cost accounting
L-S, T & H, Chapter 4: RQ4.1, RQ4.3, RQ4.5, RQ4.7, RQ4.8, RQ4.9, RQ4.10, RQ4.11, RQ4.14, RQ4.15, RQ4.18, RQ4.20 E4.21, E4.25, E4.26, P4.33, P4.36, P4.37 and P4.40.
RQ4. 1 Identify the major purposes of product costing. For each purpose discuss whether information about current or future product costs is required. What implication does your answer have for developing a product costing system?
L-S, T & H, page 131.
Purpose
Current / Future Product Costs
Short-term decisions: product mix, pricing
Future
Longer-term strategic decisions
Future
Long-term pricing
Future
Plan future product-related costs
Future
Control of product costs
Current
Reimbursement contracts
Current
External reporting (inventory calculation)
Current
All the information cannot come from one source. The main accounting system may accumulate current and past costs but for much decision-making and planning, estimates of future costs will need to be generated outside of that accounting system.
RQ4.3 How common are product costing systems in practice? Why might a business choose to do without a product costing system?
L-S, T & H, page 134.
A recent survey of members of the Chartered Institute of Management Accountants (CIMA) found that less than 50 per cent of respondents had systems for costing products in their organisation, and in small organisations this figure fell to 34 per cent (CIMA, 2009).
The range of costs included within a product costing system varies from one organisation to another. A comprehensive picture of product costs requires the inclusion of upstream and downstream costs. In practice many businesses confine their product costing systems to manufacturing costs. This is particularly true of small to medium-sized manufacturing businesses since more comprehensive costing systems cost more to implement and maintain. The costing systems that only include manufacturing costs produce the inventory valuations for external financial reporting required by
RQ4. 1 Identify the major purposes of product costing. For each purpose discuss whether information about current or future product costs is required. What implication does your answer have for developing a product costing system?
L-S, T & H, page 131.
Purpose
Current / Future Product Costs
Short-term decisions: product mix, pricing
Future
Longer-term strategic decisions
Future
Long-term pricing
Future
Plan future product-related costs
Future
Control of product costs
Current
Reimbursement contracts
Current
External reporting (inventory calculation)
Current
All the information cannot come from one source. The main accounting system may accumulate current and past costs but for much decision-making and planning, estimates of future costs will need to be generated outside of that accounting system.
RQ4.3 How common are product costing systems in practice? Why might a business choose to do without a product costing system?
L-S, T & H, page 134.
A recent survey of members of the Chartered Institute of Management Accountants (CIMA) found that less than 50 per cent of respondents had systems for costing products in their organisation, and in small organisations this figure fell to 34 per cent (CIMA, 2009).
The range of costs included within a product costing system varies from one organisation to another. A comprehensive picture of product costs requires the inclusion of upstream and downstream costs. In practice many businesses confine their product costing systems to manufacturing costs. This is particularly true of small to medium-sized manufacturing businesses since more comprehensive costing systems cost more to implement and maintain. The costing systems that only include manufacturing costs produce the inventory valuations for external financial reporting required by