Job-Order Costing System Essentials
Key Concepts of Job-Order Costing Systems
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- The use of a predetermined overhead rate in a job-order cost system makes it possible to compute the total cost of a job before. FALSE
- The formula for computing the predetermined overhead rate is: Predetermined overhead rate = Estimated total manufacturing overhead cost รท Estimated total amount of the allocation base. TRUE
- When the predetermined overhead rate is
Budgeting and Variance Analysis: Key Concepts & Formulas
Chapter 22: Budgeting – Strategic Planning, Measurement, Evaluation, and Control
Sales: Estimates the quantity of sales and prior year’s sales as a starting point. Static: One activity level. Once the budget is determined, it doesn’t change even with activity changes. Production: Estimates the number of units to be manufactured to meet budgeted sales and desired inventory goals. Flexible: Shows expected results of a responsibility center for many activity levels. Master: Operating & financial
Read MoreBudgeting Techniques: Flexible, Fixed, Zero-Based & Performance
Budgeting Techniques
Advantages of a Flexible Budget
- It is a very useful device for controlling costs.
- It is very useful in unpredictable environments.
- It shows the impact of varying levels of activity on profits.
- It facilitates production and profit planning.
Steps in Creating a Flexible Budget
- Identify the relevant range of activity.
- Classify costs according to variability.
- Determine variable costs.
- Determine fixed costs.
- Prepare the budget for selected levels of activity.
Fixed Budget
A fixed budget is designed
Read MoreKey Concepts in Business Analysis and Cost Management
1: Information
- Relevance: Does the data apply to current/future forecasts? Be cautious with past data.
- Ease of Use: Is data accessible and usable?
- Integrity: Verify if the source is reliable and accurate.
- Timeliness: Is the data up-to-date or still relevant?
2: Types of Analytics
- Descriptive: What happened? Uses historical data.
- Predictive: What might happen? Statistical forecasting.
- Diagnostic: Why did it happen? Identifies patterns.
- Prescriptive: What should we do? Provides solutions.
3: Activity-Based
Read MoreKey Accounting and Budgeting Terms: Definitions
Absorption Costing
A costing method that assigns both variable and fixed costs to products.
Contribution Format
An income statement format that is geared to cost behavior in that costs are separated into variable and fixed categories rather than being separated according to the functions of production, sales, and administration.
Contribution Margin Income Statement
An income statement that separates variable and fixed costs; highlights the contribution margin, which is sales less variable expenses.
Contribution
Read MoreEffective Management Control Systems for Business Success
1. Introduction to Management Control
Management Control is the process by which managers ensure that resources are obtained and used in the most efficient way to achieve the organization’s goals. Therefore, it is a tool for assessment defined within an established timetable.
- It involves:
- Strategy definition: mission, external analysis, internal analysis, company goals, strategic plan.
- Organization: hierarchy and responsibility.
- Management Control System: Identify Key Performance Indicators (KPI), measure