PROCESS COSTING DR. ALOK DIXIT INDIAN INSTITUTE OF MANAGEMENT LUCKNOW COSTING SYSTEMS USED TO DETERMINE PRODUCT COSTS Costing Systems Process Costing Job-order Costing Mass production of identical or similar products (at process-level). For example‚ Sugar‚ food‚ chemical industry. Many units of a single‚ homogeneous product flow evenly through continuous production process(s). One unit of product is indistinguishable (at process-level) from any other unit of product. Each unit
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1.0 Life cycle costing (LCC) 1.1 Definition Life cycle costing is a cost management approach which includes all costs and ensures that all those costs are managed over the life cycle of the product. Product life cycle begins from conception of the product until its abandonment which can be referred as ‘from cradle to grave‘. Product life cycle has four stages: 1) Product planning and initial concept design It involves process of identifying any underlying conditions‚ assumption‚ limitations and
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1) A well-designed activity-based costing system starts with __________. A. analyzing the activities performed to manufacture a product B. assigning manufacturing overhead costs for each activity cost pool to products C. computing the activity-based overhead rate D. identifying the activity-cost pools 2) "Generally accepted" in the phrase generally accepted accounting principles means that the principles __________. A. have been approved for use by the managements of business
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Differences between Activity-Based Costing and Traditional Cost Strategy Activity-based costing (ABC) is a costing model that identifies overhead activities in an organization and assigns the cost of each activity resource to all products and services according to the actual consumption‚ while traditional costing equally distributes all overhead expenses. Thus‚ an organization employing ABC‚ can precisely estimate the cost of its individual products and services for the purposes of identifying and
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STANDARD COSTING (VARIANCES) 1.1 Material costs variance = (Standard quantity x Standard Price) – (Actual quantity x Actual price) MCV = (SQ × SP) – (AQ × AP) 1.2 Material price variance = Actual quantity × (Standard price – Actual price) MPV = AQ × (SP – AP) 1.3 Material usage variance = Standard price (Standard quantity – Actual quantity) MUV = SP × (SQ –AQ) 1.4 Material cost variance = Material usage variance + Material price variance MCV = MUV + MPV 1. Material Variance Material usage
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Send Print Share ABC: too much activity and not enough costing? by Brian Rutherford 03 Feb 2001 Diploma in Financial Management Relevant to Paper D2 | | Activity based costing (ABC) hit the world of financial management with a very large bang in the late 1980s. Within a few years 20% of the UK’s largest companies were using‚ or at least piloting‚ ABC systems. By the turn of the millennium‚ however‚ the proportion of adopters was no higher‚ while one third of those adopting the technique
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Introduction * Meaning of Standard Costing: Standard costing is simply the name given to a technique whereby standard costs are computed and subsequently compared with the actual costs to find out the differences between the two. These differences are then analyzed to know the causes thereof so as to provide a basis of control. * Standard Costing: According to BROWN and HOWARD “Standard costing is a technique of cost accounting which compares the standard cost of each product or service
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18-2 Full Versus Variable Costing and Ethical Issues HeadGear‚ Inc is a small manufacturer of headphones for use in commercial and personal applications. The HeadGear headphones are known for their outstanding sound quality and light weight‚ which makes them highly desirable especially in the commercial market for telemarketing firms and similar communication applications‚ despite the relatively high price. Although demand has grown steadily‚ profits have grown much more slowly‚ and John Hurley‚
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Two general approaches are used for costing products for the purpose of valuing inventories and cost of goods sold. One approach is called absorption costing. Absorption costing is generally used for external financial reports. The other approach called variable costing is preferred by some companies for internal decision making and must be used when an income statement is prepared in the contribution format. Ordinarily absorption costing and variable costing produce different figures for net income
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Advantages and disadvantages of variable costing Many managers use variable costing for internal reporting and decision making since it has number of advantages (Myers par. 1). First‚ on variable costing reports costs are organized by behavior which makes it easier to understand. Also‚ variable costing statements facilitate cost volume profit (CVP) analysis because it separates cost behavior by fixed and variable. Under variable costing‚ changes in inventory or production do not affect the
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