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Part Five Analysis of Cost Statement

Part Five Analysis of Cost Statement. Introduction. Cost statement is reported by cost accounting data and other related information ,to supervise product cost level and various expense . The correct and timely preparation for cost statements is an important content of cost accounting.

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Part Five Analysis of Cost Statement

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  1. Part Five Analysis of Cost Statement

  2. Introduction Cost statement is reported by cost accounting data and other related information ,to supervise product cost level and various expense . The correct and timely preparation for cost statements is an important content of cost accounting .

  3. The cost report uses costs accounting methods adding direct and indirect allocated costs to determine the cost of each service. • The cost report uses different formulas to compute the cost for different service types. • By using the cost report you can determine the cost per organ and costs of transplants and post transplant care.

  4. Preparation of Cost Statement • Commodity product cost statement • Unit cost statement of main products • Detail statement of types cost

  5. Commodity product cost statement reflect the total cost of all products and the unit costs of main products in a certain period

  6. Unit cost statement of main products During the reporting period, this report reflect unit cost of all sorts of main products and the main technical and economic index. It is the further explanation for the commodity product cost statement.

  7. Detail statement of types cost • manufacturing expenses • administrative expenses • marketing expenses • financial expenses

  8. Analysis of cost statement Using cost and other relevant information, evaluate the cost level changes in order to reveal the various factors that affecting the cost changes, so as to look for ways reduce the cost of a management activity.

  9. Basic methods of cost analysis Comparative analysis A method by comparing the actual number with the base to reveal the difference between them

  10. Basic methods of cost analysis Ratio analysis Associated with the two factors that reflect the cost conditions, by calculating the ratio, reflecting the relationship between them, in order to evaluate the cost and operation status of the business

  11. Basic methods of cost analysis Factor analysis • Serial substitution method • Variance calculation method

  12. How to Use the Cost Report to Provide Information to Management • These are cost accounting systems that compute direct and indirect cost at the individual charge level and then aggregate the charges and translate it to procedural cost. • administrations need to be made aware that when it comes to the cost of the organ, especially kidney, the cost report provides the most accurate answer.

  13. THE COST MANAGEMENT INFORMATION SYSTEM • This system is primarily concerned with producing outputs for internal users for satisfying management objectives. • Such a system is not bound by any formal rules and conventions, unlike the financial accounting system. Instead such criteria are set internally. • This system has the following three broad objectives: • 1. To provide information for costing out services, products and other objects of interest to management. • 2. To provide information for Planning and Control. • 3. To provide information for Decision making.

  14. COST MANAGEMENT INFORMATION SUBSYSTEMS • This system has two major subsystems: • 1. The Cost Accounting Information system. • 2. The Operational Control Information system. • The objectives of these two systems correspond to the Costing and Control objectives mentioned earlier for the cost management information system. • The output of the two cost systems satisfies the third objective (Decision making).

  15. COST ACCOUNTING INFORMATION SYSTEM • Designed to assign costs to individual products and services and other objects as specified by management. • For external financial reporting, the cost accounting system helps to assign costs to products in order to value inventories and determine cost of sales as per the rules and conventions set by the respective Accounting Standards Boards of the respective countries.

  16. The system should be in a position to provide information not only with respect to product costs but also with respect to all activities along the length of the organizations value chain with a view to improving the value received by the customer. • Such value is however to be provided only at returns that are acceptable to the owners of the company. • Thus this system should be in a position to provide cost information concerning quality, different product designs, and post- purchase customer needs all of which are vital for managerial planning and control.

  17. EXAMPLES • 1. S company manufactures sundials. The following information was obtained for last year. • Beginning inventory: Materials……………………Rs45,000 Work in process……………. 57,000 Ending Inventories: Materials…………………….Rs50,700 Work in process……………. 31,000 During the year material purchases amounted to Rs199,200, direct labour cost was Rs170,000, and overhead cost was Rs133,000. There were 20,000 units produced. REQUIRED: • Calculate the total cost of direct materials used in production.

  18. 2. Calculate the cost of goods manufactured. Calculate the unit manufacturing cost. • 3. Of the unit manufacturing cost calculated in requirement 2, Rs10 is direct materials and Rs7 is overhead. What is the prime cost per unit? Conversion cost per unit?

  19. Solution to example • 1.Total cost of Direct materials used in production. • Beginning inventory of materials Rs45,000 • Add purchases 199,200 • Materials available for use Rs244,200 • Less: Closing inventory 50,700 • Direct materials used in prdn Rs193,500

  20. 2.Cost of goods manufactured. • Direct materials used Rs193,500 • Direct labour used 170,000 • Overhead 133,000 • Total mfg cost added Rs496,500 • Add: Beginning WIP 57,000 • 553,500 • Less: Ending WIP 31,000 • Cost of goods manufactured Rs522,500 • Total units produced 20,000 • Unit manufacturing cost Rs: 26.125

  21. 3. Prime cost per unit: • Total Mfg cost per unit Rs 26.13 • Less: Overhead cost per unit 7.00 • Prime cost Rs 19.13 • Conversion cost per unit: • Prime cost per unit Rs 19.13 • Less:Unit material cost 10.00 • Unit Labour cost 9.13 • Add:Unit overhead cost 7.00 • Unit conversion cost 16.13

  22. Thanks for Your Attention

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