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Prof. Dr. Olga Popova, OVGU Prof. Dr. Jörg Jablinski, OWL

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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.


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