Управленческий учет на предприятии

When highlights of accounting of expenses of production on processes are applied to granting by the enterprise of services, the term «pooperatsionny accounting» is applied to the description of used methods of accounting of expenses. Example of such service is management consultation where as a unit of cost business hours serve. Calculation of average cost of unit of service for the concrete period of time is necessary for services such, and used procedures will be similar to what are applied when accounting expenses of production on processes [3].

a) «Job order accounting of expenses» is a form of accounting of expenses for the concrete order. In this case the separate order is accepted according to concrete requirements of clients, and term of its performance rather short. Work is usually performed at plant or in a workshop where the order passes through a number of operations as continuously established unit.

(b) «Popartionnaya accounting of expenses» is a combination of job order accounting of expenses and accounting of expenses of production on processes. The party represents a quantity of identical units of cost and is considered as the order separate of all other orders or processes, carried out by the enterprise.

(c) The method of accounting of expenses of production on processes is related to the identical units of cost being in process production. As a result of it costs of each unit represent the average size of expenses received by division of total production expenses, arising during time, on quantity of units made during this period.

(d) The term «standard loss» is used in accounting of expenses of production on processes for the description of that loss of entered resources which by experience of last period can be expected and accepted within production. This loss can be presented by leak, loss or something similar because of what quantity of the raw materials entered into production, surpasses quantity of the made finished products. Keyword, in this case, is «expected» as at emergence of a loss, bigger or smaller, than expected, such decrease or increase of efficiency is called «as an excess loss or profit».

Questions

1. Characteristic of poprotsesny accounting

2. Popartionny accounting of expenses

3. Prime cost of separate units of cost by means of a method of poprotsessny accounting

4. Give definition to concept of the term «standard loss»

Situational task

The company Huy Ltd makes crimson jam and plans to let out 10,000 cans on 500 g of jam from each 6,000 kg of raw materials. Last month Huy Ltd put for production 20,000 kg of raw materials (at the price of $1,00 for kg) and let out 25,000 cans of jam. Calculate the size of excess profit or a loss from production for last month.

Tests

1. Object of calculation in mass production are:

A) separate types of production;

B) separate orders;

C) separate production divisions;

D) B, C answers;

E) production operations.

2. Object of calculation in individual production are:

A) B, C answers;

B) separate types of production;

C) separate orders;

D) separate production divisions;

E) separate units of production.

3. In what method of the accounting of expenses and calculations of product cost are inherent semi-finished and bespolufabrikatny options:

A) to the poperedelny;

B) to simple method;

C) to the job order;

D) to the standard;

E) to the combined.

4. Poprotsessny accounting of expenses for production is used:

A) for determination of prime cost of a product or rendered services by production mass identical or uniform production;

B) for definition of the marginal income;

C) for reflection in reports of rather low level of resources;

D) for reflection in reports of rather high level of resources;

E) for registration of expenses by request on each goods;

Recommended literature

1. Ageev A.B. Ageev Yu.B. economic dictionary, M, 2003

2. Akulich O. V. Management accounting (A grant for teachers) the International pedagogical university in Magadan, University of the State of Alaska, 2003

3. Vakhrushina M.A., Accounting management accounting: the textbook for higher education institutions, M, 2003 - 528 pages.

4. Veretenov V. «Administrative consulting», 2003, www.KlubOK.net

5. Vrublevsky N.D.Uchyot of expenses on productions. Accounting. Magazine. M: - No. 5, 2000

6. Accounting A.Yu.Postanovka's fungi in the organizations. Accounting. Magazine. M: . No. 16, 2000.

7. Kondratov I.G. bases of management accounting, M, 2001 - 160 pages.

8. Raitsky K.A.Ekonomika of the enterprise. m, 1999.

9. Savitsky G.V.Analiz of economic activity of the enterprise, Minsk, 1999 - 498 pages.

10. Sheremet A.D. management accounting: manual, M, 2001 - 512 pages.

11. All taxes of Russia - 2000. The edition second added. The directory of the Russian accountant under Akakdemik V. V. Karpov's edition. - M: Economy and Finance, 2000.

Chapter 7 Types of Costing. Absorption Costing

7.1 Absorption Costing

Absorption costing is a method for accumulating fixed and variable costs associated with the production process and apportioning them to individual products. Thus, a product must absorb a broad range of costs. These costs are not recognized as expenses in the month when an entity pays for them. Instead, they remain in inventory as an asset until such time as the inventory is sold; at that point, they are charged to cost of goods sold. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) require that an entity use absorption costing to record the value of inventory in its financial statements.The technique of absorbing fixed and variable costs to production is called absorption costing. Under absorption costing full costs, i.e. fixed and variable costs are absorbed to the production. In administrative accounts department of the enterprise that part of the account which is connected with classification, record, distribution, generalization and drawing up the reporting on the current and estimated expenses is conducted. The administrative accounts department carries out development and deployment of systems of calculation of product cost in relation to branch, subsector, a kind of activity, the enterprise.

Experience of the international management accounting shows that a rigid regulation of system of calculation of prime cost - very difficult business, considering existing features of the organization of the accounting of expenses in each branch, subsector, at the enterprise especially as the majority of the enterprises and firms have the diversified profile allowing more freely to maneuver by the capital.

Let's consider comparative characteristics to existing in international and domestic practice of systems of calculation of prime cost.

From positions of an order of inclusion of expenses in product cost all methods of the accounting of expenses and calculation of product cost can be divided into two look:

- accounting of product cost with full distribution of expenses (абзорпшен - a casting),

- accounting of product cost on variable expenses (to Direkt - a casting).

The system of the accounting of full expenses (absorption-costing) represents system of the accounting of expenses and calculation of product cost according to which all factor production cost and all indirect expenses join in product cost, i.e. is intended for calculation of full expenses. She assumes distribution of all expenses between realized production and production remains. Thus expenses are subdivided depending on their functional role on production, realizatsionny and administrative.

Expenses which are directly connected with production (expenses of raw materials, materials, compensation of workers, etc.) belong to production expenses. Others treat administrative expenses, connected with management and production service (management personnel maintenance costs, on ensuring production with necessary resources, on the maintenance of fixed assets in working condition, etc.). Realizatsionnye expenses are the expenses connected with process of realization of production (expenses on advertizing, on production transportation).

Production expenses, in turn, share on straight lines (directly join in prime cost of concrete types of finished products) and indirect (are used for production of several types of production).

Factor cost belongs on a concrete type of production in economically reasonable way. Indirect expenses include in expenses of separate types of production, works, services after definition of total amount by the proportional distribution provided by accounting policies.

The choice of coefficients of distribution depends on branch features, the sizes of the enterprise, its organizational structure, the range of products and other factors. As a part of product cost a factor cost is, as a rule, subdivided on elements, and indirect forms complex articles of expenses.

Than more expenses in structure of expenses of the enterprise are straight lines, especially exact there is a size of prime cost of concrete types of production.

Work on determination of product cost is reduced to the following stages:

- the current accounting of production expenses on calculation and collective and distributive accounts within a month;

- closing after a month of collective and distributive chats by distribution of the expenses considered on them between separate types of production (works, services) on calculation accounts of production. At this stage calculation work on determination of cost of production (works, services) auxiliary productions which is consumed in the main production is performed;

- distribution of the expenses considered on calculation accounts of production between finished goods and a work in progress, and also between separate types of production and calculation of prime cost of a unit of production. On the basis of these calculation accounts the sheet of the summary accounting of expenses for production for a month which is used for calculation of prime cost of a unit of production is formed;

- the summary accounting of expenses for production represents generalization of expenses in a month in places of emergence of expenses (to shops, repartitions) and to types of production (to orders, products) and to calculation items of expenditure with reflection of change of the remains of a work in progress and detection of actual cost of release of finished goods [10, page 292]

In the international theory and practice of management accounting two methods of distribution of overhead costs are applied.

First method. Two-level procedure of distribution of overhead costs. At the first step overhead costs are distributed on the centers of expenses, at the second step overhead costs of the centers of expenses are distributed in structure of product cost.

The purpose of the first step - to distribute all production overhead costs on the centers of production expenses. The expenses carried on the centers of expenses, are used for control of level of expenses and for an assessment of results of activity.

The purpose of the second step - a choice of a basis for distribution of production overhead costs in product cost, that is a choice of base of distribution of overhead costs as which are most often used: equipment operating time, time fulfilled by production workers.

The two-level technique of distribution of overhead costs consists of the following stages:

1. Distribution of total amount of production overhead costs on the centers of expenses of production and service (between the main and auxiliary productions).

2. Distribution of overhead costs of the centers of expenses of service to the centers of expenses of production (write-off of expenses of auxiliary production for inclusion in product cost, works, services of the main production).

3. Calculation of the corresponding rates of distribution of overhead costs for each center. Here two approaches are possible: calculation of a uniform manufacturing rate of distribution of overhead costs and calculation of rates of distribution for each division.

4. Reference of overhead costs of the centers of expenses for types of production, works, services. The two first point two last describe the first step of distribution of the overhead costs, - the second step.

The second method uses uniform rates of distribution of overhead costs. In this case overhead costs aren't distributed on the centers of expenses. Instead of a difficult two-level technique the rate of distribution of overhead costs is entered uniform for all enterprise. Overhead costs will join in structure of prime cost of all types of production on this rate. It is rational to apply a uniform rate of distribution of overhead costs at the enterprises where in all divisions on production carry overhead costs of the center of expenses approximately in equal proportions. In all other cases the uniform rate of distribution of overhead costs distorts product cost.

Ways of distribution of overhead costs depend on specifics of the enterprise and can be chosen in accounting policies at discretion:

- in proportion to a salary of production workers;

- in proportion to an expense of the main materials;

- in proportion to quantity of got production or weight of processed raw materials;

- on the established constant coefficients of distribution of expenses;

- on other bases of distribution.

Use of this system of the accounting of expenses is very widespread in domestic practice of management accounting. This system allows to create full prime cost of separate types of production, and also prime cost of a work in progress and the remains of finished goods in a warehouse, to calculate profitability of separate types of production and is applied in pricing when price for products is established by the principle «full expenses plus rate of return (profitability percent)», a so-called expensive method of pricing.

Thus, at a method of full prime cost, product cost joins all expenses of the enterprise, irrespective of their division on constant and variable, direct and indirect. Expenses which can't be carried directly on production, distribute at first on the responsibility centers where they arose, and then transfer to product cost in proportion to the chosen base of distribution which compensation of workers most often is.

In the course of calculation of prime cost costs of production are commensurated with quantity of let-out production and prime cost of a unit of production is defined.

Main advantages of this system:

- opportunity to calculate prime cost and profitability of separate types of production;

- application for the financial account and drawing up the external reporting;

- opportunity to calculate full prime cost of finished goods, stocks of finished goods in a warehouse and a work in progress;

- possibility of application for price calculation per unit of output.

The abzorpshen-kosting system is traditional system of the accounting of expenses. Traditional systems of calculation of production expenses were created several decades ago when the majority of the companies made the limited product range, and a factor cost on the main materials and on work of the main production workers was dominating production expenses. Now traditional systems of accounting cease to justify themselves as, applying only the factors of expenses depending on output, to distribution of the overhead costs which aren't depending on volume, in reports it is possible to receive essential distortions.

Mistakes at calculation of prime cost can lead to incorrect administrative decisions: to removal from production of profitable production or, on the contrary, increase in release of unpromising goods.» Accounting with full distribution of expenses» or «full» accounting of expenses is the method of management accounting applied to calculation of cost of production (or service) during time, an assessment of stocks of finished products and a work in progress, and also definition of the profit got by the enterprise for this period. The accounting method with full distribution of expenses consists in an assessment of production or services (and, therefore, production and stocks) by addition of an acceptable share of production overhead costs (indirect expenses) to a factor cost of production or service for receiving full or total expenses for a unit of production. In the previous blocks of this module we already considered a question concerning procedure of charge of production overhead costs of separate units of cost. You have to remember that process of charge of overhead costs was called «distribution of overhead costs», as gave the name to this method of management accounting.

Important task of the industrial enterprise is implementation of the plan on the volume, quality and the product range with the smallest expenses. Profitability of work of the enterprise is characterized by product cost. Product cost - is the sum of all expenses of the enterprise expressed in money for production and production realization.

All groups of expenses are intended for adoption of any decisions, but the situations arising in production, can't be laid in standard systems therefore at each enterprise of system of the account are projected taking into account satisfaction of inquiries of managers. However at all their variety the theory and practice developed the general approaches to the organization of the accounting of expenses and production calculations.

The system of the accounting of expenses for production and calculation of product cost is a set of methods of documenting and reflection of production expenses which define actual cost of production. Use of this or that system of the accounting of expenses at the enterprises of various branches of economy is established according to provisions on planning, the account and calculation of product cost.

Three interconnected elements define systems of management accounting of expenses for production: accounting of expenses for production; accounting of an exit of finished goods; determination of its prime cost. Proceeding from it the system of the accounting of expenses for production has to express a certain interrelation of receptions and ways of generalization of costs, for structure, the contents, appointment, places of emergence and to the responsibility centers, by types of production or works, their uniform groups, the broken up into smaller units parts of products, semi-finished products and ways of control of use of production resources in comparison to existing rules and planned efficiency.

Depending on features of the organization and the production technology apply some systems of accounting of product cost: the standard-kost (Standart costing), abzorpshen-kosting (Absorption costing), direkt-kosting (Direct - Costing - Sistem), functional and cost system (Activity - Boscol - Costing). Each of these systems is characterized by the organizational model.

Irrespective of branch features of industrial production the system of the accounting of expenses provides such organizational model which would correspond to reliable and objective identification of results of economic activity and control of a production course.

However technological and organizational features of production, duration of a production cycle, quantitative and qualitative characteristics of products demand a various combination of ways and receptions of the accounting of production expenses and calculation of product cost. Use of systems of the accounting of expenses and calculation can't be any. It is determined by the purposes of management and objects of the accounting of expenses.

In the Republic of Kazakhstan only the accounting of full prime cost with distribution of overhead costs between products which was justified in the conditions of the centralized state pricing earlier was applied. In process of isolation of the enterprises with various form of ownership, developments of processes of privatization of the state enterprises, turning on of mechanisms of free pricing and independent planning of the range of products, development of other parties of market economy the need for improvement of system of calculation of prime cost on which the further growth of efficiency of the account will depend increases. It characterizes relevance of a subject of a term paper.

Experience of the international management accounting shows that a rigid regulation of system of calculation of prime cost - very difficult business, considering existing features of the organization of the accounting of expenses in each branch, subsector, at the enterprise especially as the majority of the enterprises and firms have the diversified profile allowing more freely to maneuver by the capital.

Let's consider comparative characteristics to existing in international and domestic practice of systems of calculation of prime cost.

From positions of an order of inclusion of expenses in product cost all methods of the accounting of expenses and calculation of product cost can be divided into two look:

- accounting of product cost with full distribution of expenses (абзорпшен - a casting),

- accounting of product cost on variable expenses (to Direkt - a casting).

The system of the accounting of full expenses (absorption-costing) represents system of the accounting of expenses and calculation of product cost according to which all factor production cost and all indirect expenses join in product cost, i.e. is intended for calculation of full expenses. She assumes distribution of all expenses between realized production and production remains. Thus expenses are subdivided depending on their functional role on production, realizatsionny and administrative.

Expenses which are directly connected with production (expenses of raw materials, materials, compensation of workers, etc.) belong to production expenses. Others treat administrative expenses, connected with management and production service (management personnel maintenance costs, on ensuring production with necessary resources, on the maintenance of fixed assets in working condition, etc.). Realizatsionnye expenses are the expenses connected with process of realization of production (expenses on advertizing, on production transportation).

Production expenses, in turn, share on straight lines (directly join in prime cost of concrete types of finished products) and indirect (are used for production of several types of production).

Factor cost belongs on a concrete type of production in economically reasonable way. Indirect expenses include in expenses of separate types of production, works, services after definition of total amount by the proportional distribution provided by accounting policies.

The choice of coefficients of distribution depends on branch features, the sizes of the enterprise, its organizational structure, the range of products and other factors. As a part of product cost a factor cost is, as a rule, subdivided on elements, and indirect forms complex articles of expenses.

Than more expenses in structure of expenses of the enterprise are straight lines, especially exact there is a size of prime cost of concrete types of production.

Work on determination of product cost is reduced to the following stages:

- the current accounting of production expenses on calculation and collective and distributive accounts within a month;

- closing after a month of collective and distributive chats by distribution of the expenses considered on them between separate types of production (works, services) on calculation accounts of production. At this stage calculation work on determination of cost of production (works, services) auxiliary productions which is consumed in the main production is performed;

- distribution of the expenses considered on calculation accounts of production between finished goods and a work in progress, and also between separate types of production and calculation of prime cost of a unit of production. On the basis of these calculation accounts the sheet of the summary accounting of expenses for production for a month which is used for calculation of prime cost of a unit of production is formed;

- the summary accounting of expenses for production represents generalization of expenses in a month in places of emergence of expenses (to shops, repartitions) and to types of production (to orders, products) and to calculation items of expenditure with reflection of change of the remains of a work in progress and detection of actual cost of release of finished goods [10, page 292]

In the international theory and practice of management accounting two methods of distribution of overhead costs are applied.

First method. Two-level procedure of distribution of overhead costs. At the first step overhead costs are distributed on the centers of expenses, at the second step overhead costs of the centers of expenses are distributed in structure of product cost.

The purpose of the first step - to distribute all production overhead costs on the centers of production expenses. The expenses carried on the centers of expenses, are used for control of level of expenses and for an assessment of results of activity.

The purpose of the second step - a choice of a basis for distribution of production overhead costs in product cost, that is a choice of base of distribution of overhead costs as which are most often used: equipment operating time, time fulfilled by production workers.

The two-level technique of distribution of overhead costs consists of the following stages:

1. Distribution of total amount of production overhead costs on the centers of expenses of production and service (between the main and auxiliary productions).

2. Distribution of overhead costs of the centers of expenses of service to the centers of expenses of production (write-off of expenses of auxiliary production for inclusion in product cost, works, services of the main production).

3. Calculation of the corresponding rates of distribution of overhead costs for each center. Here two approaches are possible: calculation of a uniform manufacturing rate of distribution of overhead costs and calculation of rates of distribution for each division.

4. Reference of overhead costs of the centers of expenses for types of production, works, services. The two first point two last describe the first step of distribution of the overhead costs, - the second step.

The second method uses uniform rates of distribution of overhead costs. In this case overhead costs aren't distributed on the centers of expenses. Instead of a difficult two-level technique the rate of distribution of overhead costs is entered uniform for all enterprise. Overhead costs will join in structure of prime cost of all types of production on this rate. It is rational to apply a uniform rate of distribution of overhead costs at the enterprises where in all divisions on production carry overhead costs of the center of expenses approximately in equal proportions. In all other cases the uniform rate of distribution of overhead costs distorts product cost.

Ways of distribution of overhead costs depend on specifics of the enterprise and can be chosen in accounting policies at discretion:

- in proportion to a salary of production workers;

- in proportion to an expense of the main materials;

- in proportion to quantity of got production or weight of processed raw materials;

- on the established constant coefficients of distribution of expenses;

- on other bases of distribution.

Use of this system of the accounting of expenses is very widespread in domestic practice of management accounting. This system allows to create full prime cost of separate types of production, and also prime cost of a work in progress and the remains of finished goods in a warehouse, to calculate profitability of separate types of production and is applied in pricing when price for products is established by the principle «full expenses plus rate of return (profitability percent)», a so-called expensive method of pricing.

Thus, at a method of full prime cost, product cost joins all expenses of the enterprise, irrespective of their division on constant and variable, direct and indirect. Expenses which can't be carried directly on production, distribute at first on the responsibility centers where they arose, and then transfer to product cost in proportion to the chosen base of distribution which compensation of workers most often is.

In the course of calculation of prime cost costs of production are commensurated with quantity of let-out production and prime cost of a unit of production is defined.

Main advantages of this system:

- opportunity to calculate prime cost and profitability of separate types of production;

- application for the financial account and drawing up the external reporting;

- opportunity to calculate full prime cost of finished goods, stocks of finished goods in a warehouse and a work in progress;

- possibility of application for price calculation per unit of output.

The abzorpshen-kosting system is traditional system of the accounting of expenses. Traditional systems of calculation of production expenses were created several decades ago when the majority of the companies made the limited product range, and a factor cost on the main materials and on work of the main production workers was dominating production expenses. Now traditional systems of accounting cease to justify themselves as applying only the factors of expenses depending on output, for distribution of the overhead costs which aren't depending on volume, in reports it is possible to receive essential distortions.

Mistakes at calculation of prime cost can lead to incorrect administrative decisions: to removal from production of profitable production or, on the contrary, increase in release of unpromising goods.

7.2 Advantages and shortcomings of a method of accounting of prime cost with full distribution of expenses

Since absorption costing requires the allocation of what may be a considerable amount of overhead costs to products, a large proportion of a product's costs may not be directly traceable to the product. Direct costing does not require the allocation of overhead to a product, and so may be more useful than absorption costing for incremental pricing decisions where you are more concerned with only the costs required to build the next incremental unit of product.

It is also possible that an entity could generate extra profits simply by manufacturing more products that it does not sell. This situation arises because absorption costing requires fixed manufacturing overhead to be allocated to the total number of units produced - if some of those units are not subsequently sold, then the fixed overhead costs assigned to the excess units are never charged to expense, thereby resulting in increased profits. A manager could falsely authorize excess production to create these extra profits, but it burdens the entity with potentially obsolete inventory, and also requires the investment of working capital in the extra inventory.

As well as all methods of management accounting, accounting with full distribution of expenses has the advantages and shortcomings, namely:

Advantages:

* Assumes inclusion of all expenses on production of a unit of production or services in accounting of expenses counting on a unit of production. No other method of accounting of expenses before itself sets such purpose.

* Conforms to SSAP 9 requirements to an assessment of stocks and a work in progress which are included in financial reports of the enterprise.

* The profit and loss accounts prepared on a method of accounting with full distribution of expenses, estimate enterprise «profit» on the same basis on which the assessment of stocks is made (i.e. both production expenses and cost of stocks are considered at full prime cost).

* In view of the fact that the accounting method with full distribution of expenses counts full expenses on a unit of production, it is applied by the management when pricing by the principle «average expenses plus profit» to an additive of in advance established share of profit to prime cost.

* The accounting method on kinds of activity allows to apply accounting with full distribution of expenses (within which ABC can be used) as the most suitable method to the enterprises in modern conditions when all of them apply advanced technology in the productions more widely.

Shortcomings:

* Accounting with full distribution of expenses depends on a number of estimates, assumptions and forecasts at calculation of «full» prime cost of a product. The best estimates turn out during distribution and redistribution of overhead costs and at calculation of a rate of absorption of overhead costs (which is based on previously defined overhead costs and outputs). If any of these estimates is wrong, then the size received as a result of calculations of «full expenses» will be inexact.

* If accounting with full distribution of expenses is the only method used by the management, then decisions on reduction or increase in output can be accepted by the enterprise on the basis of incomplete information. By the definition, full prime cost of a product includes an element of constant expenses which were added on each unit of production. However constant expenses don't increase or don't decrease together with output of the enterprise and, therefore, shouldn't join in incremental costs of a unit of production which are related to short-term decisions on increase or output reduction.

* The enterprise profit for the period, calculated by means of an accounting method with full distribution of expenses, depends on levels of production, than on sales levels more. Such situation arises because stocks are estimated at full prime cost and, thus, the sum of constant expenses can be transferred to future reporting periods by production of bigger quantity of units of cost, than is realized. Release of bigger quantity of units of cost, than sales volume, means that the part of the constant expenses absorbed by units of cost, being in a warehouse at the end of the period, is postponed to the next period. As constant expenses are connected over time, transfer of constant expenses doesn't open the nature of these expenses. This subject will be in more detail studied in the following module of this workbook.

* Accounting with full distribution of expenses and reports on an accounting method with full distribution of expenses are more difficult in understanding in comparison with accounting system on limit expenses and the reports made on the basis of such system of accounting. The accounting method on limit expenses is considered in the following block of this workbook.

Questions

1. Give definition of accounting of prime cost with full distribution of expenses.

Situational task

Situational task 1.

1. List the main evaluation stages of a product or service by means of an accounting method with full distribution of expenses.

Situational task 2.

Previously the defined constant expenses make $60,000, and the expected output is equal 10,000 products. Thus, the rate of absorption of overhead costs how many will make. If the actual volume increased twice in comparison with expected, what deviation you would face?

Situational task 3.

From information on accounting of expenses of the enterprise follows that a factor cost on production of the only product makes $8 for a product. Constant expenses in a year are expected of $70,000.

By means of an accounting method with full distribution of expenses prepare the profit and loss account for this enterprise if the expected volume for the period was planned at the level of 35,000 products, however the actual volume appeared much less, having made 20,000 products. The commodity stock at the beginning of the reporting period was absent.

15,000 products from 20,000 made were realized only. Sale price makes $12 for a product.

Previously the defined rate of absorption of overhead costs = $70,000/35,000 = $2 / on a product.

Situational task 4.

The company MI of Menyyufekchuring began the activity on November 1 19х1 years. It has two manufacturers, one in Lidze and another in London. Both plants deliver production at the fixed sale price of the central warehouse in Milton Keynz. The head of plant in Lidze diligently follows indications of the company while the managing director of plant in London seeks to act independently.

Below registration indicators for a year which is coming to an end on October 31 of 19х2 years, prepared by the office personnel are given in places:

Data	Lidz	London
It is made products	10,000	30,000
It is transported products	10,000	10,000
Sale price of a product	$12	$12
Table of production expenses
	$	$
Materials ($4 for a product)	40,000	120,000
Work expenses ($3 for a product)	30,000	90,000
Variable overhead costs ($2 for a product)	20,000	60,000
Constant overhead costs	50,000	50,000
Total production expenses	140,000	320,000
Profit and loss report
	$	$
Income from sales	120,000	120,000
Prime cost of realized production	140,000	106,667
Profit (/loss)	(20,000)	13,333

The production director of the company is concerned by a difference between two groups of indicators, especially that both plants put identical quantity of goods on the central warehouse. He asked you to study these data to help it to find an explanation.You can assume that the initial stock was equal to zero.

(a) Establish the volume used by each plant for compensation of constant overhead costs.

(b) Determine the cost of all stocks meant in reports about profits.

(c) Make the new report for plant in London, using 10,000 units of production as volume for compensation of constant overhead costs. Specify the cost of a stock of finished goods and what amendment (if necessary) you define for insufficient or excess compensation of constant overhead costs.

You should round the digital indicators if in it there is a need.

Tests

1. Object of calculation in mass production are:

A) separate types of production;

B) separate orders;

C) separate production divisions;

D) B, C answers;

E) production operations

2. Object of calculation in individual production are:

A) B, C answers;

B) separate types of production;

C) separate orders;

D) separate production divisions;

E) separate units of production

3. In what method of the accounting of expenses and calculations of product cost are inherent semi-finished and bespolufabrikatny options:

A) to the poperedelny;

B) to simple method;

C) to the job order;

D) to the standard;

E) to the combined

4. Define the income from realization at calculation of product cost by a method an apzorpshen-kosting, using the following data:

Release - 2200 units of a product; constant expenses - 660000 tenges, i.e. constant expenses on 1 unit - 300 tenges. Variable expenses on 1 unit - 800 tenges. Business and administrative expenses - 250000 tenges, including variable expenses - 100000 tenges, constant expenses of 150000 tenges. Sales volume of 1500 units for the sum of 2250000 tenges.

A) 350000;

B) 400000;

C) 290000;

D) 500000;

E) 390000.

Recommended literature

1. Aldaniyazov, K.N.Upravlenchesky accounting and analysis: studies. grant / Korkembay Nazarovich Aldaniyazov. - Almaty: Yurid. litas. 2008 . - 364 pages.

2. Druri K. Introduction in the management and production accounting. - M: Audit, 1994. - 10 pages.

3. Armless P.S.Uchet of expenses and calculation in the industry (Questions I of a series, methodology, the organization).- M: Finance and statistics, 2003. - 50 pages.

4. Myullendorf R., Karrenbauzr M. Production account. - M. :ZAO «FLN-PRESS», 1996. - 200 pages.

5. Nazarov V. L. etc. Management accounting - And. : Economy, 2005. - 50с.

Chapter 8. Prime cost Accounting on variable expenses (Direct-Costing)

8.1 Prime cost accounting on variable expenses

Method in which the cost of a product or operation is determined by allocating to it an appropriate portion of the variable (direct) costs. Direct costing treats fixed costs (overheads such as administrative and selling costs) as period costs (associated with time and not output). Also called contribution costing or variable costing. See also absorption costing and marginal costing.

The theory and practice of domestic system of calculation in the conditions of the developing market relations needs.в studying of organizational systems of the management accounting applied in the countries of market economy. One of such systems is the system of calculation of product cost on a factor cost. The system of the accounting of variable expenses arose in the USA in the period of the Great depression and was widely adopted in the fifties. Prior to the beginning of the Great depression (1928) the remains of finished goods were estimated at the prime cost estimated on full expenses. The depression led to creation of large supplies of unrealized production, and the assessment on full expenses, according to analysts of that time, led to artificial distortion of profit. Constant expenses which don't depend on output and the income sizes, being redistributed between the reporting periods, considerably influenced the size of settlement profit. According to analysts, it was necessary to count return of the incurred expenses through communication of output with expenses and the income. In this aspect it was solved, of course, sufficiently conditionally, to divide cumulative costs of variables which were identified with straight lines, and on constants which were called useless and were identified with the indirect. The new system of expenses received the name «direkt-kosting» (direkt costing).

The essence of system is based on expression «direkt-kost the plan», entered by Johnathan Harris in 1936 by consideration of a technique of calculation of costs of production of the enterprise by it. In contents of the monthly profit and loss report began to differentiate usual production expenses and indirect overhead costs. Differentiation of production costs allowed to define dependence of volume of profit on the volume of realization of production and to operate prime cost. Thus, the essence of this system was reduced to the following.

Fundamental difference of direkt-kosting system from calculation of full prime cost consists in the relation to constant general production expenses. At calculation of full prime cost constant general production expenses participate in calculations, at calculation on variable expenses they are excluded from calculations. General running costs also are excluded from calculation. They are periodic and at the end of the reporting period are written off directly for financial result.

Such system of the account leads to that constant expenses in this reporting period don't correspond to stocks of finished goods, aren't fixed in work in progress volumes. Apparently from the given order of distribution of expenses, the report on the income at direkt-vdstiyete contains two indicators of the income: marginal income and income from primary activity. The marginal income consists of constant expenses and the income from primary activity of the enterprise.

Thus, the standard-kosting system is put in a basis of «direkt-kosting», but with division of overhead costs of variables and constants; the last are written off at the expense of the income from realization and, therefore, pages 644] don't participate in formation of product cost [11].

For introduction of direkt-kosting system it is necessary to divide costs of variables and constants. As variables understand the expenses which total amount changes with change of degree of utilization of capacity or outputs. Costs of raw materials concern to them and the main materials, fuel and energy on the technological purposes, a salary of the main production works, for example, at price-work systems of compensation, etc. Counting on a unit of production the specified expenses are invariable.

But in practice quite often dependence between outputs and expenses isn't directly proportional. For example, at increase in purchases of raw materials, materials suppliers quite often present to the discount enterprise from the price, and then costs of raw materials grow slightly more slowly than output.

Expenses belong to constants, the absolute sum which (size) at change of degree of utilization of capacity or outputs doesn't change. Depreciation of fixed capital charged for the period, rent, percent concern to them on the loan capital, a salary of administration of the enterprise, protection, etc., for example. At increase in output constant expenses are distributed for large volume that leads to decrease in prime cost of a unit of production.

In the western account, the variable expenses defining decisions on increase or decrease in output, call decisive expenses, and the constant expenses which directly aren't influencing change of output, call the expenses which aren't defining decisions.

But, there is a large number of expenses which in a certain situation on decision-making are variables, in other situation can be constants. The answer to a question to consider these expenses as variables or constants, depends first of all on two factors: duration of the period considered for decision-making, divisibility of production factors.

Differently, speaking about constants and variable expenses, it must be kept in mind that in certain situations many of variable expenses can become constants, and vice versa, constants - variables. One of the factors influencing similar behavior of expenses, the time interval in which they are considered is. It is accepted to distinguish instant, short and the long periods.

In the instant period all expenses are constants: the product is let out therefore it is impossible to change the volume of its production (it already is), to change expenses (the suffered expenses already in the past).

In the short period all expenses share on constants and variables.

In the long period the enterprise has opportunity not only to buy a large number of raw materials and materials or to employ a large number of workers, it can carry out and capital investments, i.e. to increase the sizes of fixed capital, in the long period it is considered to it that all expenses are variables. Classification of expenses for constants and variables has relative, conditional character, i.e. there is no type of expenses which could be carried on its being to variables or constants. Division of expenses into constants and variables in many respects is determined by a concrete situation or a problem by decision-making.

Thus, application of a direkt-kosting is interfaced to certain difficulties: difficult precisely to divide overhead costs of constants and variables; for calculation and pricing it is necessary to determine full product cost by a stand-alone way; etc. At the same time, the division of expenses for constants and variables strengthens control and analytical opportunities of the account.

Practical researches in the field of system a direkt-kosting show that division of expenses conditionally. The admissions accepted at everyone enterprise have to be considered at calculation of results. Prime cost calculation on system a direkt-kosting provides the invariable size of constant expenses at any output therefore the main attention in management accounting is paid to constant expenses. Directors and structural divisions strengthen control functions of management by these expenses.

At the heart of «direkt-kosting» calculation of the reduced product cost and definition of the marginal income which is one of the major indicators used in system lies. This indicator represents a difference between an amount of sale and variable expenses.

Various approaches are given to definition of this indicator: «the difference between sale price and specific variable expenses is called as the marginal income on a unit of production» or «variable expenses or partial product cost are subtracted from the price of sale of production and the marginal income» is defined. It helps to determine the price of profitable realization of production, and also to carry out the analysis of interrelation and a ratio of expenses, realization and profit volume.

The system a direkt-kosting has some distinctive features: the first - division of production expenses into variables and constants; the second - calculation of product cost on limited expenses; the third - a mnogostadiynost of drawing up the report on the income. Process of the account happens in two stages (table 1).

The scheme of drawing up the profit and loss report is provided in table 8.1, made on direkt-kosting system.

Table 8.1 - Scheme of drawing up report on the marginal income

Stage	Types of production	1	2	3	4	5
First stage	Income from realization	х	х	х	х	х
Prime cost calculation	- (minus)
	Variable expenses	х	х	х	х	х
	= (equals)
	Marginal income	х	х	х	х	х
Second stage	- (minus)
Result calculation	Constant expenses	х
	= (equals)
	profit	х	х	х	х	х

At the first stage connection of output of finished goods with factor (variable) cost is established, profitability of production of separate types of production is reflected. At the second stage the indirect (constant) expenses generalized on one account are compared with a contribution received from realization of each type of production. The result reflects profitability of all production and realization. Thus, this system is focused on realization. The more the realization volume, the more profit gets the enterprise. Estimate finished goods and a work in progress only on variable (direct) expenses. Such system of an assessment induces the enterprises to find possibilities of increase in realization [21, p.201].

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