مدختست يتلا معدلاو ليغشتلا ماسقأ ةفاكل لولأا معدلا مسق فيلاكت صيصخت. •Each subsequent support department’s costs are allocated to all operating and support departments that use its services, except any support department whose costs were already allocated. متي تارادإ عيمج ىلع ةقحلا معد ةرئاد لك فيلاكت عيزوت هفيلاكت صيصخت مت معد مسق يأ ءانثتساب ،اهتامدخ مدختست يتلا معدلاو ليغشتلالعفلاب. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 17 Q4: The Step-Down Method Example Given the information for Philco, use the step-down method to allocate support department costs. Allocate the costs of the support department that provides the largest percentage of its services to the other support department first. First determine allocation order: Accounting provided 4/(4+22+16) = 4/42 = 9.5% of its services to Info Systems. Information Systems provided 4/(4+3+3) = 4/10 = 40% of its services to Accounting, so Information Systems goes first. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 18 Q4: The Step-Down Method Example Given the information for Philco, use the step-down method to allocate support department costs. Now perform the allocation: © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 19 Q4: The Step-Down Method Example Info Systems costs are allocated to Accounting, Plastic, & Metal based on each department’s number of computers compared to total non-Info Systems computers: 4+3+3=10. Accounting costs are allocated only to Plastic & Metal based on each department’s number of employees compared to total non-Accounting and non-Info Systems employees: 22+16=38 Total costs allocated out of Accounting are now higher because of the Info Systems costs allocated to Accounting. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 20 Q4: The Step-Down Method Example (4/10) x $72,000 (3/10) x $72,000 (3/10) x $72,000 (22/38) x $76,800 (16/38) x $76,800 © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 21 Q5: The Reciprocal Method of Allocating Support Department Costs •The reciprocal method allocates all support department costs to other support departments. معدلا ةرادإ فيلاكت صيصختل ةلدابتملا ةقيرطلا •The first step is to compute the total costs of each support department when its usage of other support department services is taken into consideration. امدنع معد ةرادإ لك فيلاكت يلامجإ باسح يف ىلولأا ةوطخلا لثمتتوىرخلأا معدلا ةرادإ تامدخ مادختسا رابتعلاا يف ذخؤي. •Support department costs are then allocated to all other operating and support departments that consume its services. معدلا مسق فيلاكت عيزوت كلذ دعب متيواهتامدخ كلهتست يتلا ىرخلأا معدلاو ليغشتلا تارادإ عيمج ىلع. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 22 Q5: The Reciprocal Method Example Given the information for Philco, use the reciprocal method to allocate support department costs. First determine total costs for each support department by writing an equation for its costs (use A and IS as abbreviations). A = $48,000 + [4/(4+3+3)] x IS; IS = $72,000 + [4/(4+22+16)] x A Then solve: A = $48,000 + (4/10) x [$72,000 + (4/42) x A] A = $48,000 + $28,800 + (16/420) x A] (404/420) x A = $76,800 A = $76,800 x (420/404) = $79,842 IS = $72,000 + (4/42) x $79,842 = $79,604 © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 23 Q5: The Reciprocal Method Example Given the information for Philco, use the reciprocal method to allocate support department costs. Now perform the allocation: © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 24 Q5: The Reciprocal Method Example These numbers are the solutions to the simultaneous equations. (4/42) x $79,842 (22/42) x $79,842 (16/42) x $79,842 © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 25 Q5: The Reciprocal Method Example (4/10) x $79,604 (3/10) x $79,604 (3/10) x $79,604 © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 26 Q6: Single- versus Dual-Rate Allocation جودزم لدعم لباقم صيصخت •In single-rate allocation, each cost pool includes fixed and variable costs. فيلاكتلل عمجت لك لمشي ،دحاولا لدعملا تاصصخم يفوةريغتمو ةتباث فيلاكت. •In dual-rate allocation, fixed and variable costs are in separate cost pools. ةتباثلا فيلاكتلا نوكت ،لدعملا جودزملا صيصختلا يفوفيلاكتلل ةلصفنم تاعومجم يف ةريغتملاو. •Both methods can be employed with the direct, step-down, or reciprocal methods. ،ةرشابم بيلاسأ عم نيتقيرطلا اتلك مادختسا نكميوةلدابتم وأ ،ىحنت. •The prior three examples used the single-rate allocation method. دحاو لدعمب صيصختلا ةقيرط ةقباسلا ةثلاثلا ةلثملأا تمدختساو. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 27 Q6: Single- versus Dual-Rate Example Philco has decided to use the direct method and allocate variable Accounting costs based on the number of transactions and fixed Accounting costs based on the number of employees. The Info Systems variable costs will be allocated based on the number of service requests and fixed costs will be allocated based on the number of computers. The required information is presented below. Now perform the allocation… © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 28 Q6: Single- versus Dual-Rate Example •Support costs need to be considered when evaluating decisions such as make/buy, keep/drop, special order, and constrained resource رظنلا يغبنيو لعج لثم تارارقلا مييقت دنع معدلا فيلاكت يف / ىلع ظافحلاو ،ءارش /ةديقم دراوملاو ،صاخ رمأ ،طاقسإ •Necessary to isolate relevant support costs نمةلصلا تاذ معدلا فيلاكت لزع يرورضلا –This may not be the same as the allocated support costs ةصصخملا معدلا فيلاكت سفن وه اذه نوكي لا دقو –For example, outsourcing an operating department may not result in a reduction in support department costs ىلع ىلإ ليغشتلا ةرادإ يف ةيجراخ رداصمب ةناعتسلاا يدؤي لا دق ،لاثملا ليبسمعدلا ةرادإ فيلاكت يف ضافخنا © John Wiley & Sons, 2011 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 2e Slide # 29 Q7: Decision Making with Support Costs معدلا فيلاكت عم رارقلا ذاختا •Transfer prices should be set to motivate efficient use of the support department resources ةرادإ دراومل لاعفلا مادختسلاا زيفحتل ليوحتلا راعسأ ديدحت يغبنيومعدلا –If transfer price is set too high, user departments may outsource the service ةمدخلا ةيجراخ رداصمب ةناعتسلاا مدختسملا تارادلإا نكمي ،ادج ةيلاع ليوحتلا رعس نييعت مت اذإ –If transfer price is set too low, user departments may utilize the support department inefficiently ةدافتسلاا مدختسملا تارادإ نكمي ،ادج ةضفخنم ليوحتلا رعس نييعت مت اذإلاعف ريغ لكشب معدلا مسق نم •The best transfer pricing approach is the Opportunity Cost approach صرفلا ةفلكت جهن وه ليوحتلا ريعست جهن لضفأ –Each department is charged an amount that reflects the value of any opportunities forgone by not using the service for its next best alternative use. لضفلأ ةمدخلا مادختسا مدع لبق نم اهنع لزانتم صرف يأ ةميق سكعي غلبم مسق لك ليمحت متيلبقملا اهل ليدب مادختسا. –This is often difficult in practice so most companies use a cost based or market based transfer pricing policy مظعم نإف كلذلو ،ايلمع ابعص كلذ نوكي ام اريثكوقوسلا وأ ةفلكتلا ىلع ةمئاقلا ليوحتلا ريعست ةسايس مدختست تاكرشلا © John Wiley & Sons, 2011 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 2e Slide # 30 Q7: Establishing Transfer Prices for Support Departments ةدناسملا تارادلإا لقن راعسأ ءاشنإ © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 31 Q7: Estimated versus Actual Support Costs and Rates تلادعملاو يلعفلا معدلا فيلاكت لباقم ريدقتلا A department’s allocation of support department costs معدلا مسق فيلاكت نم مسق صيصخت the allocation rate the department’s consumption of the allocation base = x Either of these could be estimated or actual. ايلعف وأ امهنم يأ ريدقت نكمي. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 32 Q7: Estimated versus Actual Support Costs and Rates تلادعملاو يلعفلا معدلا فيلاكتو لباقم ريدقتلا the allocation rate the department’s consumption of the allocation base x Using actual rates and actual consumption provides the best measure of the cost of support services; it is the most accurate but the least timely. ةفلكتل سايقم لضفأ يلعفلا كلاهتسلااو ةيلعفلا تلادعملا مادختسا رفويوبسانملا تقولا لقأ نكلو ةقد رثكلأا وه ؛معدلا تامدخ. The purpose of the cost allocation will determine whether actual or estimated rates, and actual or estimated consumption, should be used. ةيلعفلا تلادعملا مادختسا يغبني ناك اذإ ام فيلاكتلا صيصخت نم ضرغلا ددحيوردقملا وأ يلعفلا كلاهتسلااو ةردقملا وأ. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 33 Q7: Estimated versus Actual Support Costs and Rates فيلاكت؟ةيلعفلا لباقم ةردقملا تلادعملاو معدلا •Actual rates and consumption may be required for some types of government contracts. كانه نوكت دقوةيموكحلا دوقعلا عاونأ ضعبل كلاهتسلااو ةيلعفلا تلادعملا ىلإ ةجاح. •Most federal grants to educational institutions allow the use of estimates. تاسسؤملل ةيداحتلاا حنملا مظعم حمستوتاريدقتلا مادختساب ةيميلعتلا. •Using an actual rate means that support service users are affected by نورثأتي معدلا ةمدخ يمدختسم نأ يلعفلا لدعملا مادختسا ينعي •inefficiencies of support department managers معدلا مسق ءاردم ةءافك مدع •changes in the consumption of support services by other users نيرخآ نيمدختسم لبق نم معدلا تامدخ كلاهتسا يف تاريغتلا © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 34 Q7: Other Common Cost Allocation Methods ىرخلأا ةكرتشملا فيلاكتلا صيصخت قرط •Under the stand-alone method, a common cost is allocated based on information about the users’ consumption of the cost. ىلإ ادانتسا ةكرتشم ةفلكت صيصخت متي ،اهتاذب ةمئاقلا ةقيرطلا بجومبوةفلكتلل نيمدختسملا كلاهتسا نع تامولعم. •Under the incremental cost allocation method, a “primary user” is allocated the bulk of the common cost and the secondary user is allocated only the increment in cost that it caused. صصخي ،ةيفاضلإا فيلاكتلا صيصخت ةقيرط راطإ يفو" لمعتسملايسيئرلا " ةدايزلا طقف يوناثلا لمعتسملا صصخيو ،ةكرتشملا ةفلكتلا نم ربكلأا ءزجلااهببست يتلا ةفلكتلا يف. •Other cost allocation purposes may require the allocation to صيصختلا ىرخلأا فيلاكتلا صيصخت ضارغأ بلطتت دقو •be perceived as “fair” اهنأ ىلع اهيلإ رظني"ةلداع" •be based on the user’s “ability to bear” the cost ىلإ دنتسي نأ"لمحت ىلع ةردقلا "ةفلكتلا مدختسملا © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 35 Q7: Stand-Alone versus Incremental Cost Allocation Methods Example Leslie has a job interview with Big Co. next month in New York City. Her plane ticket cost $300, and she will need to spend $125/night for 2 nights in a hotel. She estimates that she will spend $50 in cab fares and $50 for food. Big Co. has promised to reimburse her actual costs. After this trip was arranged, Small Co., also located in New York City, called her for an interview. If she interviews with Small Co. while she’s there, she will spend an additional $125 for another night at a hotel, and another estimated $40 in cab fares and food. Think of at least two ways to allocate Leslie’s travel costs using the stand-alone method. Discuss the merits of each. 1. Compute the total cost of the trip and divide it by 2, since there are 2 interviews. 2. Compute the total cost of the trip and allocate 2/3 of it to Big Co. and 1/3 to Small Co. since she is spending 2 of the 3 nights in NYC for the Big Co. interview. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 36 Q7: Stand-Alone versus Incremental Cost Allocation Methods Example Perform the calculations for your two versions of the cost allocation under the stand-alone method. Then allocate the travel costs using the incremental cost allocation method. Which is more appropriate? Why? If shared equally, then this is $407.50 for each company; if Big Co. is allocated 2/3 of the cost then $543.33 is allocated to Big Co. and $271.67 is allocated to Small Co. Estimated total costs: Plane ticket $300 Hotel 375 Cab fares & food 140 Total $815 Under the incremental cost allocation method, Big Co. is most likely to be considered the primary user. Since Leslie’s budgeted travel costs were $300 + $250 + $50 + $50 = $650 before she was offered the Small Co. interview, Big Co. is allocated $650 and Small Co. is allocated $815 - $650 = $165. © John Wiley & Sons, 2005 Chapter 8: Measuring and Assigning Support Department Costs Eldenburg & Wolcott’s Cost Management, 1e Slide # 37 Q7: Fixed Price versus Cost-Based Contracts •Under fixed price contracts, vendors provide products or services for a specified price. مدقي ،ةتباثلا راعسلأا دوقع بجومبوددحم رعسب تامدخ وأ تاجتنم نوعئابلا. •Under cost-based contracts, the price is computed based on the actual cost of the products or services. ىلع رعسلا بسحي ،ةفلكتلا ىلع ةمئاقلا دوقعلا بجومبوتامدخلا وأ تاجتنملل ةيلعفلا ةفلكتلا ساسأ. •may be necessary for research & new product development ثوحبلل ةيرورض نوكت دقةديدجلا تاجتنملا ريوطتو •ةديدجلا تاجتنملا ريوطتو ثوحبلل ةيرورض نوكت دق •vendors are not motivated to control costs فيلاكتلا ىلع ةرطيسلل عفاود مهيدل سيل ةعابلا •vendors may be motivated to inappropriately allocate common costs نوكي دقبسانم ريغ لكشب ةكرتشملا فيلاكتلا صيصختل نيعئابلل عفادلا © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 1 Cost Management Measuring, Monitoring, and Motivating Performance Alawi Alshakhouri 140069328 Chapter 9 JOINT PRODUCT AND BY-PRODUCT COSTING جتنملا ةيوناثلا ةفلكتلاو كرتشملا جتنملا © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 2 Chapter 9: Joint Product and By-Product Costing اعيبم لقلااو كرتشملا جتنملا ةفلكت Learning objectives •Q1: What is a joint process, and what is the difference between a by-product and a main product? يعرفلا جتنملا نيب قرفلا وه امو ،ةكرتشملا ةيلمعلا يه ام؟يسيئرلا جتنملاو •Q2: How are joint costs allocated? س2 :؟ةكرتشملا فيلاكتلا صيصخت متي فيك •Q3: What factors are considered in choosing a joint cost allocation method? س3 : فيلاكتلا عيزوت ةقيرط رايتخا دنع رابتعلاا يف ذخؤت يتلا لماوعلا يه ام؟ةكرتشملا •Q4: What information is relevant for deciding whether to process a joint product beyond the split-off point? س4 : ناك اذإ ام ديدحتل ةلصلا تاذ تامولعملا يه ام؟ماسقنلاا ةطقن جراخ كرتشم جتنم ةجلاعم يغبني •Q5: What methods are used to account for the sale of by-products? س5 :؟ةيوناثلا تاجتنملا عيب باسح يف ةمدختسملا بيلاسلأا يه ام •Q6: How does a sales mix affect joint cost allocation? س6 : جيزم رثؤي فيك؟ةكرتشملا فيلاكتلا عيزوت ىلع تاعيبملا •Q7: How do joint cost allocations affect decisions and managerial incentives? ؟ةيرادلإا زفاوحلاو تارارقلا ىلع ةكرتشملا فيلاكتلا تاصصخم رثؤت فيك © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 3 Q1: Joint Processes and Costs فيلاكتلاو ةكرتشملا تايلمعلا •Joint products that have minimal sales value compared to the main product are called by-products. تاجتنملا ىمستو لبق نم يسيئرلا جتنملاب ةنراقم تاعيبملا ةميق نم ىندلأا دحلا اهيدل يتلا ةكرتشملاتاجتنملا. •A process that yields one or more products is called a joint process. ةكرتشم ةيلمع رثكأ وأ دحاو جتنم جتنت يتلا ةيلمعلا ىمستو. •The products are called joint products. ةكرتشملا تاجتنملا تاجتنملا ىمستو. •The costs of the process are called joint costs. فيلاكتلا ةيلمعلا فيلاكت ىمستوةكرتشملا. •The split-off point is the stage in the joint process where the separate products become identifiable. يف ةلحرملا يه ماسقنلاا ةطقنوديدحتلل ةلباق ةلصفنملا تاجتنملا حبصت ثيح ةكرتشملا ةيلمعلا. •Joints costs are incurred prior to the split-off point. لبق لصاوفلا فيلاكت دبكت متيماسقنلاا ةطقن. •Costs incurred past split-off are separable costs. يضاملا يف ةدبکتملا فيلاکتلا نإلصفلل ةلباق فيلاکت يه ةمسقملا. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 4 Q1: Joint Processes and Costs فيلاكتلاو ةكرتشملا تايلمعلا Sawdust بشخلا ةراشن Bark رجشلا ءاحل Planks حاولأ Joint costs include DM, DL & Overhead. Joint products ةكرتشملا تاجتنملا Wall paneling طئاحلا ةحول The costs of processing planks further are separable costs. فيلاكت نأ امك فيلاكت يه حاوللأا زيهجتلصفلل ةلباق. If sawdust sells for a relatively minimal amount, it is a byproduct. ةراشن تناك اذإ يهف ،ايبسن ةليئض ةيمكب عيبت بشخلااعيبم لقلأا جتنملا. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 5 Q2: Methods of Allocating Joint Costs س2 :ةكرتشملا فيلاكتلا داجيا قرط •Physical output methods يئايزيفلا جاتنلاا قرط •Can be used only when joint products are measured the same way (e.g. pounds or feet). ةقيرطلا سفنب ةكرتشملا تاجتنملا سايق متي امدنع طقف اهمادختسا نكمي(تيفلا وأ لطرلا لاثملا ليبس ىلع.) •Market-based methods قوسلا ىلع ةمئاقلا قرطلا •Sales value at split-off method ماسقنلاا ةقيرط يف تاعيبملا ةميق •Often used when all products sold at split-off. عيمج دنع مدختست ام ابلاغماسقنلاا يف عابت يتلا تاجتنملا. •Net realizable value (NRV) method ققحتلل ةلباقلا ةميقلا يفاص •NRV = Final selling price – Separable costs. فرن = يئاهنلا عيبلا رعس- لصفلل ةلباق فيلاكت. •Constant gross margin (GM) NRV method يلامجلإا حبرلا شماهةقيرط •The two NRV methods can be used when some products are processed past split-off. ةجلاعم متت امدنع ةيئاهنلا ريياعملل نيتقيرط مادختسا نکميماسقنلاا دعب تاجتنملا ضعب. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 6 Q2: Physical Volume Method Example Pleasing Peaches grows peaches and processes three different peach products that are sold to a canning company. The pounds produced for each product, and the selling price per pound, is given below. The joint costs of processing the 280,000 pounds of products were $70,000. Allocate the joint costs to each product using the physical volume method. خوخلا رورسلا ومني خوخلا جلاعيو ةثلاث تاجتنم خوخلا ةفلتخملا يتلا متي اهعيب ىلإ ةكرش بيلعت. درتو هاندأ تاهينجلا ةجتنملا لكل ،جتنم رعسو عيبلا لكل لطر. تغلبو فيلاكتلا ةكرتشملا زيهجتل 000 280 هينج نم تاجتنملا 000 70 رلاود. صيصخت فيلاكتلا ةكرتشملا لكل جتنم مادختساب ةقيرط مجح ةيداملا. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 7 Q2: Sales Value at Split-Off Method Example Allocate the joint costs of $70,00 to each of Pleasing Peaches products using the sales value at split-off method. داجيا فيلاكتلا ةكرتشملا نم 70،00 $ لكل نم تاجتنملا خوخلا ءاضرا مادختساب ةميق تاعيبملا ىلع ةقيرط ماسقنلاا. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 8 Q2, 6: Compare the Physical Volume and Sales Value at Split-Off Methods ةمسقملا قرطلا ىلع تاعيبملاو يلعفلا دلجملا ةميق نراق Compute the gross margin for each product for each of the two allocation methods. Discuss the differences between the two methods. باسح شماه حبرلا يلامجلإا لكل جتنم لكل نم نيتقيرطلا صيصخت. شقان تافلاتخلاا نيب نيتقيرطلا. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 9 Q2, 6: Compare the Physical Volume and Sales Value at Split-Off Methods Compute the gross margin ratio (GM/Sales) for each product under both of the methods and discuss. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 10 Q2: Net Realizable Value (NRV) Method Example Pleasing Peaches could process each of its three products beyond split off. It could can the peach halves itself, make the peach slices into frozen peach pie, and make juice out of the peach purée. The retail value of the new products and the separable costs for the additional processing are given below. Compute the joint costs allocated to each of the products using the NRV method. نكمي خوخلا ءاضرا ةجلاعم لك نم اهتاجتنم ةثلاثلا دعب ماسقنلاا. نكمي نأ خوخلا فصن ،هسفن لعجو حئارش خوخلا يف ةريطف خوخلا ،ةدمجملا لعجو ريصع نم خوخلا هيروب. درتو هاندأ ةميق ةئزجتلا تاجتنملل ةديدجلا فيلاكتلاو ةلباقلا لصفلل ةجلاعملل ةيفاضلإا. باسح فيلاكتلا ةكرتشملا ةصصخملا لكل نم تاجتنملا مادختساب ةقيرط نا را يف. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 11 Q2: Constant GM NRV Method •Under the constant GM NRV method, all products are allocated joint costs to achieve the same gross margin ratio (GM%). •First compute overall gross margin and GM%: GM = Revenue – Joint costs – Separable costs GM% = GM/Sales •All products end up with the same gross margin ratio; for each product solve for allocated joint costs: يلامجلإا حبرلا شماه ةبسن سفن عم فاطملا ةياهن يف تاجتنملا عيمج . لكلةصصخملا ةكرتشملا فيلاكتلل لح جتنم: Final sales value – joint costs – separable costs = GM ةيئاهنلا تاعيبملا ةميق- ةكرتشملا فيلاكتلا- لصف فيلاكت=ما يج •Then compute the GM for each product: GM = Final sales value x GM% © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 12 Q2: Constant GM NRV Method Example Compute the joint costs that Pleasing Peaches would allocate to each of the products using the constant GM NRV method. First compute the overall GM and GM ratio: GM = $350,000 - $163,000 - $70,000 = $117,000 GM% = $117,000/$350,000 = 33.43% Values are rounded as appropriate. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 13 Q2, 6: Compare the NRV and Constant GM NRV Methods Compute the gross margin (GM) and the gross margin ratio (GM%) for each product under NRV method. Compare this to the results of the constant GM NRV method and discuss. Values are rounded as appropriate. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 14 Q3: Choosing a Joint Cost Allocation Method •Allocated joint costs should not be used in decision making. ةكرتشملا فيلاكتلا مادختسا يغبني لاورارقلا عنص يف ةصصخملا. •Still, avoid a method that shows one product to be unprofitable. حبرم ريغ ادحاو اجتنم نأ رهظت ةقيرط بنجت ،كلذ عمو. •Under the physical volume method, the product with the greatest relative physical volume is allocated the most joint costs, regardless of product’s sales value. مجحلا ةقيرطل اقفو فيلاكتلا ىلع يبسن يلعف مجح ربكأ ىلع يوتحي يذلا جتنملا عيزوت متي ،يئايزيفلاجتنملا تاعيبم ةميق نع رظنلا ضغب ،اعويش رثكلأا. •Both of the NRV methods allocate joint costs based on the products’ “ability to bear the cost”. ةميقلا قئارط نم لك صصختو لمحت ىلع تاجتنملا ةردق ساسأ ىلع ةكرتشملا فيلاكتلا رطاخملل ةينطولافيلاكتلا. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 15 Q4: Sell or Process Further Decisions •Companies often can choose to sell a product at the split-off point or to process it further. ريثك يف تاكرشلل نكميكلذك اهتجلاعمل وأ ماسقنلاا ةطقن يف جتنم عيبل راتخت نأ نايحلأا نم. •Compare the incremental revenue of processing further to the product’s separable costs. تاداريلإا ةنراقمجتنملل لصفلل ةلباقلا فيلاكتلا نم ديزم ةجلاعم نم ةيفاضلإا. •Incremental revenue of processing further = Final sales value – Sales value at split-off ةيفاضلإا تاداريلإا كلذك ةجلاعملل = ةيئاهنلا تاعيبملا ةميق- ماسقنلاا دنع تاعيبملا ةميق •Process further only when the incremental revenue exceeds the separable costs. زواجتت امدنع اضيأ ةيلمعلا ديزتولصفلل ةلباقلا فيلاكتلا ةيفاضلإا تاداريلإا. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 16 Q4: Sell or Process Further Example Peg’s Plastic Products makes the molded plastic parts for three model car kits, A, B & C from a joint production process. The joint costs of this process are $150,000. In each case, Peg could decide to make the entire kit rather than just the plastic parts. Information about the sales values and separable costs for each kit is given below. Determine which kits Peg should sell at the split-off point and which she should process further. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 17 Q5: Accounting for By-Products •When by-products have no sales value, there is no reason to account for them. تاجتنملا امدنعمهل باسحل ببس كانه سيل ،تاعيبملا ةميق اهل سيل ةيوناثلا. •Otherwise, there are two accounting methods available: ناتحاتم ناتيبساحم ناتقيرط كانه ،لاإو: •Recognize by-product value at time of production جاتنلإا تقو يف جتنملا ةميق فيرعت •Recognize by-product value at time of by-product sale يف يعرفلا جتنملا ةميق فيرعتةيوناثلا تاجتنملا عيب تقو © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 18 Q5: Recognize By-Product Value at Time of Production •This method is also known as the offset approach or the NRV approach. يف را نا جهن وأ ةحازلإا جهنب اضيأ ةقيرطلا هذه فرعتو. •Joint cost of the main products is reduced by the NRV of the by-products, even if by-products are not yet sold. ضيفخت متي تاجتنملا عيب متي مل ول ىتح ،يف را نا للاخ نم ةيسيئرلا تاجتنملل ةكرتشملا ةفلكتلادعب ةيوناثلا. •NRV of the by-products is kept in ending inventory until sold. يف ةيوناثلا تاجتنملا نم تافلخملل يعيبطلا نوزخملاب ظافتحلاا متيعابت ىتح نوزخملا ءاهنإ. •At sale of by-product, ending inventory is reduced; there is no gain/loss on sale. دجوي لا ؛يئاهنلا نوزخملا ضيفخت متي ،ةيوناثلا تاجتنملا عيب دنع حبر /عيبلا نم ةراسخ. •This method allows managers to control by-products. نيريدملل حمست ةقيرطلا هذهةيوناثلا تاجتنملا ىلع ةرطيسلل. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 19 Q5: By-Product Value Recognized at Time of Production Example SJ Enterprises produces a main product and one by-product in a joint process. The joint costs totaled $480,000. The main product sells for $10/unit and the by-product sells for $1/unit. Information about the production and sales of the 2 products is given below. Use the NRV method to compute the production cost per unit for the main product. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 20 Q5: By-Product Value Recognized at Time of Production Example Prepare an income statement for SJ Enterprises and compute the costs attached to ending inventory using the NRV method, assuming that non-manufacturing costs totaled $250,000. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 21 Q5: Recognize By-Product Value at Time of Sale •This method is also known as the Realized Value Approach or the RV Approach. يف را جهن وأ ةققحملا ةميقلا جهنب اضيأ ةقيرطلا هذه فرعتو. •Joint cost of the main products is not reduced by the NRV of the by-products, regardless if by-products are sold. متي لا تافلخملل ةينطولا ةميقلا للاخ نم ةيسيئرلا تاجتنملل ةكرتشملا ةفلكتلا ضيفختعابت ةيوناثلا تاجتنملا تناك اذإ امع رظنلا ضغب ،ةيوناثلا. •NRV of the by-products is not kept in ending inventory. نوزخملا ءاهنإ دنع ةيوناثلا تاجتنملل ةققحملا ةميقلا يفاصلاب ظافتحلاا متي لا. •At sale of by-product, either Other Income is recorded or Cost of Goods Sold is reduced. متي ،يعرفلا جتنملا عيب دنعةعابملا عئاضبلا ةفلكت ضيفخت متي وأ ىرخلأا تاداريلإا امإ ليجست. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 22 Q5: By-Product Value Recognized at Time of Sale Example SJ Enterprises produces a main product and one by-product in a joint process. The joint costs totaled $480,000. The main product sells for $10/unit and the by-product sells for $1/unit. Information about the production and sales of the 2 products is given below. Use the RV method to compute the production cost per unit for the main product. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 23 Q5: By-Product Value Recognized at Time of Sale Example Prepare an income statement for SJ Enterprises and compute the costs attached to ending inventory using the RV method, assuming that non-manufacturing costs totaled $250,000. By-product sales is recorded as other income. © John Wiley & Sons, 2005 Chapter 9: Joint Product and By-Product Costing Eldenburg & Wolcott’s Cost Management, 1e Slide # 24 Q7: Uses & Limitations of Joint Cost Information ةكرتشملا فيلاكتلا تامولعملا نم دويقلاو تامادختسلاا •Joint cost information is required for financial statement & tax return preparation only if production does not equal sales. (inventory and cost of goods sold). • طقف بئارضلا دادعإو ةيلاملا تانايبلا دادعلإ ةكرتشملا ةفلكتلا تامولعم بلطتيتاعيبملا يواسي لا جاتنلإا ناك اذإ. •Allocated joint costs are irrelevant for most decisions, especially regarding individual products ةكرتشملا فيلاكتلا تاجتنملاب قلعتي اميف ةصاخ ،تارارقلا مظعمب ةلص تاذ تسيل ةصصخملاةيدرفلا •Joint cost information should not be used to make product mix decisions. فيلاكتلا تامولعم مادختسا مدع يغبنيوتاجتنملا جيزم نأشب تارارق ذاختلا ةكرتشملا. © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 1 Cost Management Measuring, Monitoring, and Motivating Performance Alawi Alshakhouri 140069328 Chapter 10 Static and Flexible Budgets ةنرملاو ةتباثلا تاينازيملا © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 2 Chapter 10: Static and Flexible Budgets Learning objectives •Q1: How do budgets contribute to the strategic management process? •Q2: What is a master budget and how is it prepared? يه ام؟اهدادعإ متي فيكو ةيسيئرلا ةينازيملا •Q3: What are flexible budgets and how can they be used for sensitivity analysis? •Q4: What are budget variances and how are they calculated? يه ام؟اهباسح متي فيكو ةينازيملا يف قورفلا •Q5: How do behavioral tensions influence the budgeting process? •Q6: What approaches exist for addressing the problems of traditional budgeting? © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 3 Q1: Budgets, Strategies, & Operating Plans ،تاينازيملاليغشتلا ططخو ،تايجيتارتسلاا •A budget is يه ةينازيملا •A formalized financial plan. ةيمسر ةيلام ةطخ. •A translation of an organization’s strategies. مجرتتةمظنملا تايجيتارتسا. •A method of communicating. لصاوت ةقيرط. •A way to define areas of responsibility and decision rights. ذاختا قوقحو ةيلوؤسملا تلااجم ديدحتل ةقيرطرارقلا. •The budget cycle is the series of sequential steps followed to create and use budgets. تاوطخلا نم ةلسلس يه ةينازيملا ةروداهمادختساو تاينازيملا ءاشنلإ اهعابتا متي يتلا ةعباتتملا. © John Wiley & Sons, 2011 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 2e Slide # 4 Q1: Budgets & Strategic Management Process ةيجيتارتسلاا ةرادلإا ةيلمعو تاينازيملا •Budgeting process begins with the organizational vision, core competencies, and risk appetite ةينازيملا دادعإ ةيلمع أدبترطاخملا لمحت ىلع ةردقلاو ،ةيساسلأا تاءافكلاو ،ةيميظنتلا ةيؤرلاب •Organizational strategies designed to achieve the vision will drive the capital expenditures and long term financing plans تاقفنلا عفد ىلإ ةيؤرلا هذه قيقحت ىلإ ةيمارلا ةيميظنتلا تايجيتارتسلاا يدؤتسولجلأا ليوطلا ليومتلا ططخو ةيلامسأرلا •Operating plans are then created in line with the organizational strategies عم ىشامتي امب ليغشتلا ططخ ءاشنإ متي مثةيميظنتلا تايجيتارتسلاا •Actual results must be monitored, measured, and analyzed compared to budgeted plans اهليلحتو اهسايقو ةيلعفلا جئاتنلا دصر بجيوةينازيملا يف ةجردملا ططخلاب ةنراقم © John Wiley & Sons, 2011 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 2e Slide # 5 Q1: Budgets & Levers of Control تاينازيملا &ةرطيسلا ديلاقمو Belief Systems داقتعلاا مظن •Communicates organizational strategies and goals • تايجيتارتسلاا لصويةيميظنتلا فادهلأاو •Motivates managers to plan in advance and coordinate activities نيريدملا زفحي قيسنتو امدقم طيطختلا ىلعةطشنلأا Boundary Systems دودحلا ةمظنأ •Authorizes employees to engage in planned activities and spend within budget limits يف ةكراشملل نيفظوملل نذأي قافنلإاو ةططخملا ةطشنلأاةينازيملا دودح نمض •Ensures sufficient cash flow for financial viability نم فاك يدقن قفدت نامضةيلاملا ىودجلا لجأ Interactive Control Systems ةيلعافتلا مكحتلا ةمظنأ •Utilize variances to identify opportunities and threats to the business قورفلا مادختسا تاديدهتلاو صرفلا ديدحتلةيراجتلا لامعلأا هجاوت يتلا •Revaluate strategies and operating plans as conditions changes مييقت ةداعإ ططخو تايجيتارتسلاافورظلا ريغت عم ليغشتلا Diagnostic Control Systems ةيصيخشتلا مكحتلا ةمظنأ •Assign responsibility and reward employees for achieving budget targets ةيلوؤسملا نييعت قيقحتل نيفظوملا ةأفاكموةينازيملا فادهأ •Motivate managers to provide good estimates and use resources appropriately زيفحت تاريدقت ميدقت ىلع نيريدملا لكشب دراوملا مادختساو ةديجبسانم © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 6 Q2: Master Budgets ةيسيئرلا تاينازيملا •A master budget is يه ةيسيئرلا ةينازيملا •A comprehensive plan for the upcoming accounting period. ةمداقلا ةيبساحملا ةرتفلل ةلماش ةطخ. •Usually prepared for a one-year period. ةدمل اهدادعإ متي ام ةداعوةدحاو ةنس. •Is based on a series of budget assumptions. ةعومجم ىلإ دنتسيوةينازيملا تاضارتفا نم. •The master budget consists of several subsidiary budgets, in two categories: ةدع نم ةيسيئرلا ةينازيملا فلأتتونيتئف يف ،ةيعرف تاينازيم: •Operating budgets. ليغشتلا تاينازيم. •Financial budgets. ةيلاملا تاينازيملا. © John Wiley & Sons, 2011 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 2e Slide # 7 Q2: Operating Budgets © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 8 Q2: Operating Budgets ليغشتلا تاينازيم •Revenue budget حابرلأا ةينازيم •Production budget جاتنإ ةينازيم •Direct materials budget ةرشابملا داوملا ةينازيم •Direct labor budget ةرشابملا لامعلا ةينازيم •Manufacturing overhead budget عينصتلل ةماعلا تاقفنلا ةينازيم •Inventory and cost of goods sold budget ةعابملا ةينازيملا ةفلكتو درجعلسلل •Support department budgets معدلا مسق تاينازيم •Budgeted income statement ةينازيملا يف جردملا لخدلا نايب The operating budget is created by preparing the following individual budgets, in this order: ةينازيم ءاشنإ متيبيترتلا اذه يف ،ةيلاتلا ةيدرفلا تاينازيملا دادعإ للاخ نم ليغشتلا: © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 9 Q2: Financial Budgets ةيلاملا تاينازيملا •Capital budget ةيلامسأرلا ةنزاوملا •Long-term financing budget ليومتلا ةينازيملجلأا ةليوط •Cash budget ةيدقنلا ةينازيملا •Budgeted balance sheet ةيمومعلا ةينازيملا •Budgeted statement of cash flows نايبةينازيملا يف ةيدقنلا تاقفدتلا The financial budget is created by preparing the following individual budgets, in this order: ءاشنإ متيبيترتلا اذه يف ،ةيلاتلا ةيدرفلا تاينازيملا دادعإ للاخ نم ةيلاملا ةينازيملا: © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 10 Stanley J, Inc., makes a tool used by auto mechanics that sells for $68/unit. It expects to sell 6,000 units in April and 7,000 units in May. Stanley J prefers to end each period with a finished goods inventory equal to 10% of the next period’s sales in units and a direct materials inventory equal to 20% of the direct materials required for the next period’s production. The company never has any beginning or ending work-in-process inventories. There were 400 units in finished goods inventory on April 1. Prepare the revenue and production budgets for April يلناتس لعجي ةادأ مدختست نم لبق اكيناكيم تارايسلا يتلا عيبت 68 $ / ةدحو. نمو عقوتملا نأ عيبت 6000 ةدحو يف ليربأ و 7000 ةدحو يف ويام. لضفي يلناتس J ءاهنإ لك ةرتف عم درج علسلا ةزهاجلا يواسي 10٪ نم تاعيبم ةرتفلا ةمداقلا يف تادحو درجو داوملا ةرشابملا يواسي 20٪ نم داوملا ةرشابملا ةبولطملا جاتنلإ ةرتفلا ةلبقملا. ةكرشلا سيل اهيدل يأ ةيادب وأ ءاهنإ تانوزخملا لمعلا يف ةيلمعلا. ناك كانه 400 ةدحو يف نوزخم علسلا ةمات عنصلا يف 1 ليربأ. دادعإ تاينازيم تاداريلإا جاتنلإاو رهشل ليربأ. Q2: Operating Budget Example ليغشتلا ةينازيمل لاثم © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 11 Stanley J’s product uses 0.3 pounds of direct material per unit, at a cost of $4/lb. There were 220 lbs. of direct material on hand on April 1. Assume that budgeted production for May is 6,500 units. Prepare the direct materials budget for April. Q2: Operating Budget Example © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 12 Stanley J’s product uses 0.2 hours of direct labor at a cost of $12/hr. Prepare the direct labor budget for April. Q2: Operating Budget Example © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 13 Stanley J’s budgeted fixed manufacturing overhead for April is $167,000, and variable manufacturing overhead is budgeted at $6 per direct labor hour. Prepare the manufacturing overhead budget for April. Q2: Operating Budget Example © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 14 Assume that Stanley J’s April 1 direct materials inventory had a cost of $1,560. Prepare the April ending inventories budget for direct materials. Q2: Operating Budget Example © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 15 Prepare the April ending inventories budget for finished goods. Q2: Operating Budget Example © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 16 Assume that Stanley J’s April 1 finished goods inventory had a cost of $12,146. Prepare the cost of goods sold budget for April. Q2: Operating Budget Example © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 17 Stanley J’s budget for April includes $22,000 for administrative costs, $34,000 for fixed distribution costs, $18,000 for research and development, and $13,000 for fixed marketing costs. Additionally, the budgeted variable costs for distribution are $0.75/unit sold and the budgeted variable costs for marketing are 4% of sales revenue. Prepare the support department budget for April. Q2: Operating Budget Example © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 18 Suppose that Stanley J’s income tax rate is 28%. Prepare the budgeted income statement for April. Q2: Operating Budget Example © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 19 Q3: Budget Variances ةينازيملا قورف •Managers compare actual results to budgeted results in order to لجأ نم ةينازيملا يف ةجردملا جئاتنلاب ةيلعفلا جئاتنلا نوريدملا نراقي •Monitor operations, and و ،تايلمعلا ةبقارم •Motivate appropriate performance. بسانملا ءادلأا زيفحت. •Differences between budgeted and actual results are called budget variances. ةجردملا جئاتنلا نيب تافلاتخلاا ىمستوةينازيملا يف قورفلا ةيلعفلا جئاتنلاو ةينازيملا يف. •Variances are stated in absolute value terms, and labeled as Favorable or Unfavorable. ىلع فنصتو ،ةقلطملا ةميقلاب قورفلا رهظتوةيتاؤم ريغ وأ ةيتاؤم اهنأ. © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 20 Q3: Budget Variances ةينازيملا قورف •Reasons for budget variances are investigated. ةينازيملا يف قورفلا بابسأ يف قيقحتلا يرجيو. •The investigation may find: يلي ام قيقحتلا دجي دقو: •Inefficiencies in actual operations that can be corrected. اهحيحصت نكمي يتلا ةيلعفلا تايلمعلا يف روصقلا هجوأ. •Efficiencies in actual operations that can be replicated in other areas of the organization. يتلا ةيلعفلا تايلمعلا يف ةءافكلا هجوأةمظنملا نم ىرخأ تلااجم يف اهراركت نكمي. •Uncontrollable outside factors that require changes to the budgeting process. تارييغت بلطتت اهيلع ةرطيسلا نكمي لا ةيجراخ لماوعةينازيملا عضو ةيلمع يف. © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 21 Q4: Static Budgets ةتباثلا ةينازيملا •A budget prepared for a single level of sales volume is called a static budget. نم دحاو ىوتسمل ةدعملا ةينازيملا ىمستوةتباث ةينازيم تاعيبملا مجح. •Static budgets are prepared at the beginning of the year. ةنسلا ةيادب يف ةتباث تاينازيم دادعإ متيو. •Differences between actual results and the static budget are called static budget variances. ىمستوةينازيملا يف ةتباثلا قورفلا ةتباثلا ةينازيملاو ةيلعفلا جئاتنلا نيب تافلاتخلاا. © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 22 Q4: Flexible Budgets ةنرملا تاينازيملا •A budget prepared for a multiple levels of sales volume is called a flexible budget. ةدعملا ةينازيملا ىمستةنرم ةينازيم تاعيبملا مجح نم ةددعتم تايوتسمل. •Flexible budgets are prepared at the beginning of the year for planning purposes and at the end of the year for performance evaluation. يف ةنرم تاينازيم دادعإ يرجيوءادلأا مييقتل ةنسلا ةياهن يفو طيطختلا ضارغلأ ةنسلا ةيادب. •Differences between actual results and the flexible budget are called flexible budget variances. ىمستوةينازيملا يف ةنرملا قورفلا ةنرملا ةينازيملاو ةيلعفلا جئاتنلا نيب تافلاتخلاا. © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 23 Q3,4: Flexible Budget Example Tina’s Trinkets is preparing a budget for 2006. The budgeted selling price per unit is $10, and total fixed costs for 2006 are estimated to be $5,000. Variable costs are budgeted at $3/unit. Prepare a flexible budget for the volume levels 1,000, 1,100, and 1,200 units. موقتو ةكرش انيت ستيكنيرت دادعإب ةينازيم ماعل 2006. غلبيو رعس عيبلا يف ةينازيملا 10 ،تارلاود ردقيو عومجم فيلاكتلا ةتباثلا ماعل 2006 غلبمب 000 5 رلاود. غلبتو فيلاكتلا ةريغتملا يف ةينازيملا 3 تارلاود لكل ةدحو. دادعإ ةينازيم ةنرم تايوتسمل توصلا 1000، 1100، و 1200 ةدحو. © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 24 Q5: Static Budget Variances Example Suppose that Tina’s 2006 static budget was for 1,100 units of sales. The actual results are given below. Compute the static budget variances for each row and discuss. © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 25 Q5: Flexible Budget Variances Example Compute the flexible budget variances for Tina and discuss the results. Compare the flexible budget variances to the static budget variances on the prior page. باسح قورفلا ةنرم ةينازيملا ل انيت ةشقانمو جئاتنلا. ةنراقم قورفلا ةنرملا يف ةينازيملا قورفلاب ةتباثلا ةينازيملل يف ةحفصلا ةقباسلا. © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 26 Q5: Performance Evaluation ءادلأا مييقت •A static budget variance includes effects from output volume. جاتنلإا مجح نم تاريثأت ةتباثلا ةينازيملا نيابت نمضتي. •A flexible budget variance removes these output volume effects. هذه جتانلا مجح تاريثأت ةلازإ ىلإ ةينازيملا يف نرملا نيابتلا يدؤيو. •Other adjustments to the year-end flexible budget may be made for a fair performance evaluation, such as ىرخأ تلايدعت ءارجإ نکميولثم ،ءادلأل لداع مييقت ءارجلإ ماعلا ةياهن يف ةنرملا ةينازيملا یلع •Input price changes outside the control of the manager under evaluation مييقتلا ديق ريدملا ةرطيس جراخ تلاخدملا راعسأ يف تاريغتلا •Fixed cost increases outside the control of the manager under evaluation مييقتلا تحت ريدملا ةرطيس قاطن جراخ ةتباثلا فيلاكتلا ديزتو •Budgets used to evaluate performance and compensation can create behavioral tension يكولسلا رتوتلا قلخت نأ نكمي ضيوعتلاو ءادلأا مييقتل ةمدختسملا تاينازيملا •Participative budgeting – when managers who are responsible for the budgets prepare the budget forecasts ةيكراشتلا ةنزيملا- نوريدملا موقي امدنعةينازيملا تاعقوت دادعإب تاينازيملا نع نولوؤسملا –Can result in budgetary slack – when managers set targets so low that goals can be met easily (and bonuses achieved) ةينازيملا يف دوكرلا ىلإ يدؤي نأ نكمي- امدنع ةلوهسب فادهلأا قيقحت نكمي ثيحب ةضفخنم افادهأ نوريدملا عضي(تققحت يتلا تآفاكملاو) •Budget ratcheting – when top managers set targets ةينازيملا ديشرت- عضي امدنعفادهلأا نيريدملا رابك –If targets unachievable, this can result in employees having little motivation to meet targets ىدل ليئض زفاح دوجو مدع ىلإ كلذ يدؤي دقف ،قيقحتلل ةلباق ريغ فادهلأا تناك اذإوفادهلأا قيقحتل نيفظوملا •Organizations must watch for budget manipulation ةدهاشم تامظنملا ىلع بجيةينازيملا يف بعلاتلا © John Wiley & Sons, 2011 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 2e Slide # 27 Q5: Behavior Tensions in Budgeting ةنزاوملا دادعإ يف كولسلا تارتوت © John Wiley & Sons, 2011 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 2e Slide # 28 •Zero based budgets are prepared without using past information as justification. رربمك ةقباسلا تامولعملا مادختسا نود ةيرفصلا تاينازيملا دادعإ متي. •Rolling budgets are prepared frequently for overlapping time periods and actual results may be used to update the budget for the next period. دادعإ متيو ةينازيملا ثيدحتل ةيلعفلا جئاتنلا مادختسا نكميو ،ةلخادتم ةينمز تارتفل رركتم لكشب ةلوادتملا تاينازيملاةيلاتلا ةرتفلل. •Kaizen budgets plan cost reductions over time. عم فيلاكتلا ضفخ ةطخ تاينازيم نزيكتقولا رورم. •Activity based budgets use more cost pools and cost drivers. تاينازيملا مدختستةفلكتلا تاكرحمو ةفلكتلا تاعمجم نم ديزملا ةطشنلأا ىلع ةمئاقلا. •GPK and RCA budgets identify fixed and variable cost functions at the resource center level. ةريغتملاو ةتباثلا ةفلكتلا فئاظو هيا يس را و يك يب يج تاينازيم ددحتودراوملا زكرم ىوتسم ىلع. •Beyond budgeting uses external benchmarks to evaluate managers’ performance ةنزيملا جراخ :نيريدملا ءادأ مييقتل ةيجراخ ريياعم مدختسي Q6: Other Budgeting Approaches ىرخلأا ةينازيملا جهن © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 29 •Rolling budgets are prepared frequently for overlapping time periods and actual results may be used to update the budget for the next period. متيو ثيدحتل ةيلعفلا جئاتنلا مادختسا نكميو ،ةلخادتم ةينمز تارتفل رركتم لكشب ةلوادتملا تاينازيملا دادعإةيلاتلا ةرتفلل ةينازيملا. •Activity based budgets use more cost pools and cost drivers. تاينازيملا مدختستةفلكتلا تاكرحمو ةفلكتلا تاعمجم نم ديزملا ةطشنلأا ىلع ةمئاقلا. •Kaizen budgets plan cost reductions over time. فيلاكتلا ضفخ ةطخ تاينازيم نزيكتقولا رورم عم. •Extreme programming can be used to budget long-term projects that contain a large amount of uncertainty. ةينازيمل اهمادختسا نكمي ةفرطتملا ةجمربلانيقيلا مدع نم ةريبك ةيمك ىلع يوتحت يتلا لجلأا ةليوط عيراشملا. •Often used for information technology projects ايجولونكت عيراشمل مدختست ام ابلاغتامولعملا •Projects begin with little up-front planning يماملأا طيطختلا نم ليلقلا عم عيراشملا أدبت Q6: Other Budgeting Approaches © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 30 Q7: Cash Budgets ةيدقنلا تاينازيملا... •Cash budgets are prepared after the operating budgets. ليغشتلا تاينازيم دعب ةيدقنلا تاينازيملا دادعإ متيو. •The cash budgets include the following individual budgets: تاينازيملا ةيدقنلا تاينازيملا لمشتوةيلاتلا ةيدرفلا: •Cash receipts budget ةيدقنلا تاضوبقملا ةينازيم •Cash disbursements budget ةيدقنلا تاعوفدملا ةينازيم •Short-term borrowings and investments budget تارامثتسلاا ةينازيمو لجلأا ةريصق ضورقلا © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 31 Q7: Cash Budget Example ةيدقنلا ةينازيملا ىلع لاثم Bryce Manufacturing is preparing a cash budget for a new division that will begin operations on January 1, 2006. Bryce expects sales to be 40% cash and 60% on account, with 45% of credit sales are collected in the month of the sale. In the month after the sale, 50% of credit sales should be collected, with the remainder collected two months after the sale. Budgeted sales for the first three months are $100,000, $150,000 and $200,000. Prepare a cash receipts budget for the first three months of 2006. موقت سيارب غنيروتافونام دادعإب ةينازيم ةيدقن مسقل ديدج أدبي لمعلا هب يف 1 رياني 2006. عقوتتو ةكرش سيارب نأ نوكت تاعيبملا 40٪ ادقن و 60٪ ىلع ،باسحلا متيو عمج 45٪ نم تاعيبم نامتئلاا يف رهش عيبلا. يف رهشلا دعب ،عيبلا بجي عمج 50٪ نم تاعيبم ،نامتئلاا متيو عمج يقابلا دعب نيرهش نم عيبلا. تاعيبملا ةجردملا يف ةينازيملا رهشلأل ةثلاثلا ىلولأا يه 100،000 ،رلاود 150،000 $ و 200،000 رلاود. دادعإ ةينازيم تلااصيإ ةيدقن رهشلأل ةثلاثلا ىلولأا نم ماع 2006. © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 32 Q7: Cash Budget Example ةيدقنلا ةينازيملا ىلع لاثم Bryce Manufacturing budgets direct labor costs to be 30% of sales revenue and expects to pay this in the month the costs are incurred. Direct materials purchases will be on account, and paid as follows: 40% in the month of the purchase, 50% the following month, and 10% in the second month following the purchase. Budgeted direct material purchases for the first 3 months of 2006 are $20,000, $35,000 and $45,000. Compute the budgeted cash disbursements for direct materials and labor for the first 3 months of 2006. © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 33 Q7: Cash Budget Example ةيدقنلا ةينازيملا ىلع لاثم Bryce Manufacturing budgets other variable costs at 4% of sales revenue and will be paid in the month after the costs are incurred. Other budgeted fixed costs are $6,000 per month and will be paid in the month incurred. Prepare a cash disbursements budget for all costs, including direct materials and labor. © John Wiley & Sons, 2005 Chapter 10: Static and Flexible Budgets Eldenburg & Wolcott’s Cost Management, 1e Slide # 34 Q7: Cash Budget Example ةيدقنلا ةينازيملا ىلع لاثم Using the information from the prior slides, prepare a schedule of budgeted cash flows for Bryce Manufacturing’s new division for the first three months of 2006. مادختساب تامولعملا نم حئارشلا ،ةقباسلا دادعإو لودج ينمز تاقفدتلل ةيدقنلا ةجردملا يف ةينازيملا مسقل ديدج سيارب عينصتلا رهشلأل ةثلاثلا ىلولأا نم ماع 2006. © John Wiley & Sons, 2011 Alawi Alshakhouri 140069328 Slide # 1 Cost Management Measuring, Monitoring, and Motivating Performance Chapter 11 Standard Costs and Variance Analysis نيابتلا ليلحتو ةيسايقلا فيلاكتلا © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 2 Chapter 11: Standard Costs & Variance Analysis نيابتلا ليلحتو ةيسايقلا فيلاكتلا Learning objectives •Q1: How does variance analysis contribute to the strategic management process? س1 :؟ةيجيتارتسلاا ةرادلإا ةيلمع يف نيابتلا ليلحت مهسي فيك •Q2: What is a standard costing system and how is it used? ةفلكتلا ماظن وه ام؟همادختسا متي فيكو ةيسايقلا •Q3: How are direct cost variances calculated? س3 : يف قورفلا باستحا متي فيك؟ةرشابملا فيلاكتلا •Q4: How is direct cost variance information analyzed and used? س4 :؟ةرشابملا فيلاكتلا يف نيابتلا تامولعم مادختساو ليلحت متي فيك •Q5: How are variable and fixed overhead variances calculated? س5 : فيك؟ةريغتملاو ةتباثلا قورفلا باسح متي •Q6: How is overhead variance information analyzed and used? س6 : فيك؟اهمادختساو ةماعلا تاقفنلا يف نيابتلا تامولعملا ليلحت متي •Q7: How are manufacturing cost variances closed? ةفلكت قورف قلاغإ متي فيك؟عينصتلا •Q8: Which profit-related variances are commonly analyzed? قورفلا يه ام؟عئاش لكشب اهليلحت متي يتلا حبرلاب ةلصلا تاذ © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 3 Q2: Standard Costs ةيسايقلا فيلاكتلا •Standard Costs : Organizations set standards to help plan operations. ةيسايقلا فيلاكتلا : عضتتايلمعلا طيطخت يف ةدعاسملل ريياعملا تامظنملا. •A standard cost is the expected cost of providing a good or service. وأ ةعلس ريفوتل ةعقوتملا ةفلكتلا يه ةيسايقلا ةفلكتلاةمدخ. •In manufacturing, the standard cost of a unit of output is comprised of: نم جاتنلإا ةدحول ةيسايقلا ةفلكتلا فلأتت ،عينصتلا يفو: •the standard price (SP) of the input, and و ،تلاخدملل يسايقلا رعسلا •the standard quantity of the input expected to be consumed in the production of one output unit. نأ عقوتملا تلاخدملا نم ةيسايقلا ةيمكلادحاو جاتنلاا ةدحو جاتنإ يف كلهتست. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 4 Q2: Standard Costs ةيسايقلا فيلاكتلا © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 5 Q2: Establishing & Using Standard Costs ةيسايقلا فيلاكتلا مادختساو ءاشنإ •Standards can be set using: ريياعملا نييعت نكميمادختساب: •Information from the prior year ةقباسلا ةنسلا نع تامولعم •Engineered estimates ةيسدنه تاريدقت •New information available ةديدج تامولعم رفوتت •Standards can be used for: نم ريياعملا مادختسا نكميولجأ: •Planning future operations ةيلبقتسملا تايلمعلا طيطخت •Monitoring current operations ةيلاحلا تايلمعلا ةبقارم •Motivating manager and employee behavior ريدملا زيفحتفظوملا كولسو •Evaluating performance ءادلأا مييقت Advantages ايازم 1.Information can be used to quickly estimate job or project costs مادختسا نكميو وأ لمعلا فيلاكت ريدقتل تامولعملاةعرسب عورشملا 2.Monitor resources to measure efficiency دراوملا دصرةءافكلا سايقل 3.Communicates targets (goals) to employees لقني فادهلأا(فادهلأا )نيفظوملل 4.Provides information to analyze operations رفويتايلمعلا ليلحتل تامولعم Disadvantages بويعلا 1.May reduce employee motivation if the standards are too high or low زيفحت نم للقي دق وأ ادج ةعفترم ريياعملا تناك اذإ نيفظوملاةضفخنم 2.Time involved in setting standards and analyzing variances ريياعملا عضول مزلالا تقولاقورفلا ليلحتو 3.Incorrect standards could result in inappropriate employee rewards or penalties تآفاكم ىلإ ةحيحصلا ريغ ريياعملا يدؤت دقنيفظوملل ةبسانم ريغ تابوقع وأ Slide # 6 Q2: Standard Costing Systems ةيسايقلا فيلاكتلا ريدقت ةمظنأ © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 7 Q1: Variance Analysis نيابتلا ليلحت •The difference between an actual cost and the standard cost of producing goods or services at the actual volume level is called a standard cost variance. علسلا جاتنلإ ةيسايقلا ةفلكتلاو ةيلعفلا ةفلكتلا نيب قرفلا ىمسيوةيسايقلا فيلاكتلا نيابتب يلعفلا مجحلا ىوتسم ىلع تامدخلا وأ. •Managers investigate the reasons for standard cost variances so that: ثيحب فيلاكتلا يف ةيسايقلا قورفلا بابسأ نوريدملا سردي: •efficiencies can be rewarded and replicated, ،اهراركتو اهتأفاكم نكمي •inefficiencies can be minimized, and و ،روصقلا هجوأ نم ليلقتلا نكمي •the validity of the standards can be assessed. ريياعملا ةحص مييقت نكمي. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 8 Q1: Variance Analysis in Diagnostic Control System يصيخشتلا مكحتلا ماظن يف نيابتلا ليلحت •Investigating Variances قورفلا يف قيقحتلا –Must decide what amount of variance needs to be investigated (% of budget, given $ amount) هيف قيقحتلا بولطملا نيابتلا رادقم ديدحت بجي( ،ةينازيملا نم ٪ غلبمل ارظن$) –Trends in variances should also be considered تاهاجتا يف رظنلا اضيأ يغبنيوقورفلا –Separating variances into component parts improves analysis قورفلا لصفليلحتلا نسحي ةنوكملا ءازجلأا يف •Conclusions and Actions تاءارجلإاو تاجاتنتسلاا –After determining reasons for variances, managers need to draw conclusions about what happened ىلإ نوريدملا جاتحي ،قورفلا بابسأ ديدحت دعبوثدح ام نأشب تاجاتنتسا صلاختسا –Determine if corrective action is required مأ ابولطم يحيحصتلا ءارجلإا ناك اذإ ام ددحلا –Must consider behavioral implications and employee incentives to ensure standards are promoting overall success زفاوحلاو ةيكولسلا راثلآا يف رظنلا بجيلماشلا حاجنلا ززعت ريياعملا نامضل نيفظوملا © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 9 Q3: Direct Cost Variances ةرشابملا ةفلكتلا قورف •A price variance is the difference between the standard cost of resources purchased (or that should have been consumed) and the actual cost. تارتشملا دراوملل ةيسايقلا ةفلكتلا نيب قرفلا وه رعسلا يف قرفلا( وأكلهتست نأ يغبني ناك يتلا )ةيلعفلا ةفلكتلاو. •An efficiency variance measures whether inputs were used efficiently. مدختست تلاخدملا تناك اذإ ام ةءافكلا نيابت سيقيوةءافكب. •It is the difference between the inputs used and the inputs that should have been used, times the standard price of the input يغبني ناك يتلا تلاخدملاو ةمدختسملا تلاخدملا نيب قرفلا وه اذهتلاخدملل يسايقلا رعسلا تاقوأو ،اهمادختسا © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 10 Q3: Direct Cost Variances ةرشابملا ةفلكتلا قورف © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 11 Q3: Direct Labor Cost Variances ةرشابملا ةلامعلا فيلاكت قورف •The direct labor price and efficiency variances are a decomposition of the direct labor flexible budget variance. امأ ةينازيملا يف نرملا نيابتلا للحت يهف ةرشابملا ةءافكلاو ةلامعلا راعسأ يف قورفلالمعلل ةرشابملا. •The year-end flexible budget direct labor cost is based on the standard direct labor hours for the actual output, or standard quantity allowed (SQA). ةنرملا ةرشابملا ةلامعلا ةفلكت دنتستو ةيسايقلا ةيمكلا وأ ،يلعفلا جتانلل ةيسايقلا ةرشابملا لمعلا تاعاس ىلإ ماعلا ةياهن يفاهب حومسملا. •Other abbreviations used: ةمدختسملا ىرخلأا تاراصتخلاا: •SP = standard price of the input تلاخدملل يسايقلا رعسلا •AP = actual price of the input تلاخدملل يلعفلا رعسلا •AQ = actual quantity of the input used تلاخدملل ةيلعفلا ةيمكلاةمدختسملا © John Wiley & Sons, 2011 Slide # 12 Q3: Direct Labor Cost Variances ةرشابملا ةلامعلا فيلاكت قورف The direct labor price and efficiency variances are a decomposition of the direct labor flexible budget variance. لمعلل ةرشابملا ةينازيملا يف نرملا نيابتلا للحت يهف ةرشابملا ةءافكلاو ةلامعلا راعسأ يف قورفلا امأ. SQA x SP Year-end flexible budget Year-end actual results AQ x AP AQ x SP DL flexible budget variance ةنرملا ةينازيملا قورف DL price variance DL efficiency variance DLPV = [SP – AP] x AQ DLEV = [SQA – AQ] x SP © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 13 Matthews Manufacturing makes a product that is expected to use ¼ hour of direct labor to produce. At the beginning of the year Matthews expected to produce 10,000 units. Actual production, however, was 9,800 units. The standard price of direct labor is $10/hour. Actual direct labor costs were $24,696 for the 2,520 labor hours used. Compute the direct labor cost variances. زويثام عينصتلا لعجي جتنملا يذلا نم عقوتملا نأ مدختست ¼ ةعاس نم ةلامعلا ةرشابملا جاتنلإ. يف ةيادب ماعلا عقوتي زويثام نأ جتنت 10،000 ةدحو. ريغ نأ جاتنلإا يلعفلا غلب 800 9 ةدحو. رعسلا يسايقلا ةلامعلل ةرشابملا وه 10 $ / ةعاس. تغلبو فيلاكت ةلامعلا ةرشابملا ةيلعفلا 696 24 ارلاود تاعاسل لمعلا ةمدختسملا اهددعو 520 2 ةعاس. باسح قورفلا يف فيلاكت ةلامعلا ةرشابملا. Q3: Direct Labor Cost Variances Example لاثم ةرشابملا ةلامعلا فيلاكت قورف First compute SQA for direct labor: SQA = 9,800 units x ¼ hour/unit = 2,450 hours DLPV = [SP – AP] x AQ = [$10/hour - $9.80/hour] x 2,520 hours = $504F Then compute AP for direct labor: AP = $24,696/2,520 hours = $9.80/hour DLEV = [SQA – AQ] x SP = [2,450 hours - 2,520 hours] x $10/hour = $700U Note that the DL FBV = $504F + $700U = $196U © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 14 What are some possible explanations for the direct labor cost variances of Matthews Manufacturing? ام يه ضعب تاريسفتلا ةلمتحملا قورفل ةفلكت ةلامعلا ةرشابملا يف عناصم زويثام؟ Q3: Direct Labor Cost Variances Example لاثم ةرشابملا ةلامعلا فيلاكت قورف •The favorable price variance could be due to: نيابتلا نوكي نأ نكميويتاوملا اجتان راعسلأا يفنع: •an incorrect standard price, ،حيحص ريغ يسايق رعس •using a higher percentage of lower-paid workers than expected, or مادختساب كلذووأ ،اعقوتم ناك امم لقلأا روجلأا يوذ لامعلا نم ىلعأ ةبسن •a favorable renegotiation of a labor contract. لمعلا دقع ىلع ضوافتلا ةداعإ. •The unfavorable efficiency variance could be due to: ريغ نيابتلا نوكي نأ نكميويتاوملا ةءافكللنع اجتان: •an incorrect standard quantity for labor, ،لمعلل ةحيحص ريغ ةيسايق ةيمكو •inefficiency of direct labor personnel, ،نيرشابملا لمعلا يفظوم ةءافك مدعو •unexpected problems with machinery, or وأ ،تلالآا عم ةعقوتم ريغ لكاشم •lower quality of inputs that were more difficult to use. ناك يتلا تلاخدملا ةيعون ضافخناواهمادختسا بعصلأا نم. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 15 Q3: Direct Material Cost Variances ةرشابملا داوملا ةفلكت قورف •The direct materials and direct labor efficiency variances are computed in the same fashion. داوملا ةءافك يف ةرشابملا قورفلا بسحتوةقيرطلا سفنب ةرشابملا ةلامعلاو. •The direct material price variance is computed slightly differently than the direct labor price variance. قرفلا بستحيوةرشابملا ةلامعلا راعسأ يف نيابتلا نع لايلق افيفط افلاتخا داوملا راعسأ نيب رشابملا. •Direct materials can be purchased and stored, and direct labor is consumed as it is purchased. ةرشابملا داوملا ءارش نكميواهئارش دنع ةرشابملا ةلامعلا كلهتستو ،اهنيزختو. •The direct materials price and efficiency variances do not sum to the direct material flexible budget variance when there are any direct materials inventories. يف قورفلا لثامت لاو امدنع ةرشابملا ةيداملا ةنرملا ةينازيملا يف قورفلا ةرشابملا ةءافكلاو داوملا راعسأداوملل ةرشابم تانوزخم كانه نوكت. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 16 Q3: Direct Material Cost Variances ةرشابملا داوملا ةفلكت قورف The direct material price variance is based on the actual quantity of direct materials purchased, not the actual quantity of direct materials used. داوملا راعسأ يف رشابملا نيابتلا دمتعيوةمدختسملا ةرشابملا داوملل ةيلعفلا ةيمكلا سيلو ،تارتشملا ةرشابملا داوملل ةيلعفلا ةيمكلا ىلع. SQA x SP Year-end flexible budget AQ x SP DM price variance DM efficiency variance DMPV = [SP – AP] x Actual Quantity Purchased DMEV = [SQA – AQ] x SP Actual Quantity Purchased x SP Actual Quantity Purchased x AP Remember that AQ=Actual quantity used, not actual quantity purchased. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 17 Matthews Manufacturing makes a product that is expected to use 2 pounds of direct material to produce. At the beginning of the year Matthews expected to produce 10,000 units. Actual production, however, was 9,800 units. The standard price of direct materials is $3/pound. Matthews purchased 20,500 pounds of direct material at $3.10/pound, and used 19,400 pounds. Compute the direct material cost variances. زويثام عينصتلا لعجي جتنملا يذلا نم عقوتملا نأ مدختست 2 هينج نم داوملا ةرشابملا جاتنلإ. يف ةيادب ماعلا عقوتي زويثام نأ جتنت 10،000 ةدحو. ريغ نأ جاتنلإا يلعفلا غلب 800 9 ةدحو. رعسلا يسايقلا داوملل ةرشابملا وه 3 $ / لطر. ىرتشا زويثام 20،500 هينج نم داوملا ةرشابملا دنع 3.10 رلاود / ،هينج مدختساو 19،400 هينج. باسح قورفلا ةرشابملا يف ةفلكت داوملا. Q3: Direct Material Cost Variances Example First compute SQA for direct materials: SQA = 9,800 units x 2 pounds/unit = 19,600 pounds DMPV = [SP – AP] x Actual Quantity Purchased = [$3/pound - $3.10/pound] x 20,500 pounds = $2,050U DMEV = [SQA – AQ] x SP = [19,600 pounds - 19,400 pounds] x $3/pound = $600F © John Wiley & Sons, 2011 Slide # 18 What are some possible explanations for the direct material cost variances of Matthews Manufacturing? ام يه ضعب تاريسفتلا ةلمتحملا قورفل ةفلكتلا ةيداملا ةرشابملا عينصتل زويثام؟ Q4: Direct Material Cost Variances Example لاثم ةرشابملا داوملا ةفلكت قورف •The unfavorable price variance could be due to: ريغ نيابتلا ىزعي نأ نكميويتاوملا يفيلي ام ىلإ راعسلأا: •an incorrect standard price, ،حيحص ريغ يسايق رعس •an unexpected price increase from a supplier, or نم راعسلأا يف ةعقوتم ريغ ةدايز وأوأ ،دروم •the purchase of higher quality materials. ىلعأ ةدوج تاذ داوم ءارشو. •The favorable efficiency variance could be due to: ىلإ ةءافكلا يف لاعفلا قرفلا ىزعي نأ نكميويلي ام: •an incorrect standard quantity for material, ،داوملل ةحيحص ريغ ةيسايق ةيمك •efficient use of direct materials during production, or ةرشابملا داوملل لاعفلا مادختسلااوأ ،جاتنلإا ءانثأ •less waste of direct materials due to higher material quality. ةرشابملا داوملا رده لقأداوملا ةيعون عافترا ببسب. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 19 •The direct material price variance is recorded when the materials are purchased. دنع داوملا راعسأ يف رشابملا ريغتلا ليجست متيداوملا ءارش. •The direct material efficiency variance is recorded when the materials are used in production. ةءافك يف رشابملا قرفلا ليجست متيجاتنلإا يف داوملا مادختسا دنع داوملا. •The direct labor price and efficiency variances are recorded when labor is used in production. راعسأ يف ةرشابملا قورفلا لجستوجاتنلإا يف ةلماعلا ديلا مادختسا دنع ةءافكلاو ةلامعلا. •Work in process inventory is debited for the standard cost of the inputs that should have been used to produce the actual quantity of outputs (SP x SQA). ةفلكتلل ةيلمعلا درج يف لمعلا مصخيو جتاونلا نم ةيلعفلا ةيمكلا جاتنلإ اهمادختسا يغبني ناك يتلا تلاخدملل ةيسايقلا. Q3: Recording Direct Cost Variances ةرشابملا ةفلكتلا قورف ليجست © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 20 The journal entry to record the use of direct labor is: وه ةرشابملا ةلامعلا مادختسا ليجستل ةيمويلا دويقلا: Q3: Recording Direct Labor Cost Variances dr. Work in process inventory SP x SQA dr. or cr. DLEV [SQA-AQ] x SP dr. or cr. DLPV [SP-AP] x AQ cr. Accrued payroll AP x AQ Unfavorable variances are debited to the variance accounts and favorable variances are credited to the variance accounts. قورفلا ديقتو قورفلا تاباسحل ةبسانملا ريغ تاقورفلا ديقتوقورفلا تاباسحل ةبسانملا. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 21 Prepare a summary journal entry to record the direct labor costs for Matthews Manufacturing, including the direct labor cost variances. Refer to slide #8. مق دادعإب صخلم رتفد ةيمويلا ليجستل فيلاكت ةلامعلا ةرشابملا ةعانصل زويثام، امب يف كلذ قورفلا يف فيلاكت ةلامعلا ةرشابملا. عجار ةحيرشلا ةنماثلا Q3: Recording Direct Labor Cost Variances Example لاثم ةلامعلا فيلاكتل ةرشابملا قورفلا ليجست dr. Work in process inventory 24,500 [2,450 hrs x $10/hr] dr. DLEV 700 [(2,450 hrs – 2,520 hrs) x $10/hr] cr. DLPV 504 [($10/hr - $9.80/hr) x 2,520 hrs] cr. Accrued payroll 24,696 [given] © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 22 The journal entry to record the purchase of direct materials is: وه ةرشابملا داوملا ءارش ليجستل ةيمويلا ديق لاخدا: Q3: Recording Direct Material Cost Variances ةرشابملا داوملا ةفلكت يف قورفلا ليجست dr. Raw materials inventory SP x Actual Qty Purch’d dr. or cr. DMPV [SP–AP] x Actual Qty Purch’d cr. Accounts payable AP x Actual Qty Purch’d The journal entry to record the use of direct materials is: لوخدوه ةرشابملا داوملا مادختسا ليجستل ةلجملا: dr. Work in process inventory SP x SQA dr. or cr. DMEV [SQA-AQ] x SP cr. Raw materials inventory SP x AQ © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 23 The journal entry to record the purchase of direct materials is: Q3: Recording Direct Material Cost Variances Example ؟ةرشابملا داوملا فيلاكت ليجست dr. Raw materials inventory [$3/lb x 20,500 lbs] 61,500 dr. DMPV [($3/lb –$3.10/lb) x 20,500 lbs] 2,050 cr. Accounts payable [$3.10/lb x 20,500 lbs] 63,550 The journal entry to record the use of direct materials is: dr. Work in process inventory [$3/lb X 19,600 lbs] 58,800 cr. DMEV [(19,600 lbs – 19,400 lbs) x $3/lb] 600 cr. Raw materials inventory [19,400 lbs x $3/lb] 58,200 Prepare summary journal entries to record the purchase and the use of direct material for Matthews Manufacturing, including the direct material cost variances. Refer to slide #12. دادعإ تلااخدإ رتفد ةيمويلا ليجستل ءارش مادختساو داوملا ةرشابملا ةعانصل زويثام، امب يف كلذ قورفلا يف فيلاكتلا ةيداملا ةرشابملا. عجرا ىلإ ةحيرشلا 12 © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 24 Q5: Allocating Overhead Costs ةماعلا فيلاكتلا صيصخت •Chapter 5 covered the allocation of overhead to units of production. لصفلا يطغيو5 جاتنلإا تادحو ىلع ةماعلا تاقفنلا عيزوت. •Estimated overhead rates are calculated for both fixed and variable overhead. ةماعلا تاقفنلا نم لكل ةردقملا ةماعلا تلادعملا بسحتوةريغتملاو ةتباثلا. Standard variable overhead allocation rate صيصخت لدعمريغتملا ةماعلا تاقفنلا Estimated variable overhead costs ةردقملا ةريغتملا ةماعلا فيلاكتلا Estimated volume of an overhead allocation base ةماعلا تاقفنلا صيصخت ةدعاقل ردقملا مجحلا = Standard fixed overhead allocation rate تاقفنلا صيصخت لدعمةيسايقلا ةتباثلا Estimated fixed overhead costs Estimated volume of an overhead allocation base = © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 25 Q5: Overhead Cost Management ةماعلا فيلاكتلا ةرادإ •For both variable and fixed overhead, cost management includes reducing non-value-added costs. ةرادإ لمشت ،ةتباثلاو ةريغتملا ةماعلا تاقفنلا نم لكل ةبسنلابوةفاضملا ةميقلا تاذ ريغ فيلاكتلا ضفخ فيلاكتلا. •For each variable overhead cost pool, cost management includes reducing the consumption of the related cost allocation base. ةرادإ لمشت ،ةريغتملا ةماعلا فيلاكتلل عمجت لكل ةبسنلابوةلصلا تاذ فيلاكتلا صيصخت ةدعاق كلاهتسا ضفخ فيلاكتلا. •For fixed overhead, cost management involves a trade-off between insufficient and excess capacity. تاقفنلاب قلعتي اميفوضئافلاو ةيفاكلا ريغ ةردقلا نيب ةضياقم ىلع فيلاكتلا ةرادإ يوطنت ،ةتباثلا ةماعلا. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 26 Q5: Overhead Cost Variances ةماعلا فيلاكتلا قورف © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 27 Q5: Variable Overhead Cost Variances ةريغتملا ةماعلا فيلاكتلا قورف •The variable overhead cost variances are computed in the same fashion as the direct labor cost variances. يف قورفلا باسح ةقيرط سفنب ةريغتملا ةماعلا فيلاكتلا يف قورفلا بسحتوةرشابملا ةلامعلا فيلاكت. •The variable overhead spending variance is similar to the direct labor price variance. يف نيابتلا هبشي ريغتملا ماعلا قافنلإا نيابت نإةرشابملا ةلامعلا راعسأ. •The variable overhead efficiency variance is similar to the direct labor efficiency variance. هبشي ةريغتملا ةماعلا ةءافكلا يف نيابتلاوةرشابملا ةلامعلا ةءافك يف نيابتلا. •The variable overhead (flexible) budget variance is the sum of these two variable overhead variances. ةينازيملا نيابت لثميو ةريغتملا ةماعلا(ةنرملا )ةماعلا تاقفنلا يف ةريغتملا قورفلا نيذه عومجم. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 28 Q5: Variable Overhead Cost Variances The standard quantity allowed (SQA) in the variable overhead cost variance calculations is the quantity of the variable overhead allocation base that should have been used to produce the actual output. SR is the standard variable overhead allocation rate. ةيمكلاو ةيرايعملا حومسملا اهب يف تاباسح نيابتلا يف فيلاكتلا ةماعلا ةريغتملا يه ةيمك ةدعاق صيصخت تاقفنلا ةماعلا ةريغتملا يتلا ناك يغبني اهمادختسا جاتنلإ جتاونلا ةيلعفلا. سا را وه لدعم صيصخت تاقفنلا ةماعلا ريغتملا يسايقلا.... SQA x SR Year-end flexible budget Year-end actual results Total actual VO AQ x SR VO flexible budget variance VO spending variance VO efficiency variance VOSV = [AQ x SR] – actual VO VOEV = [SQA – AQ] x SR © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 29 Matthews Manufacturing makes a product that is expected to use ¼ hour of direct labor to produce. At the beginning of the year Matthews expected to produce 10,000 units. Actual production, however, was 9,800 units. The estimated variable overhead allocation rate is $4 per direct labor hour, actual variable overhead costs were $10,450, and actual direct labor hours were 2,520. Compute the variable overhead cost variances. Q5: Variable Overhead Cost Variances Example First compute SQA for direct labor, the VO cost allocation base: SQA = 9,800 units x ¼ hour/unit = 2,450 hours VOSV = AQ x SR – actual VO = 2,520 hrs x $4/hr - $10,450 = $370U VOEV = [SQA – AQ] x SR = [2,450 hours - 2,520 hours] x $4/hour = $280U Note that the VO FBV = $280U + $370U = $650U © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 30 What are some possible explanations for the variable overhead cost variances of Matthews Manufacturing? ام يه ضعب تاريسفتلا ةلمتحملا تاريغتمل ةفلكتلا ةماعلا ةريغتملا عينصتل زويثام؟ Q6: Variable Overhead Cost Variances Example •The favorable spending variance could be due to: يلاتلا ىلإ بسانملا قافنلإا يف قرفلا ىزعي نأ نكمي •an incorrect standard variable overhead rate per direct labor hour, ريغ يسايق ريغتم رييغت لدعمو،ةرشابم لمع ةعاس لكل حيحص •lower prices than expected for the components of the variable overhead cost pool (e.g. a lower price per quart of machine oil), or فيلاكتلا عمجم تانوكمل ةبسنلاب اعقوتم ناك امع راعسلأا ضافخناو ةريغتملا ةماعلا(ةنيكاملا تيز نم ءزج لك رعس ضافخنا لاثملا ليبس ىلع)وأ ، •lower consumption than expected of the components of the variable overhead cost pool (e.g. less indirect labor used per direct labor hour). عمجم تانوكم نم اعقوتم ناك امع كلاهتسلاا ضافخنا ةريغتملا ةماعلا فيلاكتلا(ةرشابم لمع ةعاس لكل ةمدختسملا لقلأا ةرشابملا ريغ ةلامعلا لثم.) •The unfavorable efficiency variance could be due to: ريغ نيابتلا نوكي نأ نكميويتاوملا ةءافكللنع اجتان: •an incorrect standard quantity for labor, ،لمعلل ةحيحص ريغ ةيسايق ةيمكو •inefficiency of direct labor personnel, ،نيرشابملا لمعلا يفظوم ةءافك مدعو •unexpected problems with machinery, or وأ ،تلالآا عم ةعقوتم ريغ لكاشم •lower quality of inputs that were more difficult to use. ناك يتلا تلاخدملا ةيعون ضافخناواهمادختسا بعصلأا نم. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 31 The summary entry to record the incurrence of variable overhead costs is: يلي امك ةريغتملا ةماعلا فيلاكتلا دبكت ليجستل لاخدلاا ةصلاخ نوكيو: Q5: Recording Variable Overhead Cost Variances ةريغتملا ةماعلا فيلاكتلا يف تانيابتلا ليجست dr. Variable overhead cost control Actual VO costs cr. Various accounts Actual VO costs The summary entry to record the allocation of variable overhead costs is: يلي امك ةريغتملا ةماعلا فيلاكتلا صيصخت ليجستل لاخدلاا ةصلاخ نوكيو: dr. Work in process inventory SR x SQA cr. Variable overhead cost control SR x SQA The year-end entry to close the Variable overhead cost control and record the variable overhead cost variances will: يف مكحتلا قلاغلإ ةنسلا ةياهن لاخدإ يدؤيويلي ام ىلإ ةريغتملا ةماعلا فيلاكتلا يف قورفلا ليجستو ةريغتملا ةماعلا فيلاكتلا: •close the Variable overhead cost control account with a debit or credit, whichever is required, and و ،بولطم امهيأ ،نامتئلاا وأ مصخلا عم ةريغتملا ةماعلا فيلاكتلا يف مكحتلا باسح قلاغإ •debit (credit) the Variable overhead spending variance and Variable overhead efficiency variance accounts for unfavorable (favorable) variances. مصخلاو(نامتئلاا) ، ريغ اقورف لثمي ،ةريغتملا ةماعلا فيلاكتلا يف نيابتلاو ،ريغتملا ماعلا قافنلإا يف نيابتلاوةيتاؤم (ةيتاوم.) © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 32 The journal entry to record the incurrence of variable overhead costs is: Q3: Recording Variable Overhead Cost Variances Example ؟ةريغتملا ةماعلا فيلاكتلا ليجست dr. Variable overhead cost control 10,450 cr. Various accounts 10,450 The journal entry to record the allocation of variable overhead is: dr. Work in process inventory [$4/hr X 2,450 hrs] 9,800 cr. Variable overhead cost control 9,800 Prepare summary journal entries to record the incurrence of and the allocation to work in process of variable overhead costs for Matthews Manufacturing. Also prepare the year-end entry to close variable overhead control and record the variances. Refer to slide #22. دادعإ تلااخدإ رتفد ةيموي ةزجوم ليجستل دبكت صيصختو لمعلل يف ةيلمع فيلاكتلا ةماعلا ةريغتملا زويثامل عينصتلا. اضيأ دادعإ لاخدإ ةياهن ماعلا قلاغلإ مكحتلا يف تاقفنلا ةماعلا ةريغتملا ليجستو قورفلا. عجرا ىلإ ةحيرشلا مقر 22. The year-end entry to close the Variable overhead cost control account is: ماعلا ةياهن يفوه ريغتملا ةماعلا فيلاكتلا يف مكحتلا باسح قلاغلإ: dr. VOSV 280 dr. VOEV 370 cr. Variable overhead cost control 650 © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 33 Q5: Fixed Overhead Cost Variances ةتباثلا ةماعلا فيلاكتلا قورف •The fixed overhead spending variance is the same as the fixed overhead (flexible) budget variance. ةينازيملا تاقفن يف تاقورفلا سفن وه تباثلا ماعلا قافنلإا قورف نوكيو ةتباثلا ةماعلا(ةنرملا.) •There is no fixed overhead efficiency variance because changes in the quantity of the fixed overhead allocation base do not cause changes in actual total fixed overhead costs. لاو ةتباثلا عيزوتلا ةدعاق ةيمك يف تاريغتلا نلأ ةماعلا ةءافكلا يف تباث قراف دجويةتباثلا لا ةتباثلا فيلاكتلا يلامجإ يف تاريغت ببستةتباثلا ةيلعفلا. •The production volume variance occurs when actual volume is different than the static budget estimated volume. نوكي امدنع جاتنلإا مجح يف نيابتلا ثدحيوةتباثلا ةينازيملل ردقملا مجحلا نع افلتخم يلعفلا مجحلا. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 34 Q5: The Production Volume Variance جاتنلإا مجح تاقورف •Allocating fixed overhead to production using a standard rate per unit of a cost allocation base treats fixed overhead as a variable cost for bookkeeping purposes. ةتباثلا تاقفنلا داجيا ةتباثلا تاقفنلا فيلاكت صيصخت ةدعاق نم ةدحو لكل يسايق لدعم مادختساب جاتنلإلرتافدلا كسم ضارغلأ ةريغتم ةفلكت اهرابتعاب. •Since fixed overhead is not a variable cost, the fixed overhead allocated to production will differ from budgeted fixed overhead when actual volume differs from static budget estimated volume. نإف ،ةريغتم ةفلكت تسيل ةتباثلا تاقفنلا نأ امبو ةينازيملا يف ةجردملا ةتباثلا تاقفنلا نع فلتختس جاتنلإل ةصصخملا ةتباثلا تاقفنلاةتباثلا ةينازيملل ردقملا مجحلا نع يلعفلا مجحلا فلتخي امدنع. •The production volume variance is favorable (unfavorable) when actual volume exceeds (is less than) static budget estimated volume. جاتنلإا مجح قراف نوكيوايتاوم (تاوم ريغ ) امدنع يلعفلا مجحلا زواجتي(نم لقأ )ةتباثلا ةينازيملل ردقملا مجحلا. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 35 Q5: Fixed Overhead Cost Variances ةتباثلا ةماعلا فيلاكتلا قورف The standard quantity allowed (SQA) in the fixed overhead cost variance calculations is the quantity of the fixed overhead allocation base that should have been used to produce the actual output. SR is the standard fixed overhead allocation rate. ةيمكلاو ةيرايعملا حومسملا اهب يف تاباسح نيابتلا يف فيلاكتلا ةتباثلا يه ةيمك ةدعاق عيزوتلا ةتباثلا يتلا ناك يغبني اهمادختسا يف جاتنإ جتانلا يلعفلا. رس وه لدعم صيصختلا يولعلا تباثلا. Total FO budget variance FO spending variance FO production volume variance FOPVV = [SQA x SR] – estimated FO SQA x SR Static & year-end budget Year-end actual results Total actual FO Estimated FO Allocated fixed overhead FOSV = Estimated FO – actual FO © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 36 Matthews Manufacturing makes a product that is expected to use 1.2 machine hours to produce. At the beginning of the year Matthews expected to produce 10,000 units. Actual production, however, was 9,800 units. Estimated fixed overhead at the beginning of the year was $60,000 and actual fixed overhead was $58,100. Actual machine hours for the year totaled 12,200 hours. Compute the fixed overhead cost variances. Q5: Fixed Overhead Cost Variances Example First compute SQA for machine hours: SQA = 9,800 units x 1.2 hours/unit = 11,760 hours FOSV = Estimated FO – actual FO = $60,000 - $58,100 = $1,900F FOPVV = SQA x SR – estimated FO = 11,760 hours x $5/hr - $60,000 = $1,200U Next compute the estimated fixed overhead rate per machine hour: SR = $60,000/[10,000 units x 1.2 hrs/unit] = $5/hr © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 37 What are some possible explanations for the fixed overhead cost variances of Matthews Manufacturing? Q6: Fixed Overhead Cost Variances Example •The favorable spending variance could be due to: •an incorrect estimate for fixed overhead costs, •a decision to forgo a budgeted discretionary fixed cost, or •a favorable renegotiation of leasing agreements. •The unfavorable production volume variance is due to: •an actual volume level that is less than the static budget volume level. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 38 The summary entry to record the incurrence of fixed overhead costs is: Q5: Recording Fixed Overhead Cost Variances dr. Fixed overhead cost control Actual FO costs cr. Various accounts Actual FO costs The summary entry to record the allocation of fixed overhead costs is: dr. Work in process inventory SR x SQA cr. Fixed overhead cost control SR x SQA The year-end entry to close the fixed overhead cost control and record the fixed overhead cost variances will: •close the Fixed overhead cost control account with a debit or credit, whichever is required, and •debit (credit) the fixed overhead production volume variance and fixed overhead spending variance accounts for unfavorable (favorable) variances. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 39 The journal entry to record the incurrence of variable overhead costs is: Q5: Recording Fixed Overhead Cost Variances Example dr. Fixed overhead cost control 58,100 cr. Various accounts 58,100 The journal entry to record the allocation of fixed overhead is: dr. Work in process inventory [$5/hr x 11,760 hrs] 58,800 cr. Fixed overhead cost control 58,800 Prepare summary journal entries to record the incurrence of and the allocation to work in process of fixed overhead costs for Matthews Manufacturing. Also prepare the year-end entry to close Fixed overhead control and record the variances. Refer to slide #29. The year-end entry to close the fixed overhead cost control account is: dr. Fixed overhead cost control 700 dr. Fixed overhead production volume variance 1,200 cr. Fixed overhead spending variance 1,900 © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 40 •At the end of the year, all eight variance accounts are closed out to Work in process inventory, Finished goods inventory, and Cost of goods sold. • درج ،ةيلمعلا درج يف لمعلل ةينامثلا نيابتلا تاباسح عيمج قلاغإ متي ،ماعلا ةياهن يفةعابملا علسلا ةفلكتو ،ةزهاجلا علسلا. Q7: Closing Manufacturing Variances عينصتلا قورف قلاغإ •The net of the variance accounts is generally prorated to the three accounts using a ratio of the accounts’ ending balances. ةثلاثلا تاباسحلا ىلع ماع لكشب تاقورفلا تاباسح يفاص ميسقت متيتاباسحلل ةيئاهنلا ةدصرلأا ةبسن مادختساب. •Technically, a portion of the direct materials price variance should also be allocated to Raw materials inventory, but this complication is ignored here. • داوملا راعسأ يف تاقورفلا نم ءزج صيصخت اضيأ يغبني ،ةينفلا ةيحانلا نمانه تافعاضملا هذه لهاجت متي نكلو ،ماخلا داوملا درج ىلإ ةرشابملا. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 41 •The revenue budget variance measures the difference between actual revenues and static budget revenues, and has two components: • تاداريإو ةيلعفلا تاداريلإا نيب قرفلا تاداريلإا ةينازيم يف قرفلا سيقيونانوكم هلو ،ةتباثلا ةينازيملا: Q8: Revenue Budget Variance حابرلأا ةينازيم فلاتخا •The sales price variance is due to the difference between actual average selling price and the budgeted selling price per unit. طسوتم نيب قرفلا ىلإ عيبلا رعس يف قرفلا ىزعيوةدحو لكل ةينازيملا يف جردملا عيبلا رعسو يلعفلا عيبلا رعس. •The revenue sales quantity variance is due to the difference between the actual number and the budgeted number of units sold. قرفلا ىلإ تاداريلإا تاعيبم ةيمك نيابت ىزعيوةينازيملا يف ةعابملا تادحولا ددعو يلعفلا ددعلا نيب. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 42 Q8: Revenue Budget Variance حابرلأا ةينازيم فلاتخا ASP is the actual average selling price per unit; BSP is the budgeted selling price from the static budget. ةدحو لكل يلعفلا عيبلا رعس طسوتم وه بسأ .ةتباثلا ةينازيملا نم ةينازيملا يف جردملا عيبلا رعس وه بسب. Revenue budget variance Revenue sales quantity variance Sales price variance [ASP – BSP] x actual units sold ASP x actual units sold Static budget revenue BSP x budgeted unit sales BSP x actual units sold Actual revenue [Actual – budgeted units] x BSP © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 43 Matthews Manufacturing makes a product with a budgeted selling price of $15/unit. At the beginning of the year Matthews expected to sell 10,000 units. Actual sales, however, were 9,800 units, and actual revenue was $156,800. Compute the revenue budget variances. Q7: Revenue Budget Variance Example First compute the actual average selling price per unit: ASP = $156,800/9,800 units = $16/unit Note the revenue budget variance is $9,800F + $3,000U = $6,800F Sales price variance = [$16/unit - $15/unit] x 9,800 units = $9,800F Revenue sales quantity variance = [9,800 units – 10,000 units] x $15/unit = $3,000U © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 44 •The contribution margin budget variance measures the difference between actual contribution margin and the contribution margin budgeted at the beginning of the year. It has two components: شماهلا نيب قرفلا ةمهاسملا شماه ةينازيم نيابت سيقيوةنسلا ةيادب يف ةينازيملا يف جردملا ةمهاسملا شماهو ةمهاسملل يلعفلا .نانوكم هلو: Q8: Contribution Margin Budget Variance ةمهاسملا شماه ةينازيم يف نيابتلا •The contribution margin variance is the difference between the actual contribution margin and the budgeted contribution margin in in the year-end flexible budget (which is based on actual sales levels). يف ةجردملا ةمهاسملا شماهو ةيلعفلا ةمهاسملا شماه نيب قرفلا وه ةمهاسملا شماه ةنسلا ةياهن يف ةنرملا ةينازيملا يف ةينازيملا(ةيلعفلا تاعيبملا تايوتسم ىلإ دنتست يتلا.) •The contribution margin sales volume variance is difference budgeted contribution margin at the beginning of the year and the budgeted contribution margin in the year-end flexible budget. يف قرفلا ةنسلا ةيادب يف ةينازيملا يف ةجردملا ةمهاسملا شماه يف قرفلا وه ةمهاسملا شماه تاعيبم مجحماعلا ةياهن يف ةنرملا ةينازيملا يف ةينازيملا يف ةجردملا ةمهاسملا شماهو. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 45 •When a company sells more than one product, the contribution margin sales volume variance itself has two components: تاعيبم مجح قراف نوكي ،دحاو جتنم نم رثكأ ةكرشلا عيبت امدنعفنينوكم هسفن حبرلا شماه: Q8: Contribution Margin Sales Volume Variance ةمهاسملا شماه تاعيبم مجح يف تاقورفلا •The contribution margin sales mix variance is the portion of the contribution margin sales volume variance caused by a change in the sales mix from the budgeted mix. ءزج وه ةمهاسملا شماه تاعيبم جيزم نيابت لثميوةينازيملا جيزم نم تاعيبملا جيزم يف رييغت نع جتانلا شماهلا شماه تاعيبم مجح يف نيابتلا نم. •The contribution margin sales quantity variance is the portion of the contribution margin sales volume variance caused by the difference between budgeted total unit sales at the beginning of the year and actual total unit sales. يف نيابتلا نم ءزج وه ةمهاسملا شماه تاعيبم ةيمك يف نيابتلا يف ةينازيملا يف ةجردملا تادحولا تاعيبم يلامجإ نيب قرفلا نع جتانلا حبرلا شماه تاعيبم مجحةيلعفلا ةدحولا تاعيبم عومجمو ةنسلا ةيادب. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 46 Q7: Profit-Related Variances Example Matthews Manufacturing produces three products, Alpha, Beta, and Gamma. You are given the following information from Matthews’ static budget: © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 47 Q7: Profit-Related Variances Example You are given below the actual results for Matthews Manufacturing. Compute the revenue budget variances. © John Wiley & Sons, 2011 Chapter 11: Standard Costs and Variance Analysis Eldenburg & Wolcott’s Cost Management, 2e Slide # 48 Q7: Profit-Related Variances Example Use the given information on the prior two slides to compute all of the contribution margin budget variances for Matthews Manufacturing. © John Wiley & Sons, 2011 Alawi Alshakhouri 140069328 Slide # 1 Cost Management Measuring, Monitoring, and Motivating Performance Chapter 15 Performance Evaluation and Compensation ضيوعتلاو ءادلأا مييقت © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 2 Chapter 15: Performance Evaluation and Compensation Learning objectives •Q1: What is agency theory? •Q2: How are decision-making responsibility and authority related to performance evaluation? •Q3: How are responsibility centers used to measure, monitor, and motivate performance? •Q4: How do return on investment, residual income, and economic value added affect managers’ incentives and decisions? •Q5: How is compensation used to motivate performance? •Q6: What prices are used for transferring goods and services within an organization? •Q7: How do transfer prices affect managers’ incentives and decisions? © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 3 Q1: Agency Theory ةلاكولا ةيرظن •In agency theory, a principal contracts with an agent to act on his or her behalf. لمعلل ليكو عم ةيسيئرلا دوقعلا ،ةلاكولا ةيرظن يفهنع ةباين. •The principal can observe the outcome of the agent’s actions, but cannot observe the agent’s behavior or effort level. تافرصت جئاتن بقاري نأ لصلأل نكميهدهج ىوتسم وأ لماعلا كولس ةبقارم هنكمي لا نكلو ،ليكولا. •The costs or lost benefits the principal suffers when the agent does not act in the best interests of the principal are called agency costs. يتلا ةدوقفملا عفانملا وأ فيلاكتلا ىمستو ةحلصملا ققحي امب ليكولا فرصتي لا امدنع لصلأا اهلمحتيةلاكولا فيلاكت لصلأل ايلعلا. © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 4 Q1: Agency Costs تلااكولا فيلاكت •Agency Costs include: يلي ام ةلاكولا فيلاكت لمشتو: •Losses from poor decisions ةئيسلا تارارقلا نم رئاسخلا •Losses from incongruent goals ريغ فادهلأا نم رئاسخلاةئفاكتملا •Monitoring costs دصرلا فيلاكت •Goal alignment costs فدهلا ةاذاحم فيلاكت •Contracting costs دقاعتلا فيلاكت •The principal must design plan to minimize agency costs. ةلاكولا فيلاكت ليلقتل ةطخ ميمصت لصلأا ىلع بجي. •Utilize well designed compensation schemes ضيوعتلا ططخ نم ةدافتسلااديج لكشب ةممصم •Assign responsibility for decision making رارقلا ذاختا نع ةيلوؤسملا نييعت •Establish appropriate transfer prices ةبسانملا ليوحتلا راعسأ ديدحت © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 5 Q2: Decision Making Responsibility رارقلا عنص ةيلوؤسم •In a centralized organization, decision making authority and responsibility resides with top management. ةمظنم يفايلعلا ةرادلإا قتاع ىلع عقت ةيلوؤسملاو رارقلا ذاختا ةطلس ،ةيزكرم. •In a decentralized organization, decision making authority and responsibility is given to lower levels of management. ىندأ تايوتسم ىلإ ةيلوؤسملاو رارقلا ذاختا ةطلس حنمت ،ةيزكرملالا ةمظنملا يفوةرادلإا نم. •Usually, top management has general knowledge about the operations of business segments and the business segment managers have specific knowledge. تايلمع لوح ةماع ةفرعم اهيدل ايلعلا ةرادلإا ،ةداعةددحم ةفرعم مهيدل لامعلأا عاطق يريدمو لامعلأا تاعاطق. © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 6 Q2: Centralized Organizations ةيزكرملا تامظنملا •The advantages of a centralized organizational structure include: يلي ام يزكرملا يميظنتلا لكيهلا ايازم لمشتو: •reduced monitoring costs, and و ،دصرلا فيلاكت ضفخ •increased assurance that lower managers act in the best interests of the organization نولمعي ىندلأا نيريدملا نأ ىلع ديكأتلا ةدايزةمظنملا حلاصمل اقفو.. •The disadvantages of a centralized organizational structure include: يلي ام يزكرملا يميظنتلا لكيهلا بويع لمشتو: •increased time to make decisions while top management gathers information about business segments, and تقولا ةدايزوو ،لامعلأا تاعاطق لوح تامولعملا عمجت ايلعلا ةرادلإا نأ نيح يف تارارقلا ذاختلا •increased potential for lower quality decisions ذاختا ةيناكمإ ةدايزوةدوج لقأ تارارق © John Wiley & Sons, 2011 Slide # 7 Q2: Decentralized Organizations ةيزكرملالا تامظنملا •The advantages of a decentralized organizational structure include: يلي ام يزكرملالا يميظنتلا لكيهلا ايازم لمشتو: •more timely decisions, ،بسانملا تقولا يف تارارق ذاختاو •increased potential for higher quality decisions, and ةدايزوو ،ىلعأ ةدوج تاذ تارارق ذاختا ةيناكمإ •top management is free to concentrate on organization’s strategic goals. ةيجيتارتسلاا فادهلأا ىلع زيكرتلا يف ةرح ايلعلا ةرادلإاةمظنملل. •The disadvantages of a decentralized organizational structure include: يلي ام يزكرملالا يميظنتلا لكيهلا بويع لمشتو: •the possibility that the business segments are duplicating each others’ efforts, and دوهجل ةرركتم لامعلأا تاعاطق نوكت نأ ةيناكمإو ،ضعبلا اهضعب •segment managers may make decisions incongruent with the goals of the organization. تارارق ذاختا تاعاطقلا يريدمل نكميةمظنملا فادهأ عم ضراعتت. © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 8 Q3: Responsibility Accounting ةبساحملا ةيلوؤسملا •Responsibility accounting assigns costs and revenues to business segments based on the areas over which the segment managers have decision making authority and responsibility. ةبساحمةيلوؤسملا : ساسأ ىلع لامعلأا تاعاطقل تاداريلإاو فيلاكتلا نيعتةيلوؤسملاو رارقلا ذاختا ةطلس تاعاطقلا يريدم يتلا تلااجملا. •The revenues and costs assigned to a responsibility center are based on the elements over which the center’s manager has control. ةصصخملا فيلاكتلاو تاداريلإا دنتستو ريدم اهيلع رطيسي يتلا رصانعلا ىلإ ةيلوؤسملا زكرملزكرملا. © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 9 Q3: Cost Centers ةفلكتلا زكارم •Managers of cost centers have responsibility only for managing the center’s costs. فيلاكت ةرادإ ةيلوؤسم ةفلكتلا زكارم ءاردم لمحتيوطقف زكرملا. •Many support departments are cost centers, for example: ليبس ىلع ،ةفلكتلا زكارم يه ةدناسملا تارادلإا نم ديدعلالاثملا: •Human resource department ةيرشبلا دراوملا مسق •Accounting department ةبساحملا مسق •These managers may only have responsibility for some of the center’s costs and not for others. نع سيلو زكرملا فيلاكت ضعب ةيلوؤسم نوريدملا ءلاؤه لمحتيومهريغ. © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 10 Q3: Revenue Centers تاداريلإا زكارم •Managers of revenue centers have responsibility for generating revenues. تاداريلإا زكارم ءاردم لمحتيوتاداريلإا ديلوت ةيلوؤسم. •These managers usually have the authority to determine the prices of goods sold. نوكي ام ةداعوةعابملا علسلا راعسأ ديدحت ةطلس نيريدملا ءلاؤهل. •Revenue center managers are held responsible for the volume of sales. تاداريلإا زكارم وريدم لمحتيوتاعيبملا مجح نع ةيلوؤسملا. •A marketing department or a geographical sales region are examples of revenue centers. قيوستلا مسقتاداريلإا زكارمل ةلثمأ يه ةيفارغجلا تاعيبملا ةقطنم وأ. © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 11 Q3: Profit Centers حبرلا زكارم •Managers of profit centers have responsibility for generating revenues and controlling costs. لمحتيوفيلاكتلا يف مكحتلاو تاداريلإا ديلوت ةيلوؤسم حبرلا زكارم ءاردم. •These managers usually have the authority to determine prices, the sales mix of goods sold, and the inputs used. ديدحت ةطلس نيريدملا ءلاؤهل نوكي ام ةداعوةمدختسملا تلاخدملاو ،ةعابملا علسلا نم تاعيبملا جيزمو ،راعسلأا. •A manufacturing division is an example of a profit center, and it will have both revenue and cost centers within the division. زكرم ىلع لاثم وه عينصتلا مسقمسقلا لخاد فيلاكتلاو تاداريلإا زكارم نم لاك اهيدل نوكيسو ،حبرلا. © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 12 Q3: Investment Centers رامثتسلاا زكارم •Managers of investment centers have responsibility for generating revenues and controlling costs. ديلوت ةيلوؤسم رامثتسلاا زكارم ءاردم لمحتيوفيلاكتلا يف مكحتلاو تاداريلإا. •These managers usually have the same authority as do profit center managers, in addition to the authority to make asset acquisition and disposition decisions. نوكي ام ةداعو ىلإ ةفاضلإاب ،حبرلا زكارم ءاردم اهب عتمتي يتلا ةطلسلا سفن نيريدملا ءلاؤهلاهيف فرصتلاو لوصلأا ءارش تارارق ذاختا ةطلس. •A manufacturing division with a manager allowed to purchase large machinery and perhaps build more factory space is an example of an investment center. عم عينصتلا مسق ىلع لاثم وه عنصملا ةحاسم نم ديزملا ءانب امبرو ةريبك تلاآ ءارشل حمسي ريدمرامثتسلاا زكرم. © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 13 Q4: Performance Evaluation of Investment Centers رامثتسلاا زكارم ءادأ مييقت •Return on investment (ROI) shows the percentage return the center made on the investment level chosen. ىلع دئاعلا نيبيوراتخملا رامثتسلاا ىوتسم ىلع زكرملا هققح يذلا دئاعلل ةيوئملا ةبسنلا رامثتسلاا. •Residual income (RI) shows the dollar amount the center earned above the minimum required for the center’s investment level. رلاودلا غلبم يقبتملا لخدلا رهظيوزكرملا ىوتسمل بولطملا ىندلأا دحلا قوف زكرملا هيلع لصح يذلا. •Economic value added (EVA®) is a specific type of residual income calculation. يه ةيداصتقلاا ةفاضملا ةميقلايقبتملا لخدلا باسح نم ددحم عون. •ROI can be used to compare the performance of different-sized business segments, but RI and EVA® can not. ىلع دئاعلا لخدلا نكلو ،مجحلا ةفلتخملا لامعلأا تاعاطق ءادأ ةنراقمل مدختست نأ نكمي رامثتسلاااهنكمي لا ةفاضملا ةميقلاو يقبتملا. ® Stern Stewart & Co. © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 14 Q4: Return on Investment (ROI) رامثتسلاا ىلع دئاعلا •ROI is simply calculated as “earnings” over “investment”. متي هنأ ىلع ةطاسبب رامثتسلاا دئاع باستحا"حابرأ " ىلع"رامثتسلاا." •Operating assets include cash, A/R, inventory, and the property and equipment used in producing the revenue. تاكلتمملاو نوزخملاو دقنلا ةيليغشتلا تادوجوملا نمضتتتاداريلإا جاتنإ يف ةمدختسملا تادعملاو. •“Earnings” and “investment” must be defined; often, earnings is defined as operating income and investment is defined as average operating assets, so that ديدحت بجيو"حابرلأا " و"رامثتسلاا" فرعيو ليغشتلا تاداريإ اهنأب حابرلأا فرعت ام ابلاغو ؛ثيحب ،ةيليغشتلا لوصلأا طسوتم هنأب رامثتسلاا © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 15 Q4: DuPont Analysis •DuPont analysis is a particularly useful decomposition of ROI. ليلحتتنوبود رامثتسلاا ىلع دئاعلا نم صاخ لكشب ديفم ليلحت وه. where: •DuPont analysis can be used to determine ways that ROI can be improved. ليلحت مادختسا نكميوتنوبود رامثتسلاا دئاع نيسحت نكمي يتلا قرطلا ديدحتل. and © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 16 Q4: ROI Example Altus Industries has two divisions, North and South. Given the information below, compute the ROI for each division. North ROI = $180,000/$2,000,000 = 9% South ROI = $40,000/$200,000 = 20% © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 17 Q4: ROI and DuPont Analysis Example Altus Industries has two divisions, North and South. Use DuPont analysis to decompose the ROI for each divisions and discuss. North does a better job of using its asset base to generate sales than does South. However, South does a better job of turning sales dollars into operating income than does North. © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 18 Q4: ROI and New Projects Example Suppose that Altus has a minimum required rate of return for all investments of 10%. Each division is considering a new project. The expected return and initial investment of each project is shown below. If ROI is used to evaluate division performance, will each division accept or reject the new project? Are these decisions in line with the best interests of Altus? North will decide to accept the project because it will increase division ROI. However, this is not in line with the organization’s best interests because investments with an ROI less than 10% should not be accepted. لامشلا فوس ررقي لوبق عورشملا هنلأ ديزيس نم دئاع رامثتسلاا. عمو ،كلذ نإف اذه لا ىشامتي عم حلاصم ةمظنملا ىلضفلا نلأ تارامثتسلاا تاذ دئاعلا ىلع رامثتسلاا لقأ نم 10٪ لا يغبني اهلوبق. South will decide to reject the project because it will decrease division ROI. However, this is not in line with the organization’s best interests because investments with an ROI exceeding 10% should be accepted. بونجلا فوس ررقي ضفر عورشملا هنلأ للقيس نم دئاع رامثتسلاا. عمو ،كلذ نإف اذه لا ىشامتي عم حلاصم ةمظنملا ىلضفلا هنلأ بجي لوبق تارامثتسلاا يتلا ديزت دئاع رامثتسلاا نع 10٪. © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 19 Q4: Residual Income (RI) ةيقبتملا لخدلا •RI is operating income less the minimum required operating income given the segment’s investment in assets. يليغشتلا لخدلا نم ىندلأا دحلا اصقان ليغشتلا لخد وه يقبتملا لخدلالوصلأا يف عاطقلا تارامثتسلا ارظن بولطملا. •RI removes the incentive for business segment managers to make project investment decisions based on a comparison of segment ROI and project ROI. ليزي لخدلا يقبتملا زفاحلا يريدمل عاطق لامعلأا ذاختلا تارارق رامثتسلاا يف عورشملا ادانتسا ىلإ ةنراقم دئاع رامثتسلاا يعاطقلا دئاعو رامثتسلاا عورشملل. RI = Operating income - Required rate of return Average operating assets X © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 20 Q4: RI Example Altus Industries has two divisions, North and South. Given the information below, compute the RI for each division. Suppose that Altus has a minimum required rate of return of 10%. How is this related to ROI? North RI = $180,000 – 10% x $2,000,000 = ($20,000) South RI = $40,000 – 10% x $200,000 = $20,000 North had an ROI less than the 10% minimum required, which translates to a negative residual income. South’s ROI exceeded the 10% minimum, so it had a positive RI. © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 21 Q4: RI and New Projects Example If RI is used to evaluate division performance, will each division accept or reject the new project? Are these decisions in line with the best interests of Altus? The minimum required rate of return for all investments of 10%. North would reject the project because $7,500 – 10% x $80,000 < 0. If North accepted the project, its new RI would be: [$180,000 + $7,500] – 10% x [$2,000,000 + $80,000] = ($20,500). South would accept the project because $2,250 – 10% x $15,000 > 0. If South accepted the project, its new RI would be: [$40,000 + $2,250] – 10% x [$200,000 + $15,000] = $20,750. Each division’s decision is in line with Altus’ best interest.
© John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 22 Q4: Economic Value Added (EVA®) ةيداصتقلاا ةفاضملا ةميقلا •EVA® is a residual income calculation with specific definitions of income, investment and rate of return. وه افيإدئاعلا لدعمو رامثتسلااو لخدلل ةددحم تافيرعت عم ةيقبتملا لخدلا باسح. •Income is defined as “adjusted” after-tax operating income. لخد هنأ ىلع لخدلا فيرعت متي”لدعم “يليغشتلا ليغشتلا دعب. •The required rate of return is defined as the weighted average cost of capital (WACC). هنأ ىلع بولطملا دئاعلا لدعم فرعيولاملا سأر ةفلكتل حجرملا طسوتملا. •Operating assets is defined as “adjusted” total assets less current liabilities. لوصلأا عومجم اهنأب ةيليغشتلا تادوجوملا فرعتو”ةلدعملا “ةلوادتملا موصخلا اصقان. •EVA®’s “adjustments” are specific to the organization’s structure and goals. ةيداصتقلاا ةفاضملا ةميقلا “تلايدعتلا ” لكيهل ةددحم يهفادهلأاو ةمظنملا.
© John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 23 Q4: Weighted Average Cost of Capital (WACC) لاملا سأر ةفلكتل حجرملا طسوتملا •WACC is a weighted average of the after-tax cost of debt and the cost of equity. ةفلكتل حجرملا طسوتملا وه لاملا سأر ةفلكتل حجرملا طسوتملاةيكلملا قوقح ةفلكتو ةبيرضلا دعب نيدلا. •WACC is the after-tax cost of all long-term financing for the business segment. طسوتملا عيمجل ةبيرضلا دعب ام ةفلكت وه لاملا سأر ةفلكتل حجرملالامعلأا عاطقل لجلأا ليوط ليومتلا. •Business segments in riskier industries will have a higher WACC. تاذ تاعانصلا يف لامعلأا تاعاطق نوكتسولاملا سأر ةفلكتل حجرملا طسوتملا نم ىلعأ رطاخملا
© John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 24 Altus Industries has two divisions, North and South. Given the information below, compute the EVA® for each division. Assume that the North Division has a WACC of 5% and that South Division has a WACC of 18%. North EVA® = $120,000 – 5% x [$2,000,000 – $400,000] = $40,000 Q4: EVA® Example South EVA® = $24,000 – 18% x [$200,000 – $36,000] = ($5,520)
© John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 25 Q5: Using Compensation to Motivate Performance ءادلأا زيفحتل ضيوعتلا مادختسا •Base salaries plus bonuses based on operating income focuses manager attention on short-term goals. زكرت بتاورلا ةيساسلأا ةفاضلإاب ىلإ تاولاعلا ىلع ساسأ لخدلا يليغشتلا مامتها ريدملا ىلع فادهلأا ةريصق لجلأا. •Base salaries plus stock options may focus manager attention on longer-term goals. دق زكرت بتاورلا ةيساسلأا ةفاضلإاب ىلإ تارايخ مهسلأا مامتها ريدملا ىلع فادهلأا ةليوط لجلأا. •Stock options are used frequently in the U.S. but are discouraged from use in some other countries. متي نكلو ةدحتملا تايلاولا يف رركتم لكشب مهسلأا تارايخ مادختسا متيىرخلأا نادلبلا ضعب يف اهمادختسا طيبثت.
© John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 26 Q6: Transfer Prices ليوحتلا راعسأ •Goods or services transferred between the segments of an organization are known as intermediate products. فرعتو علسلا وأ تامدخلا ةلوقنملا نيب تاعاطق ةمظنملا اهنأب تاجتنم ةطيسو. •Performance evaluation of the business segments can be affected. رثأتت نأ نكمي لامعلأا تاعاطق ءادأ مييقت. •Organizations set transfer prices on these goods and services. علسلا هذه ىلع ليوحتلا راعسأ تامظنملا تددحتامدخلاو. •Transfer prices are eliminated during the preparation of consolidated financial statements, so they have no effect on an organization’s income. متي فذح راعسأ ليوحتلا دنع دادعا تانايبلا ةيلاملا ،ةدحوملا يلاتلابو لا نوكي اهل يأ ريثأت ىلع لخد ةمظنملا.
© John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 27 Q6: Cost-Based Transfer Prices ةفلكتلا ىلع ةمئاقلا ليوحتلا راعسأ •Cost-based transfer prices are based on a specific definition of the cost of the intermediate product. راعسأ دنتستطيسولا جتنملا ةفلكتل ددحم فيرعت ىلإ ةفلكتلا ىلع ةمئاقلا ليوحتلا. •When the cost includes an allocation for fixed costs, and the transferring segment has the opportunity to sell to external customers, this may lead to suboptimal decisions for the organization. ،ةتباثلا فيلاكتلل اصصخم ةفلكتلا نمضتت امدنعو تارارق ىلإ كلذ يدؤي دقف ،نييجراخ ءلامع ىلإ هعيبل ةصرفلا لقنلا عاطقل حاتيوةمظنملا ىلإ ةبسنلاب ةيلاثم ريغ. •When the transferring segment does not have external customers, this reduces the transferring segment’s incentives to reduce costs. نوكي لا امدنع ضفخل لقن عاطقلا زفاوح نم للقي اذهو ،نييجراخ ءلامع لقنلا عاطقفيلاكتلا.
© John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 28 Q6: Activity-Based Transfer Prices طاشنلا ىلع مئاقلا ليوحتلا راعسأ •Activity-based transfer prices are based on the unit-level and batch-level costs of the intermediate product plus a percentage of the producing department’s facility-level costs. ليوحتلا راعسأ دنتستو ىلعو تادحولا ىوتسم ىلع تادحولا فيلاكت ىلإ طاشنلا ىلع ةمئاقلا ىوتسم فيلاكت نم ةيوئم ةبسن ىلإ ةفاضلإاب جتنملل ةعفدلا ىوتسمةجتنملا ةأشنملا. •When the purchasing department’s annual requirements for the intermediate product are known in advance, the transferring segment’s planning is improved. ةيئارشلا ةرادلإا تابلطتم نوكت امدنعلقنلا عاطق طيطخت نيسحت متي ،اقبسم ةفورعم طيسولا جتنملل.
© John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 29 Q6: Market-Based Transfer Prices •Market-based transfer prices are useful when there is a highly competitive market for the intermediate product. قوسلا ىلع ةمئاقلا ليوحتلا راعسأوطيسولا جتنملل ةياغلل ةيسفانت قوس كانه نوكت امدنع ةديفم. •The producing department can opt to sell most or its entire intermediate product to external customers. اهتاجتنم وأ مظعم عيب راتخت نأ ةجتنملا ةرادلإل نكمينييجراخلا ءلامعلل اهلمكأب ةطسوتملا.
© John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 30 Q6: Dual-Rate Transfer Prices جودزم رعس تاذ لقن راعسأ •When dual-rate transfer prices are used, the producing department’s selling price is different than the purchasing department’s purchase price. يف عيبلا رعس نإف ،جودزم رعس تاذ لقن راعسأ مادختسا متي امدنعتايرتشملا ةرادإ هب موقت يذلا ءارشلا رعس نع فلتخي جاتنلإا ةرادإ. •Dual-rate transfer prices are useful to motivate appropriate manager behavior for both departments. زيفحتل ةديفم جودزملا لدعملا تاذ ليوحتلا راعسأنيترادلإا لاكل بسانملا ريدملا كولس.
© John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 31 Q6: Negotiated Transfer Prices تاضوافملا ليوحت راعسأ •In some cases, managers of the producing and purchasing departments meet to exchange information and determine the transfer price. يفو لدابتل ةيئارشلاو ةجتنملا تارادلإا وريدم عمتجي ،تلااحلا ضعبليوحتلا رعس ديدحتو تامولعملا. •The resultant transfer price is called a negotiated transfer price. ليوحتلا رعس ىلع قلطيوهيلع ضوافتم لقن رعس جتانلا.
© John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 32 Q6: Minimum Transfer Price ليوحتلا رعسل ىندلأا دحلا •From the standpoint of the producing division, the lowest acceptable transfer price is one that covers the variable costs plus any contribution margin that is lost when the goods are not sold to external customers: نمو ةهجو رظن ةبعش ،جاتنلإا نإف ىندأ رعس ليوحت لوبقم وه يذلا يطغي فيلاكتلا ةريغتملا ةفاضلإاب ىلإ يأ شماه ةمهاسم دقفي امدنع لا عابت علسلا ىلإ ءلامع نييجراخ: Transfer price  Variable cost per unit + Total contribution margin on lost external sales Number of units transferred •The lost contribution margin depends on whether the producing department has sufficient external customers to use its entire capacity. شماه دمتعيو نييجراخ ءلامع اهيدل جاتنلإا ةرادإ تناك اذإ ام ىلع دوقفملا ةمهاسملااهتقاط لماك مادختسلا نييفاك.
© John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 33 Q6: Transfer Price Example Shepard, Inc. has two divisions, East and West. East makes a component called XW3 that West uses in its production. East’s capacity is 100,000 units of XW3 each month. The variable costs of producing XW3 are $4/unit and East’s fixed costs are $150,000 per month. East can sell XW3 to external customers for $6 and West can buy it from another supplier for $6. West needs 20,000 units of XW3 per month. Compute the transfer price if East charges the full absorption cost. Suppose that East can sell 70,000 units to external customers. Will East and West agree to the transfer? Is the transfer in the best interests of Shepard? درابيش، ةكرشو اهيدل ،نيمسق قرشلا برغلاو. قرشلا لعجي نوكم ىمسي 3 نأ برغلا مدختسي يف هجاتنإ. ةردق قرشلا وه 100،000 ةدحو نم 3 لك رهش. فيلاكتلا ةريغتملا جاتنلإ 3 يه 4 $ / ةدحو فيلاكتو ةتباث يف قرشلا يه 150،000 $ ايرهش. قرشلا نكمي نأ عيبت 3 ءلامعلل نييجراخلا ل $ 6 برغلاو نكمي هئارش نم دروم رخآ ل $ 6. برغلا جاتحي 20،000 ةدحو نم 3 يف رهشلا. باسح رعس ليوحتلا اذإ ناك قرشلا ىضاقتي لماك ةفلكت صاصتملاا. ضرتفنل نأ قرشلا نكمي نأ عيبت 70،000 ةدحو ءلامعلل نييجراخلا. له قفاويس قرشلا برغلاو ىلع ؟لقنلا وه لقن يف ةحلصم دربيش؟ Cost-based transfer price = $4.00 + $150,000/100,000 = $5.50 Both divisions will agree to the transfer. It is in the best interests of Shepard because it only costs $4.00 x 20,000 = $80,000 for East to produce the units, but it would cost West $6.00 x 20,000 = $120,000 to get the units from an outside supplier. East’s minimum transfer price = $4.00 + $0 = $4.00, because it has sufficient capacity to cover West’s demand for the product.
© John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 34 Q6: Transfer Price Example Shepard, Inc. has two divisions, East and West. East makes a component called XW3 that West uses in its production. East’s capacity is 100,000 units of XW3 each month. The variable costs of producing XW3 are $4/unit and East’s fixed costs are $150,000 per month. East can sell XW3 to external customers for $6 and West can buy it from another supplier for $6. West needs 20,000 units of XW3 per month. Suppose that East can sell 97,000 units to external customers. Compute the minimum transfer price East will accept. Will West agree to the transfer? Is the transfer in the best interests of Shepard? East will lose sales of 17,000 units to regular customer if it transfers the units to West. The contribution margin on a regular customer is $6 – $4 = $2. West will agree to this because $5.70 < $6. It is in the best interests of Shepard because it only costs $4 x 20,000 + {lost contribution margin of $2 x 17,000} = $114,000 for East to produce the units, but it would cost West $6.00 x 20,000 = $120,000 to get the units from an outside supplier. East’s minimum transfer price = $4 + ($2 x 17,000)/20,000 = $5.70. © John Wiley & Sons, 2011 Chapter 15: Performance Evaluation and Compensation Eldenburg & Wolcott’s Cost Management, 2e Slide # 35 Q7: Transfer Price Uses ليوحتلا رعس تامادختسا •Organizations set transfer prices for products and services transferred between business segments. ددحت تامظنملا راعسأ لقن تاجتنملا تامدخلاو ةلوقنملا نيب تاعاطق لامعلأا. •Transfer prices can also be set for corporate overhead costs. ليوحتلا راعسأ ديدحت اضيأ نكميوتاكرشلل ةماعلا فيلاكتلل. •International organizations set transfer prices so that total taxes are minimized for the organization, subject to IRS regulations. ددحت ةيلكلا بئارضلا ليلقت متي ثيحب ليوحتلا راعسأ ةيلودلا تامظنملابئارضلا ةحلصم حئاول ةاعارم عم ،ةمظنملل.

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