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Tag Archives: Cost Accounting

What Is Cost Leadership Strategy And How Is It Achieved?

What is Cost Leadership Strategy ? Cost leadership is a kind of Strategy that is used by many companies to improve their position in the market. The basic idea is to become a leader in costs in this market closely and control of costs and expenses related to the continued operation of the company. This helps the company to attain a safe position in the event of price war between competitors while increasing the chances of being able to maintain a reasonable profit margin.  How is Cost Leadership Achieved? With …

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The Impact Of Cost Control On Manufacturing Industries

Cost Control on Manufacturing Industries

Impact of Cost Control on Manufacturing Industries : Attention must be called to the fact that in the long run all costs are controllable. Variable costs are generally controllable over short time periods. Some fixed costs, such as supervisory labor or equipment rental, can also be terminated on short notice while other fixed costs, depreciation of fixed assets or a long-term lease agreement, involve a fixed commitment over a longer period of time. Under the scheme of Cost Control On Manufacturing Industries, some costs possess a dual short and long-run …

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Variance Analysis for Responsibility Accounting

Variance Analysis for Responsibility Accounting

Variance Analysis for Responsibility Accounting. Today with the emphasis on responsible control of financial results via the Return On Capital Employed [ROCE] concept, assets, liabilities, net worth, revenue, and costs form a vast area in which the entire management spectrum from the top executive to the lowest foreman holds some share of responsibility. Like blocks in a pyramid, the responsibility travels from the lowest to the highest level of supervision. Each supervisory level is responsible for costs incurred by its supervisor and his subordinates. To be able to exercise this …

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Why departmentalization is a must for cost planning and control?

cost planning and control, Difference between equity settled and cash settled share based payment

The responsible control of departmental expenses is equally essential in other than manufacturing activities. The following have or should have divided their large complex entities into administrative and supervisory departments, sections, or service units for cost planning and control. Non-manufacturing segments of manufacturing concerns (e.g., marketing departments) Retail or department stores Financial institutions (banks, savings and loan associations, and brokerage houses) Insurance companies Educational institutions (public school systems, colleges, and universities) Service organizations (hotels, motels,hospitals, and nursing homes) Federal, state, and municipal governments (and their agencies) Retail or department stores …

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Year-end Departmental Expense Analysis Sheet

Expense Analysis Sheet | measurement of fair value

Departmental Expense Analysis Sheet: Departmentalization of factory overhead requires that each expense be charged to a department as well as to a specific expense account. Such charges are collected on departmental expense analysis sheet. This form, used for both producing and service departments, is partially reproduced above. In this form, each column represents a certain class of factory over-head that will be charged to the department. For example, the column coded 411 represents supervisors and foremen, 412 represents indirect labor, and so forth. Entries to departmental expense analysis sheet are …

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Allocate service department costs to production departments

importance of standard costing | direct and indirect materials

Allocate service department costs to production departments: Instead of closing all service department overhead directly to producing departments, some overhead may first be charged to other service departments or to general factory overhead. In some companies, service department expenses are transferred only to producing departments. This procedure avoids much clerical work. It can be justified if no material difference in the final costs of a producing department results when the expenses of a service department are not prorated to other service departments or to general plant. However, this procedure fails …

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How To Calculate Predetermined Overhead Rate

limitations of activity based costing and predetermined overhead rate

The illustration uses four producing departments here such as Cutting, Planing, Assembly, and Upholstery; and four service departments: Materials Handing, Inspection, Utilities, and General Plant. The total estimated overhead prepared has now been departmentalized, but under the account classification described above and with a slight modification of figures for ease to calculate predetermined overhead rate. The fixed-variable cost classification has been retained. Its purpose will be explained. The establishment of predetermined overhead rate for departmentalized factory operations proceeds in the following manner: 1 . Estimate or budget total direct factory …

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Methods of allocation of utility costs to producing departments

disadvantages of backflush costing | option pricing models | equity instruments | departmental overhead costs

The number and types of service departments in a company depend on its operations and the degree of expense control desired. Service departments used for illustrative purposes are: (1) materials handling, (2) inspection, (3) utilities, and (4) general plant services. Method of allocation of utility costs to producing departments Inspection: For cost control, inspection costs are treated in the same manner as other service department costs. However, in certain instances, a special work order may require additional inspection or testing. This type of inspection cost is chargeable to the order …

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Allocating services department cost to producing departments

services department fair value hierarchy

ALLOCATION OF SERVICES DEPARTMENT OVERHEAD TO BENEFITING DEPARTMENTS: The expenses of services department must ultimately be transferred to producing departments to establish predetermined factory overhead rates and to analyze variances. Effective expense control dictates that each services department costs be first charged with its direct overhead. Services department (s) may also be charged with general factory expenses as well as with costs from other service departments. Most of the overhead items discussed for producing departments will naturally also be found in services department (s). The number and types of services …

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Basis of Charging Indirect Expenses to Producing Departments

accounting for indirect expenses | uses of cost data | essentials of a good information system

Apart from Expenses, Indirect Expenses such as power, light, rent, and depreciation of factory, when shared by all departments, can understandably not be charged directly to a department, be it producing or service. These indirect expenses do not originate with any specific departments. They are incurred for all to use and therefore, be prorated to any or all departments using them. The selection of fair bases for such distributions requires careful study. Selecting appropriate bases for the distribution of these indirect expenses or  general factory costs is difficult and in …

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