Introduction To Cost Accounting Accounting Essay
Olympia College is honored to be affiliated with a figure of institutions/ spouses locally and internationally from Malaysia, UK, Australia, Switzerland, Poland, and etc.
Together we strive to make better chances for pupils worldwide. Keeping with the rule that everyone should be able to bask instruction, all 6 Olympia College centres offer certifications, preuniversity, undergraduate and graduate student programmes. These programmes lead to external awards from United Kingdom, United States, Switzerland, Canada and Australian establishments that Olympia is affiliated with.As a freshly appointed Finance Director, you are tasked to do a research and proposal for the 2015 enlargement program, a subdivision in Sarawak, Malaysia where an old 2-storey storage edifice constructed on a lacre land, is to be rented.
Undertaking 1
In the readying of your research, present the different types of bing methods necessary for the ramification in Sarawak.
Undertaking 2
Show a undertaking cost appraisal associated with constructed installations. What constitutes Capital Costss and, Operation & A ; Maintenance costs, explicate its magnitude and importance.
Undertaking 3
In a service oriented industry like Olympia College, propose on possible everyday cost studies that has to be accomplished on a regular basis by the finance officer during the building of installations, and how it is to be accomplished, fix a sample format.
Undertaking 4
Sing the possible costs to be incurred, from the building of installations to the first twelvemonth of operation, calculate and evaluate indexs of productiveness, efficiency and effectivity of the twelvemonth 2015 enlargement.
Table of Content
Title
Page
Introduction
3
Undertaking 1
4 – 7
Undertaking 2
8 – 12
Undertaking 3
13 – 15
Undertaking 4
16 – 17
Decision
18
Bibliography
19
Introduction
Fiscal histories are the records of the fiscal traffics of the concern, their day-to-day minutess. The chief function of fiscal accounting is to enter fiscal minutess such as roll uping money from gross revenues, paying providers, wages and rewards.
Besides that, it may besides assist the directors to pull off the concern for more expeditiously by fixing regular fiscal information such as monthly direction histories demoing gross revenues, costs and net incomes against budgets, calculating hard currency flows, cost probes. Financial accounting besides provides other stakeholders with legal/vital information, for illustration, fiscal histories such as trading history, net income and loss, and balance sheet.The chief accounting records kept by the concern are records for maintaining the inside informations of minutess. These include gross revenues ledger which shows how much is owed by clients who have bought on recognition whereas purchase leger is shows how much is owed by the concern to providers who have provided goods and services on recognition. Besides that, hard currency book and bank statements shows all minutess affecting hard currency such as grosss from clients, payments to providers, employee rewards.Fiscal accounting green goodss net income and loss history which demoing how the concern has traded for a specific period ; balance sheet is a statement of the assets and liabilities of a concern at a peculiar clip, and how those assets and liabilities have been financed ; hard currency flow statement is a statement demoing how hard currency has come into the concern and what it has been spent on.
( 239 words )
Undertaking 1: In the readying of your research, present the different types of bing methods necessary for the ramification in Sarawak.
1.0 Introduction to Cost Accounting
Cost accounting has been defined as “ the procedure of accounting for cost from the point at which outgo is incurred or committed to the constitution, of its ultimate relationship with cost centres and cost units. In its widest use it embraces the readying of statistical informations, the application of cost control methods and the ascertainment of profitableness of activities carried out or planned ” . Cost accounting is needed so that there can be an effectual direction accounting system.The categorization of costs can be harmonizing to their nature or intent. Harmonizing to their nature, they can be classified as stuffs cost, labour costs, overhead costs and farther more. Harmonizing to aim it can be classified as period costs, merchandise costs, indirect and direct costs, normal and unnatural costs and farther more.
Costss can be variable, fixed or semi-variable/semi-fixed. Variable costs vary with the volume of end product, fixed costs remain the same irrespective of end product and semi-variable costs consists of both fixed and variable cost elements and will be partially affected by the alterations in the volume of activity. Semi-variable costs can be identified utilizing high-low method.
2.0 Types of Costing Methods
( I ) . Unit Costing
Another name for this method is ‘Single end product bing ‘ . This method of costing is used for merchandises which can be expressed in indistinguishable quantitative units and is suited for merchandises which are manufactured by uninterrupted fabrication activity.
Costss are ascertained for convenient units of end product. For illustrations, brick devising, excavation, cement fabrication, dairy, and flour Millss.
( two ) . Job Costing
This method is used when production consists of separate occupations. This method is followed by these concerns when work is carried on by the consumer ‘s petition. Job bing besides applies where batches of points are made. For illustrations for this method are painting, auto fix, ornament and fix of edifice.
( three ) . Contract Costing
Under this method costing is done for large occupations which involves heavy outgo and stretches over a long period and frequently it is undertaken at different sites. Each contract is treated as a separate unit for bing. This is besides known as Terminal Costing. Examples of this method are building of Bridgess, roads and edifices.
( four ) .
Batch Costing
A batch is a group of indistinguishable merchandises. This method of costing is used where the units produced in a batch are unvarying in nature and design. For the intent of bing each batch is treated as a occupation or separate unit. The entire costs of a batch are divided by the entire figure of units in a batch to get at the costs per unit.
Industries like Bakery and Pharmaceuticals normally use batch costing method.
( V ) . Operating ( Service ) Costing
This method of costing is used to determine the cost of such peculiar service.
Each peculiar service is treated as separate units in operating costing. For illustrations, H2O supply section, electricity section are utilizing this bing method. On the other manus, in the instance of a Nursing Home, a unit is treated as the cost of a bed per twenty-four hours and for coachs runing cost for a kilometre is treated as a unit.
( six ) . Procedure Costing
Procedure costing is used where production is regarded as a uninterrupted flow. Costss are determined individually for each procedure. The chief characteristic of procedure costing is that end product of one procedure becomes the natural stuffs of another procedure until the concluding merchandise is obtained. It is applicable to industries such as oil, pigment fabrication, steel, fabrics, and nutrient processing, where production is insistent and uninterrupted.
( seven ) . Multiple Costing
This method is used when the end product comprises many assembled parts or constituents such as in telecasting, motor auto or electronic appliances, costs have to be ascertained or each constituent every bit good as the finished merchandise. Such costing may affect different methods of bing for different constituents.
Therefore this type of costing is known as composite costing or multiple costing.
( eight ) . Uniform Costing
This is non a separate method of bing. This is a system of utilizing the same method of bing by a figure of houses in the same industry. It is treated as a common system of utilizing in agreement rules and standard accounting patterns in the indistinguishable houses or industry. This helps in arrested development of monetary value of the merchandise and inter-firm comparings.
Under this system cost sheet is prepared to happen out cost per unit and net incomes or loss on production.
3.0 Suggestion of Costing Method for Branching in Sarawak
I would propose that ramification of Olympia College in Sarawak should utilize the Contract Costing. This is because this costing method is for large occupations which involves may utilize heavy outgo and stretches over a long period.
This is suited for the catching of the edifice or the subdivision campus.
( 794 words )
Undertaking 2: Show a undertaking cost appraisal associated with constructed installations. What constitutes Capital Costss and, Operation & A ; Maintenance costs, explicate its magnitude and importance.
1.0 Introduction of Capital Costs, Operation & A ; Maintenance Costss
The costs of a constructed installation to the proprietor include both the initial capital cost and the subsequent operation and care costs. Each of these major cost classs consists of a figure of cost constituents.
The capital cost for a building undertaking includes the disbursals related to the initial constitution of the installation such as: Land acquisition, including assembly, keeping and betterment, Planning and feasibleness surveies, Architectural and technology design, Construction, including stuffs, equipment and labour, Field supervising of building, Construction funding, Insurance and revenue enhancements during building, Owner ‘s general office operating expense, Equipment and trappingss non included in building, Inspection and proving. The operation and care cost in subsequent old ages over the undertaking life rhythm includes disbursals such as: Land rent, if applicable, Operating staff, Labor and stuff for care and fixs, Periodic redevelopments, Insurance and revenue enhancements, Financing costs, Utilities, Owner ‘s other disbursals.
2.0 Magnitude and Importance of Capital Costs, Operation & A ; Maintenance Costss
The magnitude of each of these cost constituents depends on the nature, size and location of the undertaking every bit good as the direction organisation, among many considerations. The proprietor is interested in accomplishing the lowest possible overall undertaking cost that is consistent with its investing aims.It is of import for design professionals and building directors to recognize that while the building cost may be the individual largest constituent of the capital cost, other cost constituents are non undistinguished. For illustration, land acquisition costs are a major outgo for constructing building in high-density urban countries, and building funding costs can make the same order of magnitude as the building cost in big undertakings such as the building of atomic power workss.
From the proprietor ‘s position, it is every bit of import to gauge the corresponding operation and care cost of each option for a proposed installation in order to analyse the life rhythm costs. The big outgos needed for installation care, particularly for publically owned substructure, are reminders of the disregard in the yesteryear to see to the full the deductions of operation and care cost in the design phase.
3.0 Cost Estimation for New Branch of Olympia College in Sarawak
Appraisal of Capital Costss
Floor
Facilities
Assetss / Equipments
Measure
Cost per Unit ( RM )
Entire Cost ( RM )
1
( a ) . 3
Computer Labs
1 ) . Personal computer3 ten 15 = 452,500112,500
A
A
2 ) . Personal computer ‘s Tables3 ten 15 = 451205,400
A
A
3 ) .
Chairs3 ten 15 = 45502,250
A
A
4 ) . White Boardss3 ten 2 =6100600
A
A
5 ) . Projectors3 ten 1 =31,5004,500
A
( B ) . Library
1 ) . Tables101501,500
A
A
2 ) . Chairs50502,500
A
A
3 ) .
Books Racks102202,200
A
A
4 ) . Photostat Machine21,2002,400
A
A
5 ) . Cabinets26001,200
A
( degree Celsius ) .Cafeteria
1 ) . Tables101201,200
A
A
2 ) .
Chairs50804,000
A
( vitamin D ) . Kitchen
1 ) . Kitchen Equipments
–
–
2,000
A
A
2 ) . Ovens51,5007,500
A
A
3 ) . Refrigerator31,1003,300
A
( vitamin E ) . 2 Housekeeping Training Suites
1 ) . Bed2 ten 1 =28001,600
A
A
2 ) .
Mattress2 ten 1 =2400800
A
A
3 ) . Pillow2 ten 2 =480320
A
A
4 ) . Blanket2 ten 2 =460240
A
A
5 ) . Bed Sheet2 ten 2 =480320
A
( degree Fahrenheit ) . Marketing Office
1 ) .
Tables81501,200
A
A
2 ) . Chairs8120960
A
A
3 ) . Personal computer82,50020,000
A
A
4 ) . Cabinet37002,100
A
A
5 ) . Photostat Machine21,2002,400
A
( g ) .
Cashier Counter
1 ) . Tables2150300
A
A
2 ) . Chairs21202,400
A
A
3 ) . Personal computer22,5005,000
A
A
4 ) . Books Racks2220440
2
( a ) . 8 Offices
1 ) . Tables8 ten 2 =161502,400
A
A
2 ) .
Chairs8 ten 2 =161201,920
A
A
3 ) . Personal computer8 ten 2 =162,50040,000
A
A
4 ) . Books Racks8 ten 2 =162203,520
A
( B ) . 15
Class Suites
1 ) . Tables15 ten 10 = 15012018,000
A
A
2 ) . Chairs15 ten 40 = 6005030,000
A
A
3 ) .
White Boardss15 ten 2 = 30802,400
A
A
4 ) . Projectors15 ten 1 = 151,20018,000
Overall
A
1 ) . Air Conditioner502,000100,000
A
A
2 ) . Light5008040,000
Sum COSTS
447,370
Appraisal of Operation & A ; Maintenance Costss
Facilities
Entire Cost per month ( RM )
1 ) . Rental10,0002 ) . Electricity5,0003 ) . Utilities5,0004 ) .
Air Conditioner Services5,0005 ) . Wages80,0006 ) . Uniforms5,0007 ) .
Personal computer Care5,000
Sum COSTS
115,000
( 726 words )
Undertaking 3: In a service oriented industry like Olympia College, propose on possible everyday cost studies that has to be accomplished on a regular basis by the finance officer during the building of installations, and how it is to be accomplished, fix a sample format.The everyday cost study of the new subdivision of Olympia College in Sarawak is as follow:The college is required under State jurisprudence to obtain preapproval of the capital undertaking or acquisition by a designated Sarawak planning authorization in the State in which it is located ;The college Fieldss an initial application for a certification of demand on or before December 31, 2013 that includes a elaborate description of the undertaking and its appraisal cost and had non received blessing or disapproval on or before March 31, 2014.The college expended the lesser if $ 750,000 or 10 per centum of the estimated cost of the undertaking on or before May 31, 2014.Construction in Process – If a college that initiates building on a capital undertaking does non run into the demands under the fixed plus, movable equipment, or drawn-out certification of demand commissariats, the undertaking costs may be recognized as old capital costs if all the undermentioned conditions are met:( a ) . The college ‘s Board of Directors officially authorized the undertaking with a elaborate description of its range and costs on or before May 31, 2014 ;( B ) . The estimated cost of the undertaking as of May 31, 2014 exceeds 5 per centum of the college ‘s entire pupil grosss during its basal twelvemonth ;( degree Celsius ) .
The capitalized cost incurred for the undertaking as of May 31, 2014 exceeded the lesser of $ 750,000 or 10 per centum of the estimated undertaking cost ;( vitamin D ) . The college began existent building or redevelopment ( groundbreaking ) on or before December 31, 2014, and( vitamin E ) . The undertaking is completed before May 31, 2015.( 5 ) . Planing, Design or Feasibility Agreements. – If these understandings do non perpetrate the college to set about a undertaking, they are non recognized as compeling capital outgos.
( 6 ) . Cost Limitation – Construction Contracts. – The sum if obligated capital costs recognized as old capital costs can non transcend the estimated building costs for the undertaking as of May 31, 2014. Extra costs are recognized as old capital costs merely if the extra costs are straight attributable to alterations in life safety codifications or other edifice demands established by authorities regulation that became effectual after the undertaking was obligated.( 7 ) . New capital costs are defined as all allowable schoolroom capital-related costs that do non run into the definition of old capital costs. Betterment or betterment costs related to old capital costs are new capital assets. Capital costs incurred as a consequence of extraordinary fortunes are new capital.
Direct assignment of new capital costs must be done. This cost centre usually includes merely the cost of disposal. The wage is direct to the disposal staff.( 8 ) . Classroom costs are those costs associated with formal, didactic direction on a specific subject or topic in a schoolroom that meets at regular, scheduled intervals over a specific clip period ( e.g. , semester or one-fourth ) and for which a pupil receives a class.( 9 ) .
For cost coverage periods get downing on or after Jan 1, 2014, if you do non run the plan, the schoolroom part of the costs are non allowable as base on balls through costs and hence non reported base on balls through costs.( 10 ) . The college receives a benefit for the support it furnishes to the instruction plan through the proviso of services.( 11 ) . The lectors preparation costs must be incurred by the supplier or by an educational establishment related to the supplier by common ownership or control ( cost to related organisations ) . Costss incurred by a 3rd party, irrespective of its relationship to either the supplier or the educational establishment, are non allowed.( 12 ) .
The costs incurred by the college for the plan do non transcend the costs that would hold been incurred by the college if the plan had been operated by the college.
( 615 words )
Undertaking 4: Sing the possible costs to be incurred, from the building of installations to the first twelvemonth of operation, calculate and evaluate indexs of productiveness, efficiency and effectivity of the twelvemonth 2015 enlargement.
1.0 Introduction of Variance Analysis
Discrepancy analysis can be used to detect how good a concern is executing and besides how close existent costs and grosss are to expected costs and grosss.In accounting, a discrepancy is defined as the difference between the expected sum and the existent sum of costs or grosss. Discrepancy analysis uses this criterion or expected sum versus the existent sum to judge public presentation.
The analysis includes an account of the difference between existent and expected figures every bit good as an rating as to why the discrepancy may hold occurred. The intent of this elaborate information is to help directors in finding what may hold gone right or incorrect and to assist in future decision-making.Favorable discrepancy is a discrepancy can be put into the favourable class when the consequences are better than expected. This means that grosss were more than the expected sum or costs were below the budgeted sum. A favourable discrepancy might gain a fillip for a director, or possibly a move up the corporate leader. Unfavorable discrepancyis the discrepancy that the consequences are worse than expected. If the grosss were below outlooks or the costs were higher than criterion, the discrepancy would be termed unfavourable or inauspicious. However, the analysis is typically used to assist troughs prevent a negative state of affairs from repeating by supplying information about what went incorrect.
2.0 Variance Analysis for New Branch of Olympia College in Sarawak
Discrepancy Analysis
Title
Budgeted Amount ( RM )
Actual Amount ( RM )
Cost Variance ( RM )
Volume Variance ( RM )
Favorable / Unfavorable
1 ) . Care Costss on Personal computer30 ten RM300 = RM9,00020 tenRM250 = RM5,000RM50 x 30 = RM1,50010 ten RM250 = RM2,500Favorable
A
A
A
A
A
A
2 ) . Air Conditioner Services10 ten RM300 = RM3,0008 tenRM200 = RM1,600RM100 x 10 = RM1,0002 ten RM200 = RM400Favorable
A
A
A
A
A
A
3 ) .
Part-time Lecturers Wages180 hour x RM40 = RM7,200200 hour x RM45 = RM9,000RM5 x 180 = RM90020 ten RM45 = RM900Unfavorable
A
A
A
A
A
A
4 ) . Renew of Staffs ‘ Uniforms20 ten RM30 = RM60025 tenRM40 = RM1,000RM10 x 20 = RM2005 ten RM40 = RM200Unfavorable
A
A
A
A
A
A
5 ) . Renew of Classrooms ‘ Tables20 ten RM150 = RM3,00015 tenRM140 =RM 2,100RM10 x 20 = RM2005 ten RM140 = RM700Favorable
( 387 words )
Decision
The fiscal maps of the concern impact non-financial activities such countries as record maintaining, public presentation rating, discrepancy analysis, and acquiring and use of resources. The non-financial director must grok the ends, processs, techniques, yardsticks, and maps of finance to optimally execute his or her responsibilities. Ignorance of finance will non merely take to incorrect analysis and determinations but will besides forestall you from traveling up in the organisation.An of import ground for which the organisations need fiscal and accounting cognition is that without a good apprehension of these subjects they do non hold the tools needed for effectual direction determination doing. They will hold to trust wholly on the fiscal director, whose recommendations they may non be able to wholly understand or, if necessary, difference.
A successful operation blends production, selling, and finance with some grade of end congruity. Decisions that make sense in footings of selling and gross revenues must besides do fiscal sense. Without some fiscal background, the organisations can non lend sound input to the determination procedure.
