1. Prof. Dr. Olga Popova, OVGU Prof. Dr. Jörg Jablinski, OWL
Lecture
„Industrial Costing“
SS 2016/2016
Prof. Dr. Olga Popova, OVGU
Prof. Dr. Jörg Jablinski, OWL

2. „Classification and basic concepts of cost accounting“
Chapter 1
„Classification and basic concepts of cost accounting“

3. Main tasks in a company
Cost- and performance accounting supports management of a company
Providing information, which are necessary for guiding the company as a whole or at the individual areas
Typically the Corporate Governance includes the following fields of activity:
planning the decision-making process
leading the decision-making process
controlling the achievement of objectives incl. plan dates

4. Main contents of the corporate accounting
Balance Sheet accounting
Financial and tax accounting: overview of assets and liabilities of a company, profit and loss account
Financial Accounting
Cash flow accounting on paying and -out as an overview of the liquidity of an enterprise
Investment Accounting
Assessment of long term investment decisions
Cost- and performance accounting
Accounting as the basis of planning, leading and controlling

5. Key factors of internal and external accounting
Internal Accounting
External Accounting
Recipients of Information
Corporate members
Externals from outside the company (state, banks etc.)
Accounting Purposes
Planning, leading, controlling & decision making
Assets, finances and income; distribution and taxation
Guidelines
Scarcely Guidelines
Specific country laws (in Germany for example HGB, IFRS, AO)
Object Depiction
Disaggregated account for parts of the company
Aggregated calculation for segments and the whole company
Temporal Rhythm
Variable (daily, weekly, monthly or annual reports)
Fixed (annual, half-yearly and quarterly reports))
Temporal Focus
Future and past-oriented (planned /actual accounting )
Past-orientated
(actual accounting )

6. Cost- and performance accounting vs. Investment accounting
Differences in the temporal range of the considered decisions
Cost- and performance accounting
basis for operational decisions
operating range of up to one year
Example: production cost of a product during the next quarter
Investment accounting
base for decisions with long-term effects
time value of money – means to be well timed for success
example: purchase of a system for using during several years

7. Cost-benefit-analysis
Objective: achieving the best possible accounting purposes
Decisive criterion: The benefits of improved decision making must exceed the costs of developing and maintaining this information
Costs and benefit of expansion of cost- and performance accounting
Benefit of expansion
Costs of expansion
optimal expansion
expansion of cost- and performanceaccounting

8. Important systems of cost accounting
Accounting purpose determines the necessary information
„different costs for different purposes“
Influence quantities of the expansion of cost- and performance accounting
industrial and service-related business
production processes
competitive strategy
Classification of systems on the basis of significant accounting purposes of documentation, planning and controlling
Accounting purpose of controlling can be achieved by using information from past, actual and planned accounting records
Range of cost allocation as a further distinguishing factor
Full cost-accounting
Marginal cost-accounting

9. Full cost-accounting Cost types accounting Cost center accounting
Cost unit accounting
Overhead Costs
Overhead Costs
Overhead Costs
Profit and loss accounting
Direct Costs
Direct Costs
Performance-accounting

10. Marginal cost-accounting
Cost types accounting
Cost center accounting
Cost unit accounting
Profit and loss accounting:
Contribution margin accounting
Fixed
overhead Costs
Fixed
overhead Costs
Performances
Variable
overhead Costs
Variable
overhead Costs
Variable
overhead Costs
- Variable Costs
= Contribution Margin
Direct Costs
Direct Costs
- Fixed Costs
Business Success
Performance-accounting

11. Basic concepts of cost- and performance accounting :
Costs:
Performances:
Valued, tangible targeted good’s consumption.
Valuated, properly targeted on good’s origin.
►Tangible target orientation : Relating to operating purpose (tangible goal) of the company.
► Valuation : Valued at price, i.e. value sizes.
► Good’s Consumption / Good’s Origin : Costs arise for the first time only at the moment of the good’s consumption. Performances arise for the first time only at the moment of the good’s origin.

12. Flow variables of internal and external accounting
Calculated quantities
(flow variables)
Cumulative values and their components
Subsystems of accounting
Inpayment / Outpayment
cash balance
+ available at any time bank deposits
= amount of cash and cash equivalents
Financial Accounting, Investment Accounting
Revenues / Expenditures
Proceeds / Expenses
Cash and cash equivalents
+ All other receivables
- undetermined liabilities
= financial assets
+ tangible assets
= net assets
Balance Sheet accounting
Performances/ Costs
Operating assets
Cost- and performance accounting

13. imputed depreciations
Definition of outpayment, expenses and costs
Outpayment
Not effecting net income
Effecting net income
Repayment of a credit
Buying a device
Expenses
Neutral expenses
not relating to a purpose of the main activity
not relating to an accounting period
extraordinary
Rent reserve rooms, donation
Purpose expenses
Sales of equipment by price, that is lower than the purchase price
imputed depreciations
imputed rent
imputed interest
Destruction of equipment caused by accident
Other Costs Extra Costs Imputed Costs
Basic Costs
Costs

14. Cost terms and their significance (part 1)
Total Costs :
Unit Costs :
Costs of all goods the company has at least begun to sell during a given period.
Costs incurred in producing one unit of a good or service.
Direct Costs :
Costs which can be accurately traced to a cost object with little effort
Costs which cannot be accurately attributed to specific cost objects
Overhead Costs :

15. Process of cost accounting
Cost category
Cost allocation
Costing object
Unit Costs
Example : Material direct costs
Cost accounting
Example : Produkt (Inlay)
Overhead Costs
Example:
Material overhead costs
Cost coding

16. Ctotal = Cfix Cost terms and their significance (part 2)
Variable Costs :
A corporate expense that varies with production output. Variable costs are those costs that vary depending on a company's production volume; they rise as production increases and fall as production decreases.
A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses that have to be paid by a company, independent of any business activity.
Fixed Costs :
(linear) Cost Function :
Ctotal = Cfix
+ cvar · x
Fixed Costs
Variable costs depending on output x

17. caverage = Ctotal / x Average cost per unit : Marginal Costs :
Cost of the next unit or one additional unit of volume or output.
Pattern of Cost Behavior : Total costs and Average cost per unit
Ctotal
c average
Ctotal = Cfix + cvar · x
c average = Ctotal/ x
Cfix
x (amount)
x (amount)

18. Exercise 1: Flow Variables
Below you will find some business transactions of the company X; fill in the right solutions in the table.
Determine the following transactions: inpayment (+), outpayment (-), revenue (+), expenditures (- ), proceeds (+), expenses (-), performances (+) or costs (-).There are several possible flows of a business transaction.
1. Cash purchase of raw materials in the amount of ,-€.
2. Receiving a long-term bank credit in the amount of ,-€.
3. Credit purchase of raw materials in the amount of ,-€.
4. Residual book value of an engine purchased in the previous year in the amount of ,-€ (replacement value ,-€) is amortized linearly during next four years
5. Credit sales of finished goods in the amount of ,-€ (delivery time is before payment). The selling price (50.000,-€) is higher than the stock valuation of finished products at the warehouse (equal in financial accounting and cost accounting).
6. Cash sale of a machine from the current assets with 7.500,-€ (the net book value in the financial accounting is 0,-€).
7. Repayment of a credit in the amount of ,-€ by bank transfer.

19. 1. 2. 3. 4. 5. 6. 7. Process + Inpayment/ − Outpayment + Revenue/
− Expenditures
+ Proceeds/
− Expense
+ Performances/
− Costs 1. 2. 3. 4. 5. 6. 7.