【正文】 (b)] $ $ $ Costs to be accounted for WIP, 30 June $ 85 000 Started in production 570 000 Total costs $655 000 Step 3 Preparing the production cost report continued ? Step 4 PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 48 Conversion Materials Costs Total Cost Reconciliation Schedule Costs accounted for Transferred out $525 000 WIP, 30 June Materials (200 000 x $) $100 000 Conversion costs (120 000 x $) $ 30 000 $130 000 Total costs $655 000 Step 4 Operations costing ? Operations costing is a bination of a process cost and a job order costing ? Characteristics – Standardised methods are used to manufacture the product – Product may have some customised, individual features ? Choosing an appropriate costing method involves a costbenefit tradeoff PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 49 CONTEMPORARY DEVELOPMENTS ? Two major contemporary developments are – Justintime processing – Activitybased costing PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 50 JUSTINTIME PROCESSING ? Objective of JIT processing – Eliminate all manufacturing inventories – Inventories can have an adverse effect on ine because of their high storage and maintenance costs ? Elements of JIT processing – Dependable suppliers – Multiskilled work force – A total quality control system PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 51 LO13 JUSTINTIME PROCESSING continued ? Benefits of JIT processing – Manufacturing inventories significantly reduced or eliminated – Product quality enhanced – Rework costs and inventory storage costs reduced or eliminated – Production cost savings are realised from the improved flow of goods through the processes PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 52 JIT Processing continued PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 53 ACTIVITYBASED COSTING ? Activitybased costing (ABC) focuses on the activities performed in producing a product ? In ABC, the cost of a product is equal to the sum of the costs of all activities performed to manufacture it ? An activity is any event, action, transaction or work sequence that causes costs to be incurred PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 54 LO14 ACTIVITYBASED COSTING continued Assumptions under ABC ? All overhead costs related to the activity must be driven by the cost driver used to assign costs to products ? All overhead costs related to the activity should respond proportionally to changes in the activity level of the cost driver PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 55 PRODUCTION AND COST DATA ? Traditional costing techniques recognise volumebased unitlevel costs – However, not all costs vary according to volume ., machine setup costs personnel costs PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 56 LO15 PRODUCTION AND COST DATA continued ? ABC is a twostage process: 1. Overhead costs are allocated to multiple activity cost pools 2. Each cost pool is assigned to products according to different cost drivers ? The more plex the manufacturing operation, the more activities and cost drivers it is likely to have ? A cost driver is any activity that has a direct causeeffect relationship with the resources consumed PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 57 PRODUCTION AND COST DATA continued ? Steps in ABC 1. Identify the major activities 2. Accumulate manufacturing OH costs by activities 3. Identify cost drivers that accurately measure activity’s contribution to final product 4. Assign manufacturing OH costs for each activity to products, using cost drivers PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 58 BENEFITS AND LIMITATIONS OF ACTIVITYBASED COSTING Benefits ? More accurate product costing because: – More cost pools (and more direct assignment of costs) – Enhanced control of overhead costs (due to greater awareness) – Better management decisions (selling prices and makeorbuy decisions more appropriate) Limitations ? Can be expensive to identify multiple activities and apply various cost drivers ? Some arbitrary allocations will continue ? Cannot be used for external reporting purposes PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 59 ACTIVITYBASED COSTING IN SERVICE INDUSTRIES ? Same concepts as for manufacturing anisations: 1. Iden