CMS Lecture 6 - Overhead Costing_1.pptVIP

Cost Management SystemsLecture 6 Overhead Costing Cost Management Systems 22321 University of Technology, Sydney Cost Management Systems 22321 University of Technology, Sydney Lecture Outline Introduction – Cost Allocation and Terminology Methods of Cost Allocation Plantwide Method Steps to allocating overhead Volume based cost drivers Departmental Method Practical Example Direct method Step method Reciprocal method Lecture Demonstration Problem Other Issues with the Step Method Cost Management Systems 22321 University of Technology, Sydney Introduction Every organisation faces the problem of attempting to determine the cost of a cost object. The problem is compounded(混合,) by the need to allocate(分配) overheads(经费) (indirect costs) to the cost object. Overhead includes indirect materials and indirect labour, manufacturing costs that cannot be traced(追溯) to individual products (e.g. common costs) and costs that could be traced(追踪) directly, but are not economically(在经济上) feasible(可行的) to do so. The task of determining the cost of the cost object can be difficult, given that no direct relationship exists between overheads and the cost object. Direct Costs Indirect Costs Cost Object Cost Assignment Cost Tracing Cost Allocation Cost Pools Question: How much of Paul Polman’s (CEO of Unilever) salary is included in the cost of a Paddle pop? How many other allocations would be involved in the cost determination of this product? There are three broad(明显的) methods of allocating costs: Plantwide(全厂间接)– Introduced in lecture 3 Departmental(部门的) – Focus of this lecture Activity Based Costing(以活动为基础的成本系统) – Covered in the next lecture Cost Management Systems 22321 University of Technology, Sydney Methods of Cost Allocation In an organisation there are many different costs and each type must somehow(以某种方式) be recovered(找回) through the sale of products or services. To make good decisions on how to do this, managers need accurate(准确的) and timely(及时的) informatio