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WelcometoACCG200
F d
FundamentalsofManagementAccounting
l fM
A
i

LectureWeek1

Week 1 - Semester 2, 2011

UnitOutline
y Staff
y UnitCoordinator Ranjith Appuhami
y DeputyUnitCoordinator AmyTung
y TeachingAdministrator EdoSetiaprasojo
UnitEmail accg200@mq.edu.au

Week 1 - Semester 2, 2011

2/08/2011

Assessment
InclassQuizzes(Two)

15%

RandomWeeklyAssignments

10%

TutorialParticipation

10%

ExcelAssignments(Two)

10%

FinalExamination

55%

Total

100%

To PASS the unit you MUST pass the final examination

Week 1 - Semester 2, 2011

Inclassquizzes 15%
Quiz No.

Week No.

Time
allowed

Nature of
questions

Week 3 20 mins
Commencing
15th August
Week 9 20 mins
Commencing
10th October

Multiplechoice

Multiplechoice

Possible
chapters
covered
1, 2 and 3

Weight

4, 6 and 7

7.5 %

7.5 %

IfyoufailtosittheQuizzesintheprescribedtimeperiod
youwillbeawardedzeromarks
youwillbeawardedzeromarks.

Week 1 - Semester 2, 2011

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RandomWeeklyAssignments10%
y Five(5) randomweeklyassignmentscollectedbytutors
y
y

y
y

duringthesemester.
g
Thetutorwilldeterminewhichweeksassignmentswillbe
collected.
Maximumof2.5mark foreachassignmentwillbe
calculatedbasedonthecriteriamentionedintheunit
outline.
Thebest4ofthese willcountwiththemarksawarded
Tutorshavealsobeentoldtocheckyourhomeworkeach
weekformarkstowardsclassparticipation

Week 1 - Semester 2, 2011

Participation 10%
y Studentsareexpectedtoattend10outof12tutorials
y 4marksareawardedforattendance(0.4marksfor

eachtutorialattendedtoamaximumof4)
y 6marksarebasedonyourparticipationintutorials

andyourhomeworkpreparation.

Week 1 - Semester 2, 2011

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TwoExcelAssignments10%
Topic

Due in

Job Costingg

Week 6

Time and Date for

submission
Fridayy 6pm
p 9th September
p

Activity Based Costing

Week 11

Friday 6pm 28th October

y Theexcelassignmentquestionswillbeemailedtoyour

studentemailaccountafterweek3
y Veryimportant youreadalldocumentsinthe
ExcelAssignments folderonunitwebsitebefore
ExcelAssignmentsfolderonunitwebsitebefore
workingontheassignments.

Week 1 - Semester 2, 2011

TwoExcelAssignments10%
y Youmustuseyourstudentemailaccounttosubmit
assignmentsviaemailto
fbe submission@mq edu au
fbe.submission@mq.edu.au

typeACCG200asthesubjectinyouremail
y Thefiletypemustbe".xlsm"withoriginalmacros
intact.
y ThefilenameMA2xxxxxxxx.xlsm meansthatthisis
assignment2thexxxxxxxxisyourstudentID.
i
t th
i
t d tID
y Assignmentsthatarenotsubmittedaccordingto

instructionswillreceiveZEROMarks

Week 1 - Semester 2, 2011

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TwoExcelAssignments10%
y Theassignmentsaremarkedelectronically
y Avalidationprogramisusedtocheckfor

copying/plagiarism.
py g/p g
y Studentswhocopydata orformulas fromfilesorother

studentsfileswillautomaticallyreceiveZEROmarks
y Assignmentsaremarked,returnedtoyourstudent
emailaccountwithinaweekandcontainfeedbackon
anyerrors

Week 1 - Semester 2, 2011

PeerAssistedLearning(PAL)
y PAL isofferedinthisunit
isofferedinthisunit gotoBESS (E4A106)for

moreinformation
y Thisisafreeprogramthatisrunbystudentswhohave
previouslystudiedtheunitandachievedexcellent
grades.Note:Thesestudentshavepassedthefinal
examinthisunitsotheycangivevaluableadviceon
h t
howtoprepareforthefinalexam.
f th fi l

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Whatismanagementaccounting?
y Canbedefinedas:

the processes and techniques that focus on the effective and

efficient use of organisational resources to support managers in their
tasks of enhancing both customer value and shareholder value
Management Accounting helps to satisfy the information needs of
managers so that they can manage resources effectively and efficiently
and value for customers and organisation as a whole.

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Whatismeantbythetermscustomervalue,shareholder
valueandresources?
y Resources
y Financialandnonfinancial,includinginformation,work

processes,employees,committedcustomersandsuppliers

y Customervalue
y Thevaluethatacustomerplacesonparticularfeaturesofa

productorservice

y Shareholdervalue
y Thevaluethatshareholdersorownersplaceonabusiness

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Managementaccountingdecisions
Examples:
y Capitalbudgetingdecisions(investornotinaproject)
y Shorttermdecisions(addordropaproduct)
y Performanceevaluationdecisions(punishmentsor

rewards)
y Pricingdecisions(transferornotaproducttoa
(

internaldivision,costofaproductandcostofajob).

Week 1 - Semester 2, 2011

13

ManagementAccounting
andFinancialAccounting
y Theaccountinginformationsystemwithinanorganisation
g
y
g

hastwomajorsubsystems:
y Amanagementaccountinginformationsystem
y Afinancialaccountinginformationsystem

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DifferencesbetweenManagementAccounting
andFinancialAccounting
Management
Accounting

Financial
Accounting

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Whatiscommon?
y Costingsystemsarecommontobothfinancialand

managementaccounting
Costaccountingisatechniqueormethodfor
determiningthecostofaproject,process,orthing
Th I i
TheInstituteofManagementAccountants.
fM
A

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PlanningandControlling
Planning formulatingthedirectionforfuture
operations
Controlling puttinginplacemechanismstoensure
thatoperationsproceedaccordingtoplanandthat
objectivesareachieved.

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Week 1 - Semester 2, 2011

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Costtermsandconcepts
y Strongemphasisoncostsandthedifferentclassifications
y Whatarecosts?
y Resourcesgivenuptoachieveaparticularobjective
y Measuredinmonetaryterms

y Whatisacostobject?
y Anitemforwhichmanagementwantsaseparatemeasureofcosts
g
p

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19

Whatisacostobject?
y Product
y Service
y Project
y University
y Student
y Activity
y Classroom

Yes?
Yes?
Yes?
Yes?
Yes ?
Yes ?
Yes
Yes ?

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Costclassifications
y Beforeweclassifycosts,weneedtoconsiderhowmanagers

intendtousetheinformation
y Differentcostsclassificationsareusedfordifferent

purposes
y Thesamecostcanbeclassifiedinanumberofways

dependingontheintendeduseofthecostinformation

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22

Costclassifications

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Classifyingcostsaccordingtotheirbehaviour:
Variablevs.fixedcosts
y Managersmustunderstandhowcostschangeasthelevel
g
g

ofactivityinthebusinesschanges
y Thelevelofactivityisthelevelofworkperformedinthe

organisation(e.g.,Unitsproduced,kilometresdriven,hours
worked)

y Variablecost
y Changesintotal inproportiontochangesinthelevelofactivity(

e.g.,costofelectricityinSonyCo.andcostoftyresinToyotaCo.)

f l
i i i S
C d
f
i T
C )

y Fixedcost
y Remainunchangedintotaldespitechangesinthelevelofactivity

(eg rentpaidforfactoryremainsunchangednomatterhowmany
unitsweproduce)
23

Week 1 - Semester 2, 2011

LectureExample:Variablevs.fixedcosts
Activitylevel
Variablecost
((ToyotaCamry
y
y p
persetof4
produced)
tyres

Annualtotalfixed
supervisioncosts
p
forCamry

TotalVariablecost

$360

$2000000

$230
?

$2000000
?

1000

360
?

2000000
?

360000
?

2000
?

3000

360
?

?
2000000

?
1080000

666.67
?

Week 1 - Semester 2, 2011

Fixedcostper
Camryy
(perunit)

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ClassifyingcostsaccordingtotheirTraceability:
Directvsindirectcosts
y Directcost canbedirectlyidentifiedwithortracedor

linkedtoacostobjectinaneconomicmanner.IfToyota
Camryiscostobject Costoftyres,alloywheels,steels
y Indirectcostsaremanufacturingcoststhatcannotbe

identifiedwithortracedorlinkedtoacostobjectinan
economicmanner(eg wagespaidtocleanerswhocleanthe
Toyotafactory;plantmanagersalarycouncilrates,etc)

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Directvsindirectcosts

(Source: Horngren et al., 2011)

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Directvsindirectcosts
TotalManufacturingcost

Indirectcost

Directcost

Costallocation
Costtracing

Costobject A

Costobject B

Costobject C

Costobject D

Week 1 - Semester 2, 2011

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Classifyingcostaccordingtotimingoftheexpense:
ProductvsPeriodCosts
Aproductcost
y Thecostassignedtogoodsthatweremanufacturedorpurchasedforresale.
Thecostassignedtogoodsthatweremanufacturedorpurchasedforresale
Productcostisregardedasapartoftheasset,inventoryuntilgoodsaresold.

Productcosts=directcosts(directmaterialanddirectlabour)+
indirectcosts(variableoverheadandfixedoverhead)=total
productioncost
y Periodcosts
y Allcostsintheincomestatementotherthancostofgoodssold.
g
y Thesecostsareexpensesintheaccountingperiodinwhichtheyareincurred

ratherthanbeingattachedtounitspurchasedorproduced.
y Examples salariessalesstaff,advertisingexpense,depreciationofoffice

equipment

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Lectureexample
Home Entertainment Center (HEC) operates a large store in
Sydney
Video section operates
p
separately
p
y ((cost object)
j )
?

?
?

?
?

(Source: Horngren et al., 2011)

Week 1 - Semester 2, 2011

29

Classifyingcostsaccordingtotheir
Controllability:
Controllablevsuncontrollablecosts
y Arethecostsunderthecontrolofthemanagerresponsible

fortheproductionoftheproduct?(eg thesalaryofthe
CEOisnotacostthatthemanagerofproductioncan
control)SeeExhibit23

Week 1 - Semester 2, 2011

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Classifyingcostsacrossthevaluechain

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ClassifyingcostsbasedonManufacturingcosts
y Threetermsarecommonlyusedwhendescribing

manufacturingcosts
y Directmaterials
y DirectLabour
y Manufacturingoverhead

(Note:Thisclassificationasdirectorindirectcostassumesthat
productsaretherelevantcostobjects)

Week 1 - Semester 2, 2011

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ClassifyingcostsbasedonManufacturingcosts
(cont.)
DirectMaterials(DM)
(
)
y

Materialsthateventuallybecomepartofthecostobject

y Canbedirectlytracedandlinkedtothecostobject

CostofDM=purchasepriceincludingfreightincharges,
taxesetc. ExamplefromToyotacompany
DirectLabour(DL)
y

Allmanufacturinglabourthatcanbedirectlytracedorlinkedtocost
object

CostofDL=wagespaidtomachineoperatorsand
assemblylineworkers
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33

Classifyingcosts basedon Manufacturing

costs(cont.)
y Manufacturingoverhead(indirectmanufacturingcosts)
g
(
g
)
y Allmanufacturingcosts(otherthandirectmaterialand

directlabour)relatedtothecostobject
y Alsocalledindirectmanufacturingcostsorfactory
burden
y Includesthecostofindirectmaterialandindirect
labour depreciationandinsuranceonfactory
labour,depreciationandinsuranceonfactory
equipment,utilitiesandthecostsofsupport
departmentsformanufacturing

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Classifyingcosts basedonManufacturing
costs(cont.)
ConversionCosts=Directlabourcost+manufacturingoverheadcost
g
y Thecostofconvertingmaterialintoaproduct(thereforeitdoesnot

includecostofdirectmaterials)

PrimeCosts= directmaterialcost+directlabourcost
y Themajorcostsassociatedwithproducingaproduct

35

Week 1 - Semester 2, 2011

ClassifyingcostsbasedonManufacturing
costs(cont.)
TotalManufacturingcost

DirectMaterialcost

Primecost

Directlabourcost

Manufacturingoverhead

Conversioncost

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Lectureexample
y SunPizzahasthefollowingcosts:
y Flour
y Salaryofproductionsupervisor
y Depreciationonrestaurantbuilding
y Wagesofcook
W
f k
y Equipmentrentalcosts
y Accountantssalary
y Marketingcosts
y Deliverycosts
y Wagesofkitchenemployees

y Classifythefollowingaseither
l
f h f ll
h
(a) VariableorFixedcosts
(b) Directmaterials,directlabour,MOH,sellingandadmin
orother
37

Week 1 - Semester 2, 2011

LectureExampleSolution
Cost

Classification
(Fixedor
variable)

Classification
(DM,DL,MOH
orS&Aorother)

Variable
V
?i bl

DM
?

Salaryofproductionsupervisor

Fixed
?

MOH
?

Depreciation(straightlinebasis) on
restaurantbuilding

Fixed
?

MOH
?

Variable
?

DL
?

Equipmentrentalcost

Fixed
?

MOH
?

Accountantssalary

?
Fixed

Periodcost
?

Fixed
?
Variable/Fixed
?

Periodcost
?
Periodcost
?

Fixed
?

?
MOH

Fl
Flour

Wagesofcook

Marketingcost
Deliverycost
Wagesofkitchenhand

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LectureExample
z

The cost data for the current year for Haven Pty Ltd, a
greetings card manufacturer.

y Calculateeachofthefollowingcosts:
1. Totalprimecosts
2. Totalmanufacturingoverheadcosts
3. Totalconversioncosts
4. Totalproductcosts(forexternalreporting)
5. Totalperiodcosts

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CostdataforHavenLtd

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LectureExample(Solution)
1.

Totalprimecosts(DM+DL)
p
(
)

?
DirectMaterials
2100
Directlabour(wages) ?
150
Totalprimecosts$2250
?

41

Week 1 - Semester 2, 2011

LectureExample(Solution)
2.

Totalmanufacturingoverheadcosts(MOH)

Depreciation on factory building?

Indirect wages
?
Plant managers salary
?
Overtime premium paid
?
Cost of idle (production)
?
Fire Insurance on plant equipment
?

$100
200
40
60
40
10
?$450

Total MOH costs

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LectureExample(Solution)
3.

Totalconversioncosts

Direct labour
?
Manufacturing overhead
?
Total Conversion costs

$150
450
$600
?

4. Totalproductcosts
?
Direct materials
Di
Direct
llabour
b
?
Manufacturing overhead
?
Total product costs

$ 2100
150
450
? $2700

Week 1 - Semester 2, 2011

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LectureExample(Solution)
3.

Totalperiodcosts

Administrative cost
Sales commissions

Total period costs

?
?

130
15

?
145

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Thankyou

Week 1 - Semester 2, 2011

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