Notesale: Turn your study into money

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HULT International Business School
Managerial Accounting (ACC220)
Outline of the Required Book

Chapter 4 - Full costing
1
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➔ The logic of ​full costing is that the entire cost of running a facility, such as an office or a factory,
must be regarded as part of the costs of the output that it helps to generate
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2
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finding new sources of supply and so on)
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3
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➔ Process costing → The full cost per unit of output: average the total manufacturing cost over the
number of units produced
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- work in progress should be taken into account when calculating the total output
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(ie
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- another complication arises when there are various degree of completion for the
work in progress
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Multi-product business
➔ Job costing approach: accumulating costs for each individual unit of output in order to determine
its full cost
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➔ Direct cost​: cost that can be identified with specific cost units = cost that can be traced to a
particular cost unit and can be measured reliably
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➔ indirect cost = overheads​: other elements of the total cost
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DC and IC are defined in terms of extent to which they can be defined with and measured
in ​respect of a particular cost units​ (jobs)
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The
IC are mostly fixed but they could be variable
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Overheads as service renderers
➔ IC or overheads can be viewed as rendering a service to cost units
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➔ There is no correct way to assign overheads to jobs
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The ​direct labour hour seems to be the most popular way to do so
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➔ Many of the businesses which are divided into departments, charge cost overheads to cost units on
a department-bydepartment basis
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- product cost center: those in which jobs are worked on by direct workers and or where
direct material are added
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- The cost of service center must be charged to product cost centers and become part of the
product cost centers overheads, so that those overheads can, in turn, be charged to jobs
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- Cost apportionment:​ apportion the more general overheads to the cost centers
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➔ Non manufacturing overheads: ​do not form part of the full cost calculation
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➔ in theory, relevant cost analysis should be used whenever a decision is needed to set a price for a
product, to introduce a new product, or stop producing an existing product
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It will include
only the variable cost as part of the cost of the good or service produced

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