Cost Accounting Is A Process That Aims To Capture A Companys Production Accounting Essay

Cost accounting is a procedure that aims to capture a companys production, to measure the input cost of each production. Cost accounting is frequently used in the company to assist the direction with determination devising. Cost comptrollers are a good as a tool for direction in budgeting and in puting up cost control which improves the net borders of the company in future. Cost comptrollers in traditional fabrication companies would normally do usage of machines that automate certain operations. Production activity is measured in machine hours. Traditional fabrication is besides labour intensive where there are high labor costs and low operating expenses. Traditional fabrication allocates the companies ‘ indirect cost to the points produced in order of their volume, figure of units produced, direct labor hours and machine hours. The usage of machine hours implies that machine hours are cause footing of the mill operating expense, this deduction is done when merely machine hour s are used to apportion the fabricating operating expense to merchandises. Cost comptrollers in traditional fabrication companies use a individual caput pool, this method of apportioning indirect costs normally consequences in the wrong cost of informations. Merchandises with high volumes have high labor costs likewise merchandises with lower volumes would normally be understated and be ignored. Traditional fabrication companies cost comptrollers are needed to assist in the managing of costs which is normally non an easy undertaking to make, but the cost comptrollers have found a manner of pull offing them. Modern fabrication was developed to work out the complexnesss of running a immense concern. Modern fabrication companies make use computing machines and robotics ; they control the whole production/manufacturing procedure. Cost comptrollers would normally necessitate modern fabrication companies because they have an built-in flexibleness to supply particular studies and assist direction with determination doing sing cost activities undertaken. Modern fabrication houses are normally non forced to stay by the fiscal coverage demands. Modern fabrication companies would normally delegate costs to activities and merchandises based on how the costs and resources are consumed by the procedure or merchandise. Cost comptrollers are needed in the modern fabrication companies because it gives them a clearer image of cost of procedure and the profitableness of clients and merchandises. They are besides needed because it would assist them with budgeting techniques for the truth of fiscal prognosi s and besides increasing the comprehension of the directors. Cost comptrollers are needed in the modern fabrication companies because modern fabrication houses use computing machines and robotics this helps in the quick and accurate production of fiscal programs to assist the comptrollers in wise determination devising. Productivity is truly improved in modern fabrication companies because there is a wider set of related component here, which is computing machines and robotics. Absorption costing is no longer for modern auto manufacturer such as BMW discuss. Your reply should include suggestions of other bing methods that are more relevant for a modern auto manufacturer and supply your accounts. Absorption costing is absorbing all the fabrication through units produced. It absorbs all the direct labor, direct stuffs, with all the variable and fixed costs. It is By and large Accepted Accounting Principles which means it is used for external coverage. Absorption costing because it absorbs all the cost is non suited for modern fabrication houses, because with this bing pricing is lesser extent than it appears to be in the instance. Cost is calculated to make up one's mind how much net income you have made, and so the monetary value while be set. Because absorbs all the costs, that establishes the fact that it does non recognize the importance fixed costs. This makes it difficult to distinguish between fixed and variable costs. The variableness of net incomes besides causes confusion because the gross revenues and stock alteration. Absorption bing recognises the importance of fixed costs in production by including them in the production procedure. It is used to fix fiscal histories. When production remains changeless while gross revenues rise and autumn irregularly in figure this method will demo a less fluctuation in net net income. Absorption costing is non suited for the modern auto makers like BMW because it is non so utile to t he direction to do wise determinations, to be after and command that is it does non assist directors to develop the company ‘s mission and aims to be the decisive factor in carry throughing them and non set uping public presentation criterions, mensurating and describing existent public presentation and comparing them to take a disciplinary action as necessary. This truly shows that it is non suited fabricating companies like BMW because they need to utilize the cost information for good determination devising intents and budgeting. But instead modern fabrication houses like BMW need to utilize Activity Based Costing because is the method of bing that assigns costs to their activities based on the resources instead than merchandises or services. Other costs and resources are equally distributed to the merchandises and services they use. This method does non extinguish any costs ; it gives more information and takes into history how costs are consumed. This method is suited for BMW because BMW is involved process betterment and reduction costs. Activity Based Costing assigns all the single activities involved in the fabrication procedure are accurately costed, that is it makes seeable waste and non value added. Therefore doing it easier to place the cost of each procedure. It uses unit cost instead entire cost. It facilitates benchmarking which means there is a standard mention against which things can be compared and assessed. It provides a better apprehension of operating expenses and it is easy understood by everyone because since companies like BMW discloses their fiscal studies to the populace they can understand why things are the manner they are. Activity Based Costing helps with future merchandise planning because for illustration all the activities associated with BMW can be accurately determined before it is launched. This can besides assist to find the monetary value and other outgos. Question 3 Cost?Material X & A ; Y working 1 4,000 Material which can be used in another machine 6,000 Labour – Department A ( working 2 ) -Department B ( working 3 ) 12,800 3,600 Sale of machine 5,000 Alteration work 2,000 Entire 33,400 Entire = ? 33,400 + ?125, 000 = ? 158, 400 Working 1 5000 – 1000 = 4000 Working 2 Department A 200 ten 2 ten 4 ten 8 = ?12,800 Working3 Department B 150 ten 4 ten 6 = ?3,600 Working 4 = ? 33, 400 = 125, 000 = ? 158, 400 ten 10 % = ? 174, 240 The minimal monetary value that should be quoted to the new purchaser is ?174, 240 ( working 4 ) . This is because this monetary value includes all the alteration work costs. MM should accept the offer made by the new purchaser because it more than the sum willing to be paid by the first purchaser. MM should besides disregard the ?2000 sedimentation made by the original purchaser because it is a historical cost that is it is a cost that has already occurred therefore doing it an irrelevant cost. I would besides advice MM to go on with alterations asked for by the new purchaser as would convey him more net income than of the original purchaser. The net incomes made would besides assist him to cover the costs he incurred when doing the alterations. Cost?Material X & A ; Y working 1 4,000 Material which can be used in another machine 6,000 Labour – Department A ( working 2 ) -Department B ( working 3 ) 12,800 1,500 Sale of machine 5,000 Alteration work 2,000 Entire 31, 300 Working 1 5000 – 1000 = 4000 Working 2 Department A Mach Dept B = ?150 x 5 tens 2 = ?1, 500 Working3 Department B 150 ten 4 ten 6 = ?3,600