Lecture 11+13 - German cost accounting Flashcards
(!) Describe Paul Riebel’s purpose of a neutral database
General:
- Register all poss resource aspects
- All data should be extractable from database when relevant
- Database able answering different questions & time horizons
- Idea in most ERP data warehouse
- Normalized relational database
- Engine inside SAP
- Ref. Vagn Madsens VA
Examples:
- Place it was bought
- Price
- Quality
- Placement in parts list
- Replacement value
- Time horizon for relevance in DM
(!) What is accrual accounting?
General:
- Ref. Schmalenbach
- Dansk: Periodisering
- Match revenue & prod. cost to it
- Period sales driving costs
- Match sales & resource consumption
- Differ from CF idea: Direct cons. of decision: Ref. Paul Riebel
Period costs:
- Cost closely related to payment
Allocated costs:
- Eg. Depreciations
- Payment for asset made in another period
(!) Describe replacement costs, reproduction value & original cost
General:
- Reproduction or replacement prices on expenditures = expenses
__________
Replacement costs
General:
- Market price on economic good on real or assumed date of replacement: Present day value
- Best basis for financial statements for managerial purposes, in planning mergers & reorganization
- Seek profit functioning in all economic situations
- Part of economic perspective
Balance sheet:
- Has disposal price
- Reference day: Assumed date of replacement
Income statement:
- Reference day: Date of sale or replacement
__________
Replacement value:
- Value difference between original & current replacement costs
- Due to changes in market prices
__________
Reproduction value:
- What the value of enterprise is
- Required capital to build current form: Not real value.
__________
Original cost:
- What the value was
- Destroy balance between prod. & consump. if relied solely upon
Describe different VC structures
- Proportionally
- Progressive
- Regressive
(!) Independent cost measurement
General:
- Cash transaction as consequence of specific decision
- Ref. Paul Riebel
Identity principle:
- Cost only occur in relation to decision object: Ref. Joint prod.
- Possible production without costs: Eg. Prod. from stocked mat.
What was Schmalenbahns mission?
- Accrual accounting as central: Opposite cash
- Separate financial & managerial cost accounting
- CA should support managerial DM
- Decisions & actions create costs
- Combine accounting & economic logic
Describe the three major parts of managerial accounting
General:
- Ref. Vagn Madsen
Cost accumulation:
- Classification & adjustment
Cost distribution:
- To consuming department
- (Causation principle or established distribution ratio)
Cost allocation
- To product, job, output batch
- For pricing purpose
(?) Describe different FC
Committed fixed costs:
- Cost from possession of facilities, equipment & basic organization
Discretionary fixed costs:
- Cost as part of periodic planning process to meet goals
- No relation to capacity or output
- Determined by management
Other names to the terms:
- FC of idleness: Procurement
- FC of operating readiness: Out of pocket. More manageable
(?) What is meant by trustworthy & valid cost allocation?
- Possible allocation of cost to all decision types & at least one
- Possible cost registering until needed arbitrarily dividing
- Decisions has a time horizon: Cost locked for certain period
(?) Describe organic accounting theory
- Promoted replacement values
- Account for inflation
- Make decisions when inflation
What should be done when prices on input factors fluctuate?
General:
- Separate two different effects
- Including replacement cost assure right operational decision
- (Changing from weighted average to FIFO/LIFO dont address issue: Refers to historic costs)
__________
Effects:
Profit from operation:
- Sales - replacement costs
- (Purchase price as cost value)
- (Paper / true profit)
Profit from speculation:
- Replacement cost - historic costs
- With borrowed or owned capital
What is meant by current appreciation?
- Value difference between original & current replacement cost
- Prevent appearance as profit
- Including appreciation changes can change tax revenue
- Account for capital, not operation
- Realization principle, original costs & normal prices to separate value changes from profit
- Eg. Bought for 100, sold for 250, but reproduced for 200
(?) Describe replacement accounting
- Value changes enter correction account & profit & loss statement
- Profit only realized when inventory or other property values is fully maintained
- No profit with price fluctuations between acquisition & sale
(?) Describe proportional costs
General:
- Cost change with output at varying degree
- Cost lag factor
Under-proportional:
- Degressive costs
- Cost slower rate than output
Proportional:
- Cost same rate as output
Over-proportional:
- Progressive costs
- Cost faster rate than output
(?) Describe joint production
- 1 input make many different products
- Illustrated as probability tree
Seperation of resource units from resource unit costs
- Makes some sort of variance analysis possible
- Total cost R=#RU·Price/RU: Price could be seen as CDR
How does german accounting differ from ABC?
- Incl. department in cost object
- Better craftmanship than ABC
Describe the cost function & critiques for it
General:
- Rather static
- S-curves: Law of diminishing returns. Low volumes increase return & return diminish as output grow
- TC = Input purchase price * Amount input per unit prod.: tc_i=p_i*q_i
- Product cost: Sum of all TC
Critique:
- Dont include changes in conditions: Intensity, time & input quality: Ref. Levers
Describe E-combinations, elements, options & operations
General:
- By Heinen
- More operational: (Gutenberg)
- Output result of inputs combined
- Distinguish between potential & repetitive input factors: FC & VC
- Prod. process a sequence of repeated e-combinations
- Logical relationship
- No numbers
- Open for other than TDABC
- Explicit measure & integrate input factors
- (Indirect cost should be accessed separately: Secondary or tertiary e-combinations)
- (Also define cost on basis of technological constraints & limiting prod. factors)
__________
Elementary combinations / E-combinations:
- Production as chain of elements
- Different element combination lead to different finished products
- For each operation
- (Repeat factor as multiplier)
- (Load factor combined with technical consumption = usage for input factor)
- (Usage of input factor can be multiplied by current cost per unit
(Types:)
- Fixed output with limiting input: Dont allow input factor substitute
- Variable output with limiting input: Adaption of processed quantity, not process itself
- Fixed output with substitutional input: Free choice of input level for given output
- Variable output with substitutional input: Everything can vary. Rare.
__________
Elements:
- Production step
- Marked with k
- Has different options
- Basic segment of prod. process
- More detailed than activity
__________
Options:
- Marked with j
- Time always an option: Times operation can be repeated
- Finite set of prod. options: Can be combined. Not merged as in ABC
- Cost of option include potential & repetitive input factors: FC & VC
- Input factor often calculated as time function (Eg. Machine hours)
- Ref. Intensity, time & quality from Gutenberg
__________
Operation:
- Can be made in different ways: Intensity, time & input quality
- Several options associated
(!!) Describe the cost theory of Gutenberg
General:
- No singular cost curve
- Ref. Levers
- Cost not auto or only due to
production volume: Adaption
- Many adaptions to demand
- Cost = Consequence of decisions: Ref. Paul Riebel
Resource consumption:
- Both fixed & variable: Adaption
- Determined by equipment & changeable elements: Eg. Intensity & operating time
__________
Choices:
- Technology
- Production speed
- Input factor quality
- Overtime
__________
Terms:
Potential factors:
- Quality & quantity of input factor
- Assume same price for units with different quality: Often related
Usage time adjustment:
- Slower or faster machine runs
- If factors fixed for period
- Temporal disposition: Increased unit costs due to production speed. Eg. More mistakes or energy use
Usage intensity:
- Efficiency of production
- # Input unit to prod. output unit
- Often hidden time dimension
- If factors fixed for period
- Eg. Overtime or reduced shifts
Quality of input factor:
___________
Adaptions:
Quantitative adaption:
- Eg. Deactivate equipment
Selective adaption:
- Quick decrease in curve due to possible reducing in utilization of low quality input factors
Mutative adaption:
- New cost level due to permanent increase in capacity
- Eg. New technology
