管理会计课后习题Ronald Hilton 第七章

A CLOSER LOOK AT OVERHEAD COSTSANSWERS TO REVIEW QUESTIONS7.1 When we refer to manufacturing overhead costs we are describing the indirect manufacturing costs of products.These are the factory costs that are incurred in producing products but cannot be traced directly to them. They include all manufacturing costs other than direct material and direct labour, such as the costs of supervision, power, factory security and so on. From a product costing perspective, we can expand our definition of overheads to include all product-related costs other than direct costs as managers may require comprehensive estimates of product costs for making product-related decisions (see Chapter 4). However, as Australian accounting standard AASB 102 Inventories requires that inventory valuations in external reports of manufacturing businesses only include manufacturing costs, a distinction is drawn between indirect costs within the manufacturing area, called manufacturing overhead, and other indirect costs incurred along the value chain, upstream and downstream, of the manufacturing or production area.Upstream costs and downstream costs, regardless of whether the entity is a manufacturer or a service provider include costs incurred before and after the production process, such as research and development, design and supply costs, marketing, distribution and customer service costs.The indirect costs of responsibility centres are costs assigned to a unit in an organisation such as a department or division where a manager is held accountable for performance. Indirect costs cannot be traced directly to the centre so they need to be assigned instead.7.2 Cost object: is something that is assigned a separate measure of cost because management need such costinformation; for example, responsibility centres, products, projects and so on. (The various production departments in a manufacturing firm also provide examples of cost objects. For example, the material handling cost pool may be allocated across the various production departments that use material handling services. In a hospital costs may be assigned to reception, a ward, a doctor, operating theatres or intensive care unit (ICU) and so on.)Cost pool: a collection of costs that are to be assigned to cost objects. Costs are often pooled because they have the same cost driver. (An example of a cost pool is all costs related to material handling in a manufacturing firm.) Cost allocation base: is some factor or variable that is used to allocate costs in a cost pool to cost objects. (An example of a cost allocation base may be the weight of materials handled for each production department that uses material handling services. This base would be used to assign the costs in the material handling cost pool to the production departments.)Cost driver: is a factor or activity that causes a cost to be incurred. (From the example above, the allocation base of weight of materials handled for each production department may be a cost driver depending on its causal relationship to the costs in the cost pool.)The difference between cost allocation bases and cost drivers is that cost drivers are allocation bases but not all allocation bases are cost drivers. Ideally allocation bases should be cost drivers; that is, there should be a cause and effect relationship between the costs in the cost pool and the allocation base. In practice, some allocation bases do not have this relationship, or the relationship is imperfect. Under these circumstances the accuracy of the cost allocations can be questioned.7.3 As shown in Exhibit 7.2 (Estimating the cost of a cost object), in estimating the cost of a cost object, direct costsare traced directly to the cost object and indirect costs (those with no direct linkage to the cost object) are collected into cost pools and assigned to the cost object by means of allocation bases, preferably cost drivers.Some possible examples of cost objects and their direct and indirect costs for the NGOs involved in the tsunami relief efforts (described in the ‘Real life - Measuring tsunami recovery costs: an overhead or not?’ on page 276) follow:7.4 A cost allocation base is some factor or variable that allows us to allocate costs in a cost pool to a cost object.One possible allocation base for assigning advertising costs to the various attractions of a large theme park would be the number of people patronising the park’s attractions. This would assume that the number of people attending a certain part of the theme park would be an indication of the advertising resources consumed by each attraction. Notice that in most cases the sales revenue generated by the various components of the theme park would not be a viable allocation base since most theme parks have a single admission fee for the entire park.Note that some people would consider ‘corporate’ advertising of this nature should not be allocated to the various subunits of the business, as it is very hard to determine a causal cost driver. In activity-based costing terminology the advertising could be regarded as a facility cost.7.5 The development of departmental overhead rates involves a two-stage process.In stage one, overhead costs are assigned to the firm’s production departments. First, overhead costs are distributed to all departments, including both support and production departments. Second, support department cost allocation takes place which involves costs being allocated from the support departments to the production departments. At the end of stage one, all overhead costs have been assigned to the production departments.In stage two, overhead application occurs as the costs that have been accumulated in the production departments are applied to the products that pass through the departments using the overhead rate set for each production department.7.6 A support department is a unit in an organisation that is not involved directly in producing the organisation’sgoods or services. However, a support department does provide services that enable the organisation’s production process to take place. Production departments, on the other hand, are units that are directly involved in producing the organisation’s goods and services.Examples of ‘production’ departments in a bank may include cheque processing, tellers, loan departments and so on. Examples of support departments in a restaurant chain may include washing dishes (either manual or stacking and unstacking dishwashers), cleaning, ordering/buying (some franchises rely on ordering from a central unit and some require purchasing at the local market), bookings desk, head office, laundry and accounting.7.7 Activity-based costing can be used to assign manufacturing overhead costs to products in two stages. In the firststage overhead costs are assigned to activity cost pools (that is, activities). In the second stage, activity costs are assigned from the activities to products in proportion to the products' consumption of each activity, measured by the amount of activity driver consumed. In traditionalcosting systems, when a two-stage allocation process is used, the first stage is to assign overhead costs to production departments and the second stage is to assign the overhead costs from the production departments to products in proportion to the products' consumption of the departmental overhead cost drivers.7.8 Using departmental overhead rates instead of a single plantwide overhead rate can improve the accuracy ofproduct cost information. The allocation bases used for each department are likely to be more realistic in representing the relationship between overhead costs and the product, compared to using just one plantwide rate.However, using departmental overhead rates requires the distribution of overhead costs to departments, the allocation of support department costs to production departments and the collection of cost driver data by production departments. While this approach usually provides more useful information than the single cost pool approach, it is more expensive to operate and still can provide misleading information. A problem with this approach is that costs with different behaviour patterns are added together before allocation to the product. It is difficult to identify a realistic cost driver for a cost pool that includes setup costs, space costs and indirect material costs, for example.Using activity-based costing should improve the accuracy of cost information. Allocating costs to activities rather than departments enables the identification of even more appropriate allocation bases. For example ABC uses both volume and non-volume based cost drivers as allocation bases and attempts to aggregate costs that have similar behaviour patterns. Again, however, there is an additional cost in analysing costs and cost drivers at an activity level rather than at a department level.7.9 A cost driver is an activity or factor that causes costs to be incurred. A volume-based cost driver is a cost driverthat is a measure of or proxy for the volume of production. An assumption underlying the use of a volume-based cost driver is that costs are caused, or driven, by the volume of production. Examples include direct labour hours, machine hours and direct material volume.Non-volume based cost drivers are cost drivers that are not directly related to the number of units produced. For example in manufacturing the set up costs are not driven directly by the units of output since each batch can vary in volume. In a bank, non-volume based costs can include human resource management (driven by staff numbers), cleaning (driven by floor space or room numbers), and IT servicing (possibly driven by the number of computers).7.10 Labour cost is a commonly used base for allocating overhead costs to cost objects including projects such asthose undertaken by FFA. Although such projects may be self funded by the member countries they result in additional overhead costs being incurred by the FFA. As these overhead costs cannot be specifically traced cost-effectively to the individual projects, an appropriate allocation base is needed to allocate them to the individual projects to avoid cross-subsidisation of projects from member contributions and donations.It is likely that there is some relationship between the level of salary costs for the projects and the increase in overhead costs incurred by the FFA (as larger, higher cost projects are likely to require more support from FFA), though the correlation is unlikely to be perfect. In the absence of a stronger logical connection and a more practical, cost effective allocation base the use of salary costs as the allocation base may be reasonable. However, it is not surprising that the member countries questioned and sought independent advice on the accountability of the seemingly high overhead recovery rate of 66% of salary costs, because to them the overhead recovery is an uncontrollable cost.7.11 The primary benefit of using a predetermined overhead rate instead of an actual overhead rate is to providetimely information for decisionmaking, planning and control. Also the predetermined rate removes fluctuations inherent in monthly actual overhead rates. While the use of actual overhead rates removes the need to account for over- or under-allocated overhead, this is because it relies on data that are not known until after the event, so it cannot be used in a timely fashion. Notice that in both approaches, it is necessary to calculate an overhead rate, as overhead costs cannot be traced directly to products.7.12 The denominator volume is the measure of cost driver volume used to calculate the manufacturing overhead rate.The most common measure is the budgeted volume of cost driver for the coming year. Theoretical capacity is the maximum level of production that the plant can run at, without ever stopping. Practical capacity assumes the business operates at the maximum level that its resources allow under normal, efficient operating conditions.Product costs will be higher using practical capacity, as the denominator measure of cost driver volume will be lower, resulting in higher overhead rates. Using theoretical capacity as the denominator will result in lower overhead rates and product costs, but there will be higher levels of underapplied overhead.7.13 Management accountants allocate indirect costs to responsibility centres to help managers understand the effectsof their decisions, to encourage particular patterns of resource usage and to support the product costing system.For example production departments may source services from support departments and where these services are supplied f or ‘free’ there may be a tendency to over-consume them. Where they are charged to departments, the departmental managers are held responsible for these costs and need to be careful about the amountof these services they consume. Also, where departmental overhead rates are used for product costing, it is necessary to allocate the costs of support departments to production departments, to calculate departmental overhead rates for the production departments.The problems encountered in allocating a proportion of costs of the Prime Infrastructure Group (which changed its name to Babcock and Brown Infrastructure on 1 July 2005) to its responsibility centre of Dalrymple Bay Coal Terminal (DBCT) related to the disentanglement of overheads associated with DBCT’s op erations from the costs of other activities within the Prime group. The amount of overhead allocated by Prime to DBCT affected the overhead cost per loaded tonne sought to be recovered by DBCT in the total price per loaded tonne of coal charged to terminal users. The terminal users have little option but to use the terminal facility because of its monopolistic nature. The competition authority, to ensure fair and reasonable access for terminal users, needed to approve the terms and conditions of terminal ac cess. It sought an independent review of Prime’s method of allocating overhead to DBCT, which found that Prime had not reliably estimated the amount of overhead relating to DBCT. This ‘Real life’ example illustrates the impact that overhead cost allocation choices can have, not only on product costs and product prices, but also industry competitiveness.7.14 Budgeted support department costs should be allocated rather than actual support department costs. If actualcosts were allocated, the activities of the department that provides the services could compromise the results of the department that uses these services as well as their ability to plan activities. The incentive for cost control in the department that provides the services may be reduced if they just transfer those excesses to the next department. The allocation on the basis of budgeted figures highlights the good or poor results in the sourcing department.7.15 Under the direct method of support department cost allocation, all support department costs are allocateddirectly to the production departments, and none of these costs are allocated to other support departments. Under the step-down method, a sequence is first established for allocation of support department costs. Then the costs incurred in the first support department in the sequence are allocated among all other departments that follow in the sequence, including other support departments. The method proceeds in a similar fashion through the sequence of support departments, never allocating back to a support department that has had its costs allocated.Under the reciprocal services method, a system of simultaneous equations is established to reflect the reciprocal provision of services among support departments. Then, all of the support departme nts’ costs are allocated among all of the departments that use the various support departments’ output of services. The reciprocal services method of support department cost allocation is the only method that fully accounts for the reciprocal provision of services among departments.7.16 As stated in the previous answer, under the reciprocal services method all of the support departments’ costs areallocated among all of the departments that use the various support departments’ output of services. It is the only method that fully accounts for the reciprocal provision of services among departments. However, this degree of accuracy may not be necessary for the purpose and sometimes makes very little difference to the resulting costings. The degree of inaccuracy of the reciprocal and step down methods depends on the amount of overhead in each cost pool and the level of support provided between departments.As the method of allocating support department costs becomes more detailed and sophisticated the cost of maintaining the system increases.7.17 The term reciprocal services refers to two or more support departments providing support services to each other.In a university, for example, the IT department provides support services to the human resource (HR) department but the human resource department also provides HR support to the IT department. In fact IT gives support to all other departments (e.g maintenance, grounds, student administration, faculty administration, library, security) and receives support from many of them (maintenance of facilities, HR, security).7.18 The contribution margin statement is used to highlight the separation of variable and fixed costs. The totalcontribution margin is equal to sales revenue less the variable cost of goods sold (sometimes called the variable manufacturing expenses) and the variable selling and administrative expenses. The fixed expenses deducted below the contribution margin include bothfixed manufacturing overhead andfixed selling and administrative expenses.In the absorption costing income statement the cost of goods sold expensed, for each month, includes variable manufacturing costs and the predetermined fixed manufacturing overhead cost applied to products sold. The expenses deducted after that are the selling and administrative expenses, which include both fixed and variable components.7.19 Both absorption and variable costing systems assign direct material, direct labour and variable manufacturingoverhead costs to products in exactly the same way, but they differ over their treatment of fixed manufacturing overhead. Absorption costing includes fixed manufacturing overhead as a part of product cost. Variable costing excludes fixed manufacturing overhead from product cost and expenses it in the period in which it is incurred.The key distinction between variable and absorption costing is the timing of fixed manufacturing overhead becoming an expense. Eventually, fixed overhead is expensed under both product costing systems. Under variable costing, fixed overhead is expensed immediately, whenit is incurred. Under absorption costing, fixed overhead is inventoried and not expensed until the accounting period during which the manufactured goods are sold.7.20Variable product costs are particularly useful for short-term decisions, such as whether to make or buy acomponent, and pricing—especially when variable selling and administrative costs are included. The fixed costs will be incurred anyway and in the short term they should be disregarded. In making these decisions, the variable costs provide a good measure of the differential costs that need to be assessed. The information needed for short-term decision making is discussed in Chapter 19.Under variable costing, profit is a function of sales. The classification of costs as fixed or variable makes it simple to project the effects that changes in sales have on profit. Managers find this useful for decision making.Also, cost volume profit analysis (which we discuss in Chapter 18) requires a variable costing format.Planned costs must take account of cost behaviour if they are to provide a reliable basis for control. In addition, the link between sales and profit performance, under variable costing, ensures a performance measure that managers understand easily.Fixed costs are an important part of the costs of a business, especially in the modern manufacturing environment.Variable costing provides a useful perspective of the impact that fixed costs have on profits by bringing them together and highlighting them, instead of having them scattered throughout the statement.Absorption product costs include unitised fixed overhead, which can result in suboptimal decisions, especially as fixed costs are not differential costs in the short term. However, in the modern business environment, with a high level of fixed overhead, a relatively small percentage of manufacturing costs may be assigned to products under variable costing. Also, in the longer term a business must cover its fixed costs too, and many managers prefer to use absorption cost when they make cost-based pricing decisions. They argue that fixed manufacturing overhead is a necessary cost incurred in the production process. When fixed costs are omitted, the cost of the product is understated.SOLUTIONS TO EXERCISESExercise 7.21 (20 minutes) Predetermined overhead rates for various cost drivers: manufacturerNOTE: Budgeted sales revenue, although given in the exercise, is irrelevant to the solution. 1 Predetermined overhead rate = drivercost of level budgeted overheading manufactur budgeted(a) $546 00015 000 machine hours= $36.40 per machine hour(b) $546 00030000 direct labour hours= $18.20 per direct labour hour(c)$546 000$630 000*= $0.867 per direct labour dollar or 86.7%of direct labour cost *Budgeted direct labour cost = 30 000 hours x $21 Actual overhead rate = actual manufacturing overhead actual level of cost driver(a) $510 00016 500 machine hours= $30.91 per machine hour(b) $510 00027000 direct labour hours= $18.89 per direct-labour hour(c)$510 000$607 500*= $0.84 per direct labour dollar or 84%of direct labour cost *Actual direct-labour cost = 27 000 hours x $22.502 Denyer Ltd will not know the data for actual costs and cost drivers until the end of the year. For timely decisionmaking it is necessary to have estimates and use predetermined rates.Exercise 7.22 (20 minutes) Predetermined plantwide overhead rate: printing firm1Predetermined overhead rate =budgeted manufacturing overheadbudgeted level of cost driver$546 00015 000 machine hours= $36.40 per machine hour2 Business cards600 ⨯ $36.40 = $21 840Wedding invitations 300 ⨯ $36.40 = $10 920 Promotion flyers200 ⨯ $36.40 = $72803Actual manufacturing overhead- Applied manufacturing overhead = Overapplied or underappliedoverhead$51000-(1100)($36.40)=$10 960underappliedExercise 7.23 (30 minutes) Predetermined plantwide overhead rate; alternative cost drivers1Predetermined overhead rate =budgeted manufacturing overheadbudgeted level of cost driver(a) $546 00030 000 direct labour hours=$18.20 per direct labour hour (b) $546 000 =$1.30 per direct labour dollar or$420000 130% of direct labour cost 2(a) Business cards 800 direct labour hours ⨯ $18.20 = $14 560 Wedding invitations 600 direct labour hours ⨯ $18.20 = $10 920Promotion flyers 400 direct labour hours ⨯ $18.20= $7280(b) Business cards (800 direct labour hours)($22.50) ⨯ 1.30 = $23 400 Wedding invitations (600 direct labour hours)($22.50) ⨯ 1.30 = $17 550 Promotion flyers(400 direct labour hours)($22.50) ⨯ 1.30= $11 7003Actual manufacturing overhead - Applied manufacturing overhead = Overapplied or underappliedoverhead (a) $51000 - (1800)($18 20) = $18 240underapplied overhead (b)$51000–(1800)($22.50)(1.30)†=$1650 overapplied overhead† Actual direct labour cost = 1800 ⨯ $22.50In hindsight, direct labour dollars seems the most appropriate cost driver, as it results in the lowest level of underapplied/overapplied overhead. It therefore appears to better represent the behaviour of overhead costs. However, it is difficult to make this judgment based on just one month’s data.Exercise 7.24 (10 minutes) Departmental overhead rates: manufacturerApplied manufacturing overhead per deluxe saddle and accessory set:Tanning Department 110 m 2⨯ $8$ 880 Assembly Department 4 machine hours ⨯ $22 88 Saddle Department 45 direct labour hours ⨯ $10 450$1418Exercise 7.25 (15 minutes) Volume-based cost driver versus ABC: manufacturer1 Material handling cost per mirror:$180 00060()500() + 60()500()éëùû*´ 500 = $1500* The total number of direct labour hours.An alternative calculation, since both types of product use the same amount of the cost driver, is the following:$180 000120*= $1500* The total number of units (of both types) produced.2 Material handling cost per lens = $1500. The analysis is identical to that given for requirement 1.3 Material handling cost per mirror:$180 0008 + 32()* ´ 8 60= $600* The total number of material moves.4 Material handling cost per lens:$180 0008 + 32()* ´ 32 60= $2400* The number of material moves for the lens product line.Exercise 7.26 (20 minutes) Normal costing; alternative denominator volumes: engineering firm1Practical capacity will be greater than the actual volume of production. Overhead will be underapplied at the end of the coming year. Job costs and tender quotes will be lower than their actual costs because the overhead cost will be understated.2 A change from practical capacity to the budgeted volume will increase the overhead rate and, therefore, increase job costs and tender quotes. This will make it more difficult to win tenders.3If normal volume were used, by the end of this year actual production will be lower than the normal volume, as the company is expected to be in the ‘trough’ of its normal business cycle. Overhead would be underapplied, but not by as much as it would have been if practical capacity had been used as the denominator volume. Next year the company will be in the peak of its two-year cycle and, if normal volume is used as the denominator volume, overhead will be overapplied. Over the two-year cycle, the underapplied and overapplied overhead should even out, assuming that actual production behaves as expected over its normal cycle.Job costs and tender quotes under normal volume will be understated this year and overstated next year, compared to their actual cost. The average cost over the two years should approximate the actual production cost.Exercise 7.27 (10 minutes) Direct method of support department cost allocation: bankDirect customer service departments using servicesDepositLoanProvider of service Cost to be allocated Proportion Amount ProportionAmount Human Resources $ 720 000 (50/80) $450 000 (30/80) $270 000 Computing 1 200 000 (60/80) 900 000 (20/80) 300 000 Total $1 920 000Grand total$1 920000Exercise 7.28 (15 minutes) Step-down method of support department cost allocation: bankHumanresources Computing Direct customer service departmentsusing servicesDeposit LoanCosts prior to allocation $720 000 $1 200 000Allocation of Human ResourcesDepartment costs $720 000 144 000 (2/10) $360000 (5/10) $216000 (3/10) Allocation of ComputingDepartment costs $1 344000 1 008000 (60/80) 336000 (20/80) Total costs allocated to eachdepartmentTotal cost allocated to directcustomer service departments$ 1 920000。