ACCT20001 Lecture Notes - Lecture 12: Operating Leverage, Standard Cost Accounting, Value Chain
5 Jun 2018
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Lecture 12
*introduce examples in response to question
1.
(a)
• Pricing decisions, cost reduction, value-chain analysis
strategic decision vs operating decision:
strategic -
-> longer term
-> requires significant investment in resources
-> hard to undo/reverse
operating -
-> shorter term
->
->
• Standards:
eg. find out these costs at the end: direct labour, direct materials, overhead
to estimate the costs via standard costing systems - to set prices in advance before we know
the actual costs
then when we do get the costs we compare - analysing variances
• Insource/outsource opportunity costs
• Value-chain
(b)
Definitely not job costing - "large amounts of standardised.."
Not process costing as the products are not virtually identical - designs
Therefore, operations costing
Spectrum: job, operation, process
ABC is not a costing system; it is a costing structure; a refinement on either of the others to do it
better - it is an improvement
2.
Variances
Table for materials, labour, overhead
given standard price: $11.25
11.25 x 12000 = 135000 = B standard cost allowed
AQ(AP-SP)
AP/SP = AQ 13000
$9750 materials price variance
$11250 materials quantity/usage variance
$1500 materials variance
Explain the concept of management by exception:
Concentrating on areas that are not performing as well;
-> only bringing issues to the attention of management if results represent substantial differences
from the budgeted or expected amount.
Too prescriptive approach: arbitrary
Once-offs
What does common sense tell us?
Ee if it is outside those rages, do’t aste tie
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