Accounting for Managers: Interpreting accounting information for decision-making
ACCOUNTING DECISIONS 157 be readily traced to particular products/services. Indirect costs are often referred to asoverheads. An ...
158 ACCOUNTING FOR MANAGERS Sales Less cost of sales Product costs − direct or prime costs Indirect costs − indirect costs or pr ...
ACCOUNTING DECISIONS 159 Direct costs Variable costs Materials, labour etc. directly traceable to + Electricity, consumables etc ...
160 ACCOUNTING FOR MANAGERS Costs are distributed to products by simplistic and arbitrary measures, usually direct-labor based, ...
ACCOUNTING DECISIONS 161 Leading companies, according to Kaplan and Cooper (1998), use their enhanced cost systems to: ždesign p ...
162 ACCOUNTING FOR MANAGERS products/services is variable (or marginal) costing. Undervariable costing,the product cost only inc ...
ACCOUNTING DECISIONS 163 For example, a business with budgeted overhead expenditure of £100,000 and an activity level of 4,000 d ...
164 ACCOUNTING FOR MANAGERS Of the five departments, two are service departments. Their costs can be allocated as follows (stage ...
ACCOUNTING DECISIONS 165 Table 11.3 Cost centre budget overhead rate Total cost Dept 1 Dept 2 Dept 3 Total cost £100,000 £46,363 ...
166 ACCOUNTING FOR MANAGERS The allocation of overhead based on cost centre rates (rounded to the nearest £) would be: Overhead ...
ACCOUNTING DECISIONS 167 and posted. This business process cuts across several departments. ABC collects the costs in all depart ...
168 ACCOUNTING FOR MANAGERS Table 11.6 Overhead per product based on ABC Product A Product B Total overhead £75,000 £25,000 Quan ...
ACCOUNTING DECISIONS 169 žUnit-level activities: These are performed each time a unit is produced, e.g. direct labour, direct ma ...
170 ACCOUNTING FOR MANAGERS well as cost centres, and to identify cost drivers and measure the extent to which individual produc ...
ACCOUNTING DECISIONS 171 reward systems. Otley also argued that there were intervening variables that, together with the conting ...
172 ACCOUNTING FOR MANAGERS least in part, influenced long-term strategy because of the absence of strong stock market pressures ...
ACCOUNTING DECISIONS 173 incentives throughout the organization’ (p. 68). By contrast, another Hitachi factory uses the number o ...
174 ACCOUNTING FOR MANAGERS approach). In the UK, contingency theory and neo-human relations approaches were abandoned for more ...
ACCOUNTING DECISIONS 175 Dent traced the introduction of a revised corporate planning system, the amend- ment of capital expendi ...
176 ACCOUNTING FOR MANAGERS Case study: Quality Bank – the overhead allocation problem Quality Bank has three branches and a hea ...
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