1. COST CLASSIFICATION Ke cac loai cost classification ra. Cac ban co the lam theo trong sach hay theo thang Kun cung dc!! There are many types of costs and they are classified differently according to the immediate need of management. The followings are basic costs categories as below. 1. Product costs – Period cost 2. Manufacturing costs – Non-manufacturing costs 3. Variable costs – Fixed costs – Mixed costs 4. Direct costs – Indirect costs From the above categories, to me, the descriptions of Foxwood cost information from the scenario should be put into Manufacturing cost and Non-manufacturing cost as an appropriate cost classification. Manufacturing costs | | |-Direct labor costs |Direct manufacturing labor | |-Direct materials costs |Direct materials purchased | |-Manufacturing overhead costs |Sandpaper | | |Materials-handling costs | | |Lubricants and coolants | | |Miscellaneous indirect manufacturing labor | |Non-manufacturing costs | | |-Administrative costs |Plant-leasing costs | | |Depreciation – plant equipment | | |Property taxes on plant equipment | | |Fire insurance on plant equipment | |- Marketing/selling costs |Marketing promotions | | |Marketing salaries | | |Distribution costs | | |Customer-service costs | (Cai bang nay cac ban nen lam theo thang Kun nhe!!! ) 2. FINALCIAL STATEMENT Foxwood is a manufacturer in metal and wood.
The following tables show its financial statement including schedule of cost of goods required manufactured and income statement. | Schedule of cost of goods required manufactured | |Descriptions |$ |$ |Variable or | | | | |Fixed cost(V/F) | |Direct materials | | | | |Direct materials inventory Jan. , 2010 /Beginning direct materials | 40,000 | |- | |costs | | | | |Direct materials purchased | 460,000 | |- | |Materials available for use |500,000 | | | |Direct materials inventory Dec. 31, 2010 /Ending materials costs | 50,000 | |- | |Direct materials costs used | | 450,000 |V | |Direct labor | | | | |Direct manufacturing labor | |300,000 |V | |Manufacturing overhead | |- | |Sandpaper | 2,000 | |V | |Materials-handing costs | 70,000 | |V | |Lubricants and coolants | 5,000 | |V | |Miscellaneous indirect manufacturing labor | 40,000 | |V | |Plant-leasing costs | 54,000 | |F | |Depreciation-plant equipment | 36,000 | |F | |Property taxes on plant equipment | 4,000 | |F | |Fire insurance on plant equipment | 3,000 | |F | | | | 214,000 | | |Manufacturing costs incurred during 2011 | | 964,000 |- | |Finished goods | | | | |Beginning working in process/Work-in-process inventory Jan. 1, 2010 | 10,000 | |- | |Total manufacturing cost to account for | | | | | |974,000 | | | |Ending working in process/Work-in-process inventory Dec. 1, 2010 | 14,000 | |- | |Cost of goods manufactured | | 960,000 |- | Income Statement Lam theo thang Kun nhe cac ban!! Cho nay de nghi cac ban gho lai theo thang Kun The cost of goods manufactured which is derived from the schedule of cost of goods manufactured consists of the manufacturing costs associated with finished goods during the period. The equation: Cost of goods sold = Beginning finished goods inventory + Cost of goods manufactured – Ending finished goods inventory The equations: Materials available for use = Beginning balance of materials + direct materials purchsed
Direct material costs used = Materials available for use – ending direct materials inventory ? After defining direct materials costs used, direct labor and manufacturing overhead, sum of them is Manufacturing cost. The equation: Manufacturing cost = Direct materials costs used + Direct labor + Manufacturing overhead The cost of goods manufactured was made by deducting the ending work in process inventory from the total manufacturing cost. The equation: Cost of goods manufactured = Manufacturing cost + Beginning balance of work in process inventory – Ending balance of work in process inventory
However, will the total cost change substantially over a wide range of units produced? The following issues give us the answer. From the schedule of goods manufactured, we can define easily the two costs that are The direct material costs $ 450,000 The plant-leasing costs $ 54,000 ? Suppose that both the direct materials costs and the plant-leasing costs are for the production of 900,000 units. ( The direct materials unit cost = The direct materials costs / Units produced $450,000 / 900,000units = $0. per units The plant-leasing unit cost = The plant-leasing costs / Units produced $54,000 / 900,000 units = $0. 06 per units But, the plant-leasing cost is fixed cost so it is impossible to change it over production of units ( The plant-leasing unit cost = $54,000 / 1,000,000 units = $0. 054 The plant-leasing unit cost would decrease from $0. 06 to $0. 054. De nghi cho nay cac ban edit lai cho ki , khong la thot day nhe!!! Bai lam dung roi, trinh bay lai cho no khac khac nhe! ) 3. COST MEASUREMENT Foxwood has cost information on cost measurement that is showed in the following table. Standard cost per unit |$ | |Direct materials |18 | |Direct wages |4 | |Variable production overhead |3 | |Budgeted and actual cost per month | | |Fixed production overhead |99000 | |Fixed selling expenses |14000 | |Fixed administration expenses |26000 | |Variable selling expenses (of sales value) |10% | | |June (units) |July (units) | |The number of units produced and sold | | | |Sales |12800 |11000 | |Production | 14000 | 10200 | With Price per unit = $50 Normal capacity (per month) = 11000 units Unit cost = $9 ( ¦ ABSORPTION COSTING METHOD Descriptions |June | |July | | |$ |$ | |$ |$ | |Revenue | |640,000 | | |550,000 | |Direct materials |252,000 | | |183,000 | | |Direct wages |56,000 | | |40,800 | | |Variable production overhead |42,000 | | |30,600 | | |Fixed production overhead |126,000 | | |91,800 | | | |476,000 | | |346,800 | | |Add: Opening stock |0 | | |40,800 | | |Less Closing stock |40,800 | | |13,600 | | |Total production cost |435,200 | | |374,000 | | |Over/(under) absorption cost |27,000 | | |7,200 | | | | |408,200 | | |381,200 | |Gross profit |231,800 | | |168,800 | |Variable selling expenses |64,000 | | |55,000 | | |Fixed selling expenses |14,000 | | |14,000 | | |Fixed administration expenses |26,000 | | |26,000 | | | | |104,000 | | |95,000 | |Net profit | |127,800 | | |73,800 | ¦ MARGINAL COSTING METHOD Descriptions |June | |July | | |$ |$ | |$ |$ | |Revenue | |640,000 | | |550,000 | |Variable production cost | | | | | | |Direct material |252,000 | | |183,600 | | |Direct wages |56,000 | | |40,800 | | |Variable production overhead |42,000 | | |30,600 | | | |350,000 | | |255,000 | | |Add: Opening stock |0 | | |30,000 | | |Less value of closing stock |30,000 | | |10,000 | | |Total production costs |320,000 | | |275,000 | | |Variable selling expenses |64,000 | |55,000 | | |Total variable costs | |384,000 | | |330,000 | |Total contribution | |256,000 | | |220,000 | |Fixed production overhead |99,000 | | |99,000 | | |Fixed selling expenses |14,000 | | |14,000 | | |Fixed administration expenses |26,000 | | |26,000 | | | | |139,000 | | |139,000 | |Net profit | |117,000 | | |81,000 | Cac so sanh 2 phuong phap, ( dai loai la noi no khac nhau cho nao) Sau do cac ban Ve cai Historgam nhu Anh Kun vao nhe
Sauk hi ve xong cac ban nhan xet them nhe, Duoi day la vi du nhan xet cua minh, cac ban dua vao do ma chem them, edit lai dung co copy y trang la thot day nhe!!! The net profits in the both methods are not equal to each other. The stock units in June = Production units in June – Sales units in June = 14,000 units – 12,800 units = 1,200 units ( The cost of stock in June = The stock units in June x Unit cost = 1,200 units x $9 = $10,800 The reconciliation in June The net profit of the Marginal costing method + The cost of stock in June = The net profit of Absorption costing method $117,000 + $10,800 = $127,800 The reconciliation in July The net profit of the Absorption costing method + The cost of stock in July = The net profit of the Marginal costing method ($81,000 – $7,200 = $73,800) Cost report: Lam theo Kun nhe, Cac ban chi viec Copy trong cai Exell ma minh dua cac ban va lam theo cai bang cua Kun la ok!! 5. REDUCE COSTS AND ENHANCE VALUE Dua vao tinh toan cua minh trong may cai bang! Cac ban edit lai theo cai Fortmat cua Kun nhe!! 1. Material crapped 5% > 3% 2. Material wasted when input to machine 4% > $2. 5% 3. Inspection and storage material $1/m2 4. Inspection equipment $250,000/period 5. Downgraded product 12. % > 7. 5% 5 Downgraded product sold at a discount 30% 6. Production returned from customer 5% > 2. 5% of a units delivered 7. Product liability 3% > 1% 8. Machine idle 20% > 12. 5% 9. Admin, selling and distribution $600,000 > $500,000 (10%) 10. Prevention program $200,000 > $600,000 11. Machine Run Time 0. 6 hrs > 0. 5 hrs Total production units (pre inspection) |Particulars |Existing (units) |After QPM program (units) | |Total sales requirement |5000 |5000 | |Specification failure 5%, 2. 5% |250 |125 | |5250 |5125 | |Downgrading at inspection |750 | | |Downgrading at inspection | |416 | |Total units before inspection |6000 |5541 | Purchase of materials A (square meters) | |Existing |After QPM program | | |Sp. Mtr (m2) |Sq.
Mtr(m2) | |Material required to meet pre-inspection | | | |Production requirement |48000 |44328 | |Processing loss (after input machine) |2000 |1137 | | |50000 |45465 | |Scrapped materials due to poor quality |2632 |1406 | | |52632 |46871 | Gross Machine Hours |Exixting (hrs) |After QPM program (hrs) | |Initial requirement |3600 |2771 | |Idle time |900 |396 | | |4500 |3167 | ( Profit and Loss account (before and after implementation of QPM) | |Before QPM programm |After QPM program | |Sales revenue |5000000 |5000000 | |Sales down graded |525000 | | | | |291200 | | |5525000 5291200 | |Less: costs | | | |Materials |2105280 |1874840 | |Inspection |52632 |46871 | |Machine cost |1800000 | | | | |1266800 | |Inspection and other costs |250000 | | | | |150000 | |Product liability and other claims |150000 | | | | |50000 | |Administration, Selling and |600000 |540000 | |Distribution | | | |Preventive Program |200000 |600000 | |Total cost |5157912 |4528511 | |Profit |367088 |762689 | Assessment of indicators Productivity: The total production units (pre-inspection) after TQM program was decreased from 6000 units to 5541 units, 459 units are not much compared to 6000 units. Cai nay minh tinh toan xoang roi moi nhan xet o duoi nay, cac ban co the tham khao va edit lai theo fortmat cua Kun vi no da dc check boi anh Uy kute) Efficiency: We can see that though the revenue between before and after QPM program is equivalent to each other ($5,525,000 and $5,591,200), the profits are different levels. The profit after QPM program had a big rise of $395,601 (from $367,088 to $762,689). The reason is that after QPM program, there is a significant drop of costs of sales downgraded (from $525,000 to $291,200), machine cost (from $1,800,000 to $1,266,800), inspection and other costs (from $250,000 to $150,000), product liability and other claims (from $150,000 to $50,000), etc.
Effectiveness: The total cost between before and after QPM program has a disparity of $629,401 (= $5,157,912 – $4,528,511), which is rather big amount of money in saving. Through the result analyzed, it is feasible for the program to continue. 6. QUALITY AND VALUE ( Nghien cuu them SGK/92) Quality and value are two elements going abreast in manufacturing and selling/buying products. Quality means “the degree of excellence of a thing” – how well made it is, or how well it is performed if it is a service, how well it serves its purpose, and how it measures up against its rivals. Value has four distinct aspects: -Cost value is the cost of producing and selling an item/providing a service. Exchange value is the market value of the product or service. -Use value is what the product or service does, the purpose it fulfils. -Esteem value is the prestige the customer attaches to a product. Cai nay minh lam ko on, cac ban theo Kun nhe!!! 7. POTENTIAL IMPROVEMENTS ( Xem them SGK /95) Cau cuoi hinh nhu lam chua on nha may! Xem sach ma chem. Nha!!! The following issues which are considered as basic ones of variety of potential improvements help Foxwood on this process. 1. Product profitability: Foxwood can make intelligent decisions regarding marketing strategies, product mix, supply chain processes, pricing, aligning assortments with customer value and other things. 2. Benchmarking improvement:
With the right level of insight into process costs, Foxwood can understand where to drive operational efficiency and process improvement. Drive down actual expenses to a unit cost level with a common methodology. Variances then can be identified between different facilities, staff, etc, identifying clear best practices that can be applied throughout Foxwood. 3. Vendor negotiations: Foxwood can generate detailed granular P & Ls for their vendors without just sitting at the table as merchandisers do in order to have a better preparation for marketing. Although nobody is looking to make price concessions in this economy, a comprehensive P&L often can uncover the classic win – win relation.
It is impossible to predict how long the process lasts, but the potential improvements above may be weapons helping Foxwood as well as every organization emerge from the downturn or even survive and thrive stronger than ever. CONCLUSION This report helps Foxwood know how much its products cost and how these costs might change in response to decisions made. Foxwood seniors will use this information to manage the business effectively, for example, in setting prices and determining which products are profitable, in planning and budgeting for future periods and for monitoring and controlling costs. References accountingformanagement, Cost terms, Concepts, and Classifications, viewed 13th Nov 2011,http://www. accountingformanagement. com/cost_terms_concepts_and_classifications. htm righthub, 2008, Project management, viewed 14th Nov 2011, www. brighthub. com/office/project-management/articles/70318. aspx HNC/HND Management accounting: Costing and Budgeting Supporting Foundation Degree Course book (1st edition) BPP Profession Education retailonlineintergration, 2009, 3 ways to strategically reduce costs and enhance profitability, viewed 15th Nov 2011, www. retailonlineintegration. com/article/3- ways-strategically-reduce-costs-enhance-profitability-410643/1 psychologytoday, Art Markman, Ph. D, Price, Quality, and Value, viewed 16th Nov 2011, http://www. psychologytoday. com/blog/ulterior-motives/201111/price-quality-and value