Full Cost Accounting

In: Business and Management

Submitted By adanlai
Words 667
Pages 3
1 Introduction

1.1 Background of Full Cost Accounting

Environmental pollution is more serious day by day. Boer, Estes and Klammer (1994, p.61) stated that the business community has a great challenge from environmental costs. In 90’s century, the businesses needed to increase in environmental cost (Zachry, Gaharan and Chaisson 1998, p. 72). So the business wanted to control the environmental cost. Tetra Tech EM Inc. (1997, p.1) stated municipal solid waste (MSW) from Florida was provided, and full cost accounting (FCA) could identify, assess and report the costs of solid waste management.

1.2 Definition of Full Cost Accounting

Boer, Estes and Klammer (1994, p.61) defined that FCA may provide the more reasonable pricing of goods or services and help the managers choose better alterative from decision making. ‘It is method of accounting for all monetary costs of resources used or committed for MSW services’ (Veeraraghavachariar, 2007). Another detail description for FCA by Conway-Schempf (1998, p. 11), which pointed out that the good or services should be priced to relative their true costs. The true costs included environmental and other social costs. ‘The natural resources would be factored into calculations of a GDP’ and environmental cost would become a product cost.

1.3 Scope of Full Cost Accounting

FCA would address (Veeraraghavachariar, 2007):

• Up-front costs - public education and outreach, land acquisition, permitting, and facility construction and modification. • Operating costs - operation and maintenance, capital costs, interest payment, and hidden costs. • Back-end costs - site closure and postclosure care.

2 Body

2.1 Prinicples of Full Cost Accounting

Full cost accounting embodies several key concepts that distinguish it from standard accounting techniques. The following list highlights the basic tents of FCA. •…...

Similar Documents

Cost Accounting

...SUBJECT: Cost Accounting Systems Managerial accounting concerns utilizing information available that assists managers to plan, control, and execute the company’s performance. It emphasizes on the relationships of internal costs and internal control tools in a systematic way. In a manufacturing organization, a typical cost accounting system aims to identify and allocate costs reasonably so that the organization can estimate the profitability of its products. With the input of numerical information such as direct materials and direct costs, management within the organization can make decisions such as the selling price of its products. The system is also a tool for managers to control the product lines. There are several types of costing systems, including job-order system, process costing system, and activity-based system. For instance, the activity-based system is composed of cost drivers, fixed cost, variable cost, and fixed/variable overheads. Cost drivers help allocate variable cost to the production of different product lines. Process costing method distributes the cost according to the manufacturing progress of the products, while job-order costing system assigns costs to different categories of job functions. Driven by the objective of controlling relevant cost and minimizing ineffective activities, managers of the organization examines the costs from a macro perspective instead of focusing on each piece of products. Under the method of full absorption costing,......

Words: 453 - Pages: 2

Cost Accounting

...Cost Accounting David Norris Western Governors University Accounting doesn’t have the best reputation but for as long as there has been money, there has been a need for accounting. Long gone are the days of the smoke filled room piled floor to ceiling with the leger books of the entrepreneur. Using state of the art technology and creative techniques, today’s accounting is a vital component of the corporate world helping to build financial foundations that encourage long term growth and profitability. Cost accounting is the managerial financial budgeting tool of the accounting domain that deals specifically with cost and production. Cost accounting assists companies to understand the cost of product versus service and this helps to prepare bids and proposals and assembles information for planning and control which are needed to evaluate performance. Any business can use cost accounting but it is most effective with corporations that manufacture mass produced products and have a large employee base. Cost accounting is also becoming a valuable asset within the medical industry. In the ultra-competitive market of health care, hospitals are using price strategies, one of the new methods used in accounting, to entice customers and keep patients happy. Cost accounting techniques have developed as quickly as industry has in the 21st century. Basic accounting has become antiquated as new, creative approaches to financial stability emerge. Methods......

Words: 2800 - Pages: 12

Accounting Costs

...COST CLASSIFICATION AND BEHAVIOUR. Cost: Reflects a monetary measure of the resources sacrificed or forgone to achieve a benefit such as acquiring a good or service. The term has multiple meanings: Different types of costs are used in different situations. Costs are developed and used for some specific purposes. The way a cost is used is to be used will define the way it should be computed. Cost Object: Any activity for which a separate measurement of cost is required. Something for which we want to compute a cost e.g. Product Product Line Department Division Geographical Area Cost unit: Unit of Production / service in relation to which cost are ascertained the unit is what is most relevant for the activity of the organization. Cost Centre: A production or service / location, function, activity or item of equipment for which costs are accumulated. i) ii) iii) Cost Classification. Costs can be classified as Direct or Indirect i) ii) By Function iii) Fixed, variable or mixed (discussed under cost behavior) DIRECT OR INDIRECT: i) Direct Cost (Manufacturing Cost). Those that can be specifically and exclusively identified with a particular cost object. These costs comprises Direct Materials Direct Labour Direct Expenses N.B. Sometimes direct costs are treated as indirect because tracing them to the cost object directly is not cost effective. E.g the cost screws in a car. ii) Indirect Cost (Overheads). Cost of a resource acquired to be used by more than one cost......

Words: 2018 - Pages: 9

Cost Accounting

...JOB COSTING 4-1 Cost pool––a grouping of individual cost items. Cost tracing––the assigning of direct costs to the chosen cost object. Cost allocation––the assigning of indirect costs to the chosen cost object. Cost-allocation base––a factor that links in a systematic way an indirect cost or group of indirect costs to a cost object. 4-2 In a job-costing system, costs are assigned to a distinct unit, batch, or lot of a product or service. In a process-costing system, the cost of a product or service is obtained by using broad averages to assign costs to masses of identical or similar units. 4-3 An advertising campaign for Pepsi is likely to be very specific to that individual client. Job costing enables all the specific aspects of each job to be identified. In contrast, the processing of checking account withdrawals is similar for many customers. Here, process costing can be used to compute the cost of each checking account withdrawal. 4-4 The seven steps in job costing are: (1) identify the job that is the chosen cost object, (2) identify the direct costs of the job, (3) select the cost-allocation bases to use for allocating indirect costs to the job, (4) identify the indirect costs associated with each cost-allocation base, (5) compute the rate per unit of each cost-allocation base used to allocate indirect costs to the job, (6) compute the indirect costs allocated to the job, and (7) compute the total cost of the job by adding all direct and indirect costs assigned to the......

Words: 9286 - Pages: 38

Cost Accounting

...or not. Another concern with budgets, according to Prendergrast, the budgets have resulted in a conflict between top management and their subordinates. The top management are expected more from the lower managerial staffs; however, the subordinates are work to build in slack in their budgets in an effort to make budget numbers easier to attain. According to McNally (2002), he argues that the budgeting process takes a long time, costs too much, and consumes too many corporate resources. For some companies, the process may take as long as six to eight months. That is the reason for many smaller company may not make a budget if the company has a very limited managerial staffs. Besides that, the budgeting model must be clearly understood by all the managers at various levels to be successfully implemented. In large organisations, the volume of forms may be so large that not one person could understand it all. It may be more managers to be involved in order to administer and communicate the budgeting. The essential to train the managers incur another cost to the company. Consequently, when the budget is issued, it may no longer accurate and this causes problems for businesses in “today’s unpredictable and fast-paced business climate” (McNally, 2002). Jack Welch, the Chairman of General Electric, claims in his best selling book Winning, the budgeting process is “the most ineffective practice in management”. It is wasting the energy, time, and the uncertain profit out of the......

Words: 2166 - Pages: 9

Cost Accounting

...Cost Allocation in Multiagent Settings Author(s): Madhav V. Rajan Source: The Accounting Review, Vol. 67, No. 3 (Jul., 1992), pp. 527-545 Published by: American Accounting Association Stable URL: http://www.jstor.org/stable/247976 Accessed: 13/12/2008 09:19 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=aaasoc. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship. We work with the scholarly community to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources. For more information about JSTOR, please contact support@jstor.org. American Accounting Association is collaborating with JSTOR to digitize, preserve and extend access to...

Words: 7156 - Pages: 29

Cost Accounting

...Fundamentals of Cost Accounting Week 5 Assignments Chapters 8 and 9 Questions Chapter 8 6. Discuss the sequence in which the major components of the master budget are prepared. Why is it necessary to prepare the components in such a sequence? The Sequence for a master budget is as follows: A production budget, purchases budget, personnel budget, direct labor budget, overhead budget, selling and administrative budget, capital budget, and budgeted financial statements. Using this sequence to create a master budget a manager has assistance to align activities and resources allocations with organizational goals; it’s a vehicle to promote employee participation, cooperation, and department coordination. It's also a tool to enhance conduct of the managerial functions of planning, controlling, problems solving; basis on which to sharpen management's responsiveness to changes in both internal and external factors; and model that provides a rigorous view of future performance of a business in time to consider alternative measures. 7. Why is a firm’s production budget influenced by the finished goods inventory policy? The production budget follows from the sales budget and is based on information about the type, quantity, and timing of units to be sold. (A retail or service company would not prepare a production budget.) Sales information is combines with beginning and ending Finished Goods (FG) Inventory information so that managers can schedule necessary production. 8.......

Words: 1188 - Pages: 5

Cost Accounting

...BPO price ($50,000 x .59345*) (29,673) Amount to be recovered through periodic lease payments $390,327 _____________________( Lease payments at the beginning ( of each of the next 5 years: ($390,327 ÷ 4.10245**) $95,145 * present value of $1: n=5, i=11% ** present value of an annuity due of $1: n=5, i=11% Note: Since a BPO is expected to be exercised, the lease term ends for accounting purposes when the option becomes exercisable. Exercise 15-14 (concluded) Situation 3 Amount to be recovered (fair value) $185,000 Less: Present value of the BPO price ($22,000 x .77218*) (16,988) Amount to be recovered through periodic lease payments $168,012 _____________________( Lease payments at the beginning ( of each of the next 3 years: ($168,012 ÷ 2.75911**) $60,894 * present value of $1: n=3, i=9% ** present value of an annuity due of $1: n=3, i=9% Note: Since a BPO is expected to be exercised, the lease term ends for accounting purposes when the option becomes exercisable. Exercise 15-15 Requirement 1 Note: Because exercise of the option appears at the inception of the lease to be reasonably assured, payment of the option price ($45,000) is expected to occur when the option becomes exercisable (at the end of the third year). Present value of annual lease payments ($36,000 x 2.69005**) $ 96,842 Plus: Present value......

Words: 5497 - Pages: 22

Full Cost Accounting

...Full Cost Accounting A Course Module on Incorporating Environmental and Social Costs into Traditional Business Accounting Systems Noellette Conway-Schempf, Ph.D. Carnegie Mellon University Pittsburgh, PA 15213 1 Overview: This module describes methods for incorporating environmental information into accounting management information systems to allow financial decision makers to include environmental criteria in their decisions. The module is subdivided to permit a progression of detail concerning accounting systems and their role in encouraging the design and development, marketing, and use of more environmentally-conscious products, services, and manufacturing processes. The module is suitable for use as part of an engineering or business environmental management course, at either the undergraduate or graduate level, through the selection of various components of the module. Thus for example, in an MBA course, the early material on types of accounting systems would be unnecessary, or in an engineering environmental management course, more emphasis could be placed on the managerial/cost accounting section than on the national accounting section. The module is subdivided as follows: 1) Introduction   What is accounting? Relevance of accounting and capital budgeting to environmental management and engineering issues    Types of accounting systems Shortcomings of accounting systems as environmental information systems Full cost......

Words: 11071 - Pages: 45

Cost Accounting

...Activity-Based Costing is also known as ‘ABC’ costing has a simple concept. In contrast to traditional costing system, Activity-Based Costing system first accumulates overheads costs for each organizational activity, and then assigns the costs of the activities to the products, services, or customers. Let’s take a look back in time, during the 1970’s and 1980’s, the boundaries of absorption costing system were felt with firmness which meant they were not as complex. Companies needed something different for a costing system that could reflect true product cost in order to battle competition. The absorption costing system was designed many years earlier, when most companies produced small range of products. Further, overhead costs were small part in the identification of cost of a product in those times. These problems of absorption costing led to a new generation of the idea of Activity-Based Costing system. Robert Kaplan wrote articles on the idea of Activity-Based Costing system in the early 90’s. Kaplan also was the person who created the idea of Balance scorecard. Balance scorecard is a measurement-based strategic management system, which provides a method of aligning business activities to the strategy, and monitoring performance of strategic goals over time. Together these systems work hand in hand to provide companies with the best tools to be successful in today’s markets. So how does Activity-Based Costing system work compared to direct costing system or......

Words: 1909 - Pages: 8

Cost Accounting

...* CHAPTER 1: COST MANAGEMENT AND STRATEGY * QUESTIONS 1-1 Firms Using Cost Management. Here are some examples; there are many possible answers. 1. Wal-Mart: to keep costs low by streamlining restocking and sales 2. Dell: to keep costs low by improving manufacturing performance and by using target costing and other management techniques 3. Citicorp: to keep costs low by using activity analysis (see exercise1-31) to identify key operations and to find those that add little or no value 4. A local school district or public agency: to keep costs low in order to provide the best possible service given available funds 5. Procter & Gamble: to assess the profitability of its different products 6. Any other large, diversified manufacturer, like Procter & Gamble: which needs to be able to analyze the relative profitability of its different products, using cost management 7. A small machine shop: which needs cost management to determine whether it should repair or replace a machine 8. A dance studio: to analyze and choose between different compensation plans for its teachers; and to determine whether it should open a new studio 1-2 Firms not expected to be significant users of cost management information: 1. Microsoft: here the focus is on forming strategic alliances, innovation and competition; cost management is more important for other firms in the information technology business, such as Hewlett-Packard, and IBM that compete in part on......

Words: 9648 - Pages: 39

Cost Accounting

...the liquidation. Pr. 3–7 Haye & Lee LLP (20 minutes, easy) Partners accept bonds in exchange for certain limited liability partnership assets and withdraw noncash assets during liquidation. Journal entries for transactions completed in carrying out liquidation of the partnership. Pr. 3–8 Adams, Barna & Coleman LLP (30 minutes, easy) A limited liability partnership is insolvent, as is one of the three partners. Given a balance sheet of the partnership and a summary of the financial status of partners, prepare a statement of realization and liquidation and determine the amount of cash that would have to be generated from the realization of partnership assets to enable the insolvent partner to pay personal creditors in full. Prepare journal entries for the liquidation. Pr. 3–9 Smith, Jones & Webb LLP (30 minutes, easy) Installment liquidation of a limited liability partnership over a period of three months. Statement of realization and liquidation with supporting analysis. Pr. 3–10 Denson, Eastin & Feller LLP (45 minutes, medium) Priorities among limited liability partners as to eligibility to receive cash payments in an installment liquidation. Consists of a series of independent questions as to the circumstances under which a partner would be entitled to receive a specified amount of cash. Pr. 3–11 Lord & Lee LLP; Lord-Lee Corporation (50 minutes, medium) Incorporation of a limited liability partnership. Journal......

Words: 6976 - Pages: 28

Cost Accounting

...Cost accounting is an accounting process that measures and analyses the costs associated with products, production and projects so that correct amounts are reported on financial statements. Cost accounting aids in decision-making processes by allowing a company to evaluate its costs. Some types of costs in cost accounting are direct, indirect, fixed, variable and operating costs. Absorption costing is a costing system which treats all costs of production as product costs, regardless whether they are variable or fixed. In absorption costing method the main emphasis is on direct and indirect cost. Variable costing is a costing system under which those costs of production that vary with output are treated as product costs. In variable costing method the main emphasis is on variable and fixed cost. The heart of the difference between variable costing and absorption costing for financial accounting is the accounting for fixed manufacturing costs. All variable manufacturing costs are product costs under the both methods. But fixed manufacturing costs are treated differently. Under variable costing, fixed manufacturing costs are treated as expenses of the period. Under absorption costing, fixed manufacturing costs are product costs. They are then deducted as the costs of goods sold when sales occur. Format of Absorption Costing Income Statement Format of Variable Costing Income Statement Sales ......

Words: 669 - Pages: 3

Cost Accounting

...Cost Management a s t r a t e g i c e m p h a s i s 5 Fifth Edition Blocher | Stout | Cokins Cost Management A Strategic Emphasis Cost Management A Strategic Emphasis Fifth Edition Edward J. Blocher University of North Carolina at Chapel Hill Kenan-Flagler Business School David E. Stout Youngstown State University Williamson College of Business Administration Gary Cokins Strategist, Performance Management Solutions SAS/Worldwide Strategy COST MANAGEMENT: A STRATEGIC EMPHASIS Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2010, 2008, 2005, 2002, 1999 by The McGraw-Hill Companies, Inc. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. 1 2 3 4 5 6 7 8 9 0 DOW/DOW 0 9 ISBN 978-0-07-352694-2 MHID 0-07-352694-0 Vice president and editor-in-chief: Brent Gordon Editorial director: Stewart Mattson Executive editor: Richard T. Hercher, Jr. Editorial coordinator: Rebecca Mann Marketing manager:......

Words: 399292 - Pages: 1598

Cost Accounting

...Accounting Cheat Sheet Visit our website online at: http://www.AccountingCoach.com Learn more about AccountingCoach Pro: http://www.AccountingCoach.com/pro/ For personal use by the original purchaser only. Copyright © AccountingCoach®.com. Click a Category Below Financial Statements Balance Sheet Income Statement Cash Flow Statement Stockholders’ Equity Financial Ratios Accounting Principles Bookkeeping, Debits and Credits Accounting Equation Adjusting Entries Bank Reconciliation Petty Cash Accounts Receivable and Bad Debts Expense Inventory and Cost of Goods Sold Depreciation Accounts Payable Cost Behavior and Break-even Point Payroll Accounting Standard Costing Accounting Pronouncements Organizations Pages 1 1-2 2-3 3 4 4-5 5-6 7-8 8 9 9-10 10-11 11 12 12-13 13 14 14-15 15-16 16-17 17 For personal use by the original purchaser only. Copyright © 2011 AccountingCoach®.com. AccountingCoach.com’s Accounting Cheat Sheet is a quick reference and overview of accounting concepts. You should consult a professional accountant and/or the accounting profession’s official pronouncements for specific situations and for more complete information. FINANCIAL STATEMENTS Financial statements are general purpose, external financial statements prepared according to generally accepted accounting principles. Some terms that apply to the financial statements include: balance sheet reports the amounts of assets, liabilities, and stockholders’ equity at a specified......

Words: 5433 - Pages: 22

Big Little Lies | 更新至2 大陆/2019 新大头儿子和小头爸爸 | 星球大战:前线2