Lecture
„Industrial Costing“
SS 2016/2017
Prof. Dr. Olga Popova, OVGU
Prof. Dr. Jörg Jablinski, OWL
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Chapter 2
„Cost type accounting“ (Part 1)
2
Flow Variables
Flow
Variables
Inpayment
Outpayment
Revenues
Expenditures
Proceeds
Expenses
Performances
Costs
Content
Inflows of cash or cash equivalents (Cash and demand
deposits for example Transfers and cheques)
outs of cash or cash equivalents (cash and demand
deposits)
An increase of financial assets. A receipt is defined as the
value of all sold goods and services over one (given) period
of time
A decrease of financial assets. An expenditure is defined
as the value of all goods and services received over one
(given) period of time
Value of all goods and services produced over one (given)
period of time
Value of all goods and services consumed over one (given)
period of time
Value of all goods and services produced over one (given)
period of time according to the type of operating activity
Value of all goods and services consumed over one (given)
period of time to produce a product
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Time-based cost accounting systems
Actual Cost Accounting
Actual costs of a past period
Analysis of the past
operation activities
(post calculation)
past
Normal Cost Accounting
Analysis of the past
operation activities
Average cost over several
periods which is adjusted for
“outliers”
Data base for the future
decisions
Standard Cost Accounting
Basis for decisions
Planning with expected
future costs
Planned targets for targetactual comparison
future
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Tasks of Cost Accounting
Cumulating all
costs
Data
Processing
Cost
Control
Cost
Budgeting
Material Costs
• Determination of the consumption
- access method
- stocks method
- update method
- retrograde method
• Evaluation of the consumption
- Fixed price method
- Collective valuation method
Staff Costs
External Service Costs with
Taxes and Fees
•
•
•
•
•
Imputed Costs
Imputed amortization
Imputed interest
imputed employer's salary
Imputed risks
Imputed rent
Income Controlling → Tasks→ Decisions
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Integration of cost type accounting in the cost and
performance accounting
Cost Type Accounting
Question: What costs have been incurred?
overheads
Cost Center Accounting
Question: Where costs have been
incurred ?
direct costs
allocation/distribution
Cost Unit Accounting
Question: For what costs have been incurred?
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Principles of cost type accounting
Principles
Unambiguity
Direct costs must be assigned to specific expenses
without a doubt. Too extensive plan as well as the
breakdown by several properties complicates the
review of individual elements of cost. It must be
avoided
Completeness
All costs incurred by the company should be
considered. Through a complete listing of all costs
mistakes can be avoided.
Flexibility
The cost element plan should be flexible so it can be
adjusted to reflect the new realities
Economic efficiency
The cost type accounting should be based on
economic grounds. Expenses for accounting should
be minimal.
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The main cost types
Cost types
Material
Costs
Staff
Costs
External Service Costs, Public Fees
and Taxes
Imputed
Costs
8
Methods for calculating the material consumption
Methods for calculating the material consumption
Stock
Inflow
Access method
Stock
Outflow
Stock method
Update method
Retrograde method
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How does Access Method work
Material Consumption = Sum of all Inflows According to the
Delivery
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How does stock method work
initial stocks according to stocks at the beginning of a period
+ Inflows according to the delivery during the period
- final stocks at the end of a period
Consumption during the period
Example: Calculating the material consumption
initial stocks = final stocks according to inventory 2015
+ Inflow on January 2016
+ Inflow on February 2016
+…
+ Inflow on December 2016
- final stocks according to stocks 2016
Consumption 2016
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How does update method work
Material Consumption = Sum of all Outflows According to the
material requisition card
Calculating of the extraordinary consumption
Actual initial inventory (according to inventory)
+ Actual Inflows (according to delivery notes)
- Actual Outflows (consumption detected by material requisition card)
= Standard final inventory (according to inventory accounting)
- Actual final inventory (according to inventory)
= extraordinary consumption
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How does retrograde method work
Consumption Volume = (expected consumption per product
unit) * (produced quantity)
On the following slides you will find examples of
calculating the material consumption
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Stocks of July:
Process
Datum
Amount
Initial stocks
01.07.
4.000 units
Inflow
07.07.
2.000 units
Outflow
08.07.
2.400 units
Inflow
13.07.
2.000 units
Outflow
16.07.
3.000 units
Outflow
21.07.
2.500 units
Inflow
25.07.
4.000 units
Outflow
27.07.
2.200 units
Final stocks
31.07.
1.400 units
In July the following products were produced:
Product
Amount
Needed quantity for each
product
A
600 products
6 units per product
B
800 products
4 units per product
C
400 products
8 units per product
Determine the quantitative consumption according to the different
methods:
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a) access method
Consumption = All Inflows= 8.000 Units
b) stock method
Consumption = Initial Stocks + Inflows - Final Stocks
initial stocks
+ Inflow on 07.07.
+ Inflow on 13.07.
+ Inflow on 25.07.
- final stocks on 31.07.
4.000 Units
2.000 Units
2.000 Units
4.000 Units
1.400 Units
Consumption
10.600 Units
c) update method
Consumption = Sum of all Outflows According to the material
requisition card
Outflow on 08.07.
+ Outflow on 16.07.
+ Outflow on 21.07.
+ Outflow on 27.07.
Consumption
2.400 Units
3.000 Units
2.500 Units
2.200 Units
10.100 Units
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d) retrograde method
Consumption = Sum of all Outflows According to the material
requisition card
Consumption
Consumption
= expected consumption per unit of product A * produced quantity
+ expected consumption per unit of product B * produced quantity
+ expected consumption per unit of product C * produced quantity
= 6 Units * 600
+ 4 Units * 800
+ 8 Units * 400
= 10.000 St.
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Methods of Calculating the Consumption of Stocks
the periodic
average method
Average price
method
evaluation
methods with cost
price as a base
the weighted
average method
FIFO method
sequence of
consumption
method
LIFO method
HIFO method
LOFO method
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Periodic Average Price =
Value of the Initial Stock
+ Value of all Deliveries of the Period
Amount of Initial Stock
+ Amount of all Deliveries of the Period
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Example: Methods of calculating the stocks consumption
Process
Datum
Amount
Unit price
Total value
Initial Stock
01.10.
300 u.
10,- €/u.
3.000,- €
Inflow
07.10.
200 u.
15,- €/u.
3.000,- €
Outflow
09.10.
250 u.
Inflow
13.10.
300 u.
15,- €/u.
4.500,- €
Outflow
17.10.
500 u.
Outflow
21.10.
50 u.
Inflow
23.10.
400 u.
12,- €/u.
4.800,- €
Outflow
28.10.
150 u.
Final Stock
31.10.
250 u.
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a) According to the periodic average method
Process
Datum
Amount
Unit price
Total value
Initial Stock
01.10.
300 u.
10,€/u.
3.000,- €
+ Inflow
07.10.
200 u.
15,€/u.
3.000,- €
+ Inflow
13.10.
300 u.
15,€/u.
4.500,- €
+ Inflow
23.10.
400 u.
12,€/u.
4.800,- €
= Sum
= 1.200 u.
12,75,€/u.
= 15.300,00 €
– Outflow
– 950 u.
12,75,€/u.
– 12.112,50 €
=250 u.
12,75,€/u.
= 3.187,50 €
= Final Stock
31.10.
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b) According to the weighted average cost method
Process
Datum
Amount
Unit price
Total value
Initial Stock
01.10.
300 u.
10,- €/u.
3.000,- €
+ Inflow
07.10.
+200 u.
15,- €/u.
+3.000,- €
= 500 u.
12,00 €/u.
= 6.000,- €
= Intermediate Stocks
– Outflow
09.10.
–250 u.
12,00 €/u.
– 3.000,- €
+ Inflow
13.10.
+300 u.
15,- €/u.
+4.500,- €
= 550 u.
13,64 €/u.
= 7.500,- €
= Intermediate Stocks
– Outflow
17.10.
–500 u.
13,64 €/u.
– 6.820,- €
– Outflow
21.10.
–50 u.
13,64 €/u.
– 680,- €
+ Inflow
23.10.
+400 u.
12,-€/u.
+4.800,- €
= 400 u.
12,00 €/u.
= 4.800,- €
= Intermediate Stocks
– Outflow
28.10.
–150 u.
12,00 €/u.
– 1.800,- €
= Final Stock
31.10.
250 u.
12,00 €/u.
= 3.000,- €
Material Consumption
12.300,- €
Evaluation of Material Consumption in October
= 3.000,- € + 6.820,- € + 680,- € + 1.800,- € = 12.300,- €
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Example: method of calculating the consumption of stocks
Method
Datum
Consumption (950 Units)
final stock (250
Units)
FIFO method
01.10.
07.10.
13.10.
23.10.
300 St. x 10,- €/Unit
+ 200 St. x 15,- €/Unit
+ 300 St. x 15,-€/Unit
+ 150 St. x 12,-€/Unit
=
12.300,- €
250 St. x 12,- €/Unit
= 3.000,- €
LIFO method
(time-based)
23.10.
13.10.
07.10.
01.10.
400 St. x 12,- €/Unit.
+ 300 St. x 15,- €/Unit
+ 200 St. x 15,- €/Unit
+ 50 St. x 10,- €/Unit
=
12.800,- €
250 St. x 10,- €/Unit
= 2.500,- €
LIFO method
(permanent)
07.10.
01.10.
13.10.
01.10.
01.10.
23.10.
200 St. x 15,- €/Unit
+ 50 St. x 10,- €/Unit
+ 300 St. x 15,- €/Unit
+ 200 St. x 10,- €/Unit
+ 50 St. x 10,- €/Unit
+ 150 St. x 12,- €/Unit
=
12.300,- €
250 St. x 12,- €/Unit
= 3.000,- €
HIFO method
07.10.
13.10.
23.10.
01.10.
200 St. x 15,- €/Unit
+ 300 St. x 15,- €/Unit
+ 400 St. x 12,- €/Unit
+ 50 St. x 10,- €/Unit
=
12.800,- €
250 St. x 10,- €/Unit
= 2.500,- €
LOFO method
01.10.
23.10.
07.10.
13.10.
300 St. x 10,- €/Unit
+ 400 St. x 12,- €/Unit
+ 200 St. x 15,- €/Unit
+ 50 St. x 15,- €/Unit
=
11.550,- €
250 St. x 15,- €/Unit
= 3.750,- €
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Valuation
Assumption
of the final stock
of the consumption
FIFO
Available at the beginning
with the prices of
of the period stocks or
the latest received
supplied materials are
materials
consumed the first
with the prices of the
initial stock and the
first received
materials
LIFO
Last received materials
are consumed the first
with the prices of
the initial stock
and the prices of
the first (material)
Inflows during the
period
with the prices of the
of the last (material)
Inflows during the
period
HIFO
The most expensive
materials are consumed
the first
with the lowest
prices
with the highest
prices
LOFO
Goods purchased at a
low price are consumed
the first
with the highest
prices
with the lowest
prices
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Summary
Material Costs
= consumed amount x cost value
Direct costs:
raw materials, auxiliaries
Overheads: (auxiliaries),
operating materials
Determination of material consumption
Evaluation of material consumption
Average cost method
• Periodic average price =
Value of OB + value of all the delivery. (Period)
Amount of OB + amount of all delivery. (Period)
Access Method:
Material Consumption = Sum of all Inflows according to the Delivery
• Sliding method:
Evaluating of average after each inflow→
Also evaluating outflows
Stocks Method:
initial stocks according to stocks at the beginning of a period
+ Inflows according to the delivery during the period
- final stocks at the end of a period
= Consumption during the period
Sequence of consumption:
• Time based:
FIFO, LIFO method
• Price based:
HIFO-, LOFO method
Update Method:
Actual initial inventory (according to inventory)
+ Actual Inflows (according to delivery notes)
- Actual Outflows (consumption detected by material requisition
card)
= Standard final inventory (according to inventory accounting)
- Actual final inventory (according to inventory)
= extraordinary consumption
Retrograde method :
Consumption Volume = (expected consumption per product unit) *
(produced quantity)
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