A production department is the piece of the organization that produces goods and services that are in turn sold to the outside market for consumption. Service departments back up the production department by providing services to the production department. For example, in an organization that manufactures custom furniture, the production department might be responsible for cutting and assembling raw materials thus creating pieces of furniture. The service department would include maintenance professionals who repair and equipment used in the manufacturing process as well as office staff, human resources and other support departments within the organization.
2. Distinguish between a direct cost and an indirect cost.
An indirect cost is one
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Give the steps in the cost allocation process.
The first step in the cost allocation process is to allocate direct costs to departments, the second step is to allocate indirect costs to departments, and the final step is to allocate the costs associated with running the service department to the production department.
4. What is the nature of a joint-production process?
When joint production processes are used a number of common inputs are used which cannot be attributed to any product in particular. Joint production processes would likely be used in an organization that manufactures two different types of products. For example, a company might manufacture food products as well as beverages into separate factories on the same campus. In this scenario there might be an office that serves the food and beverage factories or a maintenance staff that repairs equipment in both factories. In these types of situations there would be no way to directly attribute these inputs to a specific department.
5. What is the objective of joint-cost
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In these types of situations it can be difficult to determine the production costs for each product that is produced. This is when an organization is likely to employ joint cost allocation. The objective of joint cost allocation is to ensure that production costs for each and every joint product is measured.
6. Discuss reasons for allocating costs to departments.
An organization may choose to allocate costs to departments for a number of reasons, including:
• Motivation – when each unit of a business is required to be responsible for managing its own costs, unit managers will be motivated to outperform other units in an attempt to obtain extrinsic rewards.
• Asset valuation – when costs are accurately allocated to departments it is much easier for an organization to identify which departments are the most or least profitable. Management can use this information to decide which departments may need to be sold or closed as well as determining which departments might need to be expanded.
7. Name some of the costs and benefits of cost allocation.
The costs of cost allocation include:
• The need to hire additional personnel to assist in the allocation
If done right, I believe that all of the costs can be allocated to each of the three products through both direct and overhead costs. The only direct costs that are being included currently are labor and manufacturing costs. I broke up overhead into overhead based off direct labor and overhead based on units sold.
The effectiveness of the production control system helps to improve the quality of the company’s product while still reducing the costs. The company is constantly looking for ways to increase the effectiveness of their production. They want to ensure that the product is at the quality they expect and always are looking to improve the quality of the product. Reduction of costs is another factor they consider, but the company refuses to produce a product that is not the quality they expect no matter what the cost savings are.
After these overhead costs are assigned, the costs can be allocated to the various retail stores based on their consumption of the good (e.g. the number of musical works they stock and sell).
Budgeting Assignment A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of a manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496)
Process costing System is an accounting expression which describes one method to determine the manufacturing costs to the units manufactured . Processing is typically used when similar units are mass produced. Also process costing system is a type of accounting process costing which is used to determine the cost of a produced inventory. Chartered Institute of Management Accountants (CIMA) defines process costing as " The costing method applicable where goods or services result from a sequence of continuous or repetitive operations or processes. Costs are average over the units produced during the period, being initially charged to the operation or process "( College Accounting Coach, 2007). Process costing is more important and appropriate for all businesses producing identical products during which production is an ongoing flow. Toyota is on the of the major companies in the world that used well-known new philosophic management to produce identical products using process costing system.
Operations – To work out the right layout and work flow process in the company. The manpower resource allocation is also critical in the situation on the right balance of resource to handle the production. If possible, adopt a hybrid model to handle the flexibility in the product nature, make both the production line being able to configure standard and customized so to reduce setup and changeover time and cope with the demands.
Ownership and control of production ; vertically integrated manufacturing operation to enable its constant introducing of new items and also ensure short lead time
B. Overview of Process Costing. Manufacturing costs are accumulated in processing departments in a process costing system. A processing department is any location in the organization where work is performed on a product and where materials, labor, and overhead costs are added to the product. Processing departments should also have two other features. First, the activity performed in the processing department should be essentially the same for all units that pass through the department.
As we see that process costing only concentrates on what happens in the departments, unit cost information in this type of cost comes directly from the department accounting office, while in job costing the unit cost information is derived from the job cost sheet (Walther, L. M. & Skousen, C.J.
Motivation is an important concept which is critical for understanding of and improvement in organizational behaviour and performance. It is therefore important for the managers to understand motivation. It is an important tool which they can use to get more out of their employees and increase organizational performance. Motivation can be defined as the factors, both internal as well as external which arouse in individuals the desire and commitment for a job (Mele, 2005, p. 15). Organizational performance on the other hand refers to the degree to which the organizational objectives have been achieved.
The overall purpose of cost accounting is to advise top administration and the management team on the most suitable and cost effective methods and actions to employ based on cost, capability and efficiencies of a given product or service. It can be defined as the method where all the expenditures used during execution of business activities are gathered, categorized, examined and noted down (Horngren & Srikant, 2000). Once these numbers are gathered and recorded the information is used to determine a selling price and/or to identify possible investment opportunities. Although the principal aim or function of cost accounting is to help the business administration with their decision making and business planning process, the cost accounting data
More recently, entrepreneurship has also been added as one of these factors. Understanding these is essential to understanding the two production functions which this WIKI article focuses on. (2) Land Understanding what is meant by land is relatively simple. This comprises all of the natural resources that a particular producer has at their disposal. Most often this means immediate natural resources, like oil or the property on which the production facility is located.
Motivation is the reason or purpose behind action, or what causes one to act in a particular manner. Motivation can either be intrinsic or extrinsic in nature, yet it rests solely within the power of the individual actor to be motivated (or not) by intrinsic and extrinsic motivators. Motivation is an extremely important topic of discussion in the larger discourse on leadership. It is important because it provides the basis for human action, or inaction. Leaders must be able to understand what motivates their followers in a hope to use that knowledge to guide them to behave in a certain way that is beneficial for the organization. To do so, it behooves leaders to understand the basic concepts and theories of motivation that abound.
The function of manager is to complete a task on time. The task or project may be very simple or vastly complex and technically challenging. Where, a manager must find ways to motivate the people working on the task. In order to understand how to motivate the people, a manager must also understand the difference between the management and the leadership. An understanding of the motivation methods, including the traditional theories from the early to mid 21st century to more modern theories of motivation, is ...
A joint venture is a contractual agreement between two or more parties executing a business undertaking in which the parties agree to share in the profits and losses of the enterprise as well as the capital formation and contribution of operating inputs or costs. It is similar to a partnership, but typically differs in that there is generally no intention of a continuing relationship beyond the original purpose.