Are Opening Stocks are in agreement with last closings?

Very good wording in your mail !!! You open the attachment sent on 8th Dec '13 and see with your keen vision and say whether it is having any OPENING-RECEIPT-ISSUE-CLOSING Balances of Materials or NOT. Usable Stock is meaningless word in Finance, our concern in both usable,non-usable. You refer to the previous month's report and check whether it matches with the current month's FORMAT or NOT. From this report, no inattentive & layman like me can say:

1. Are Opening Stocks are in agreement with last closings?
2. How much materials was sent from Sonata to Tiska (Receipts)
3. How much materials was used in Production from available Stocks?
4. How much materials was in Rejected, Unusable status etc.? 

If above information are missing in a stock movement report of a month, it will generate no sense for Costing. First assess and understand the impact, then practice lexicography like sent to an employee of Sonata Ltd, attentiveness, concern etc.

The proposal calculation: make or buy decision

Cost Object
As for the cost unit accounting, the cost will be here with the same spreadsheet shows as calculated. In the end, the cost will be deducted from the net sale and save obtained results of operations. The cost carrier time-statement is checked how accurately the previously established Overhead rates are present. The figures of the previous calculation are called NORMAL COST or pre-calculation. The latest figures are the actual costs or actual costing. The results from the comparison between normal costs - actual costs can be read as surplus / deficit in the column. In addition, in Cost Object era, the preliminary cost estimate for individual product groups is presented.



Notes about this example
1. If nothing else is on the task, then the costs Materials, Labor and Overhead (FM + FL) are taken from the actual costs for the normal cost. Reason: The aim of the comparison between actual and standard costs is to check how well the old overhead surcharge rates are still. For this purpose, sufficient to compare the overheads.
2. The sign in surplus / deficit arises when one enters into the calculator Normal cost minus actual costs. Are the old numbers of the normal cost is higher than the current actual costs, so our plan covered more than necessary. (= Overlap). And vice versa.
3. For each product is expected to normal overhead costs overhead rates.
4. The sum of the individual products corresponds to the normal costs overall.
5. There are changes in inventories of work in progress and finished goods. Both are listed separately. The calculation is the same for both. See, above.
6. The calculated cost is deducted from net sales. The result is the conversion result.

WARNING: If you subtract the top value from the lower value (net sales) as the sign of the sales income is just wrong. N-sale proceeds> cost = profit (logical)
7. From the result, the revenue surplus or deficit is added to or subtracted from the total and obtained results of operations.
8. The scheme and the calculation of the results must be trained by practicing several tasks.

Clarification of the calculated production overheads through the pre Machine hour rate

The main cost are caused by the use of machinery. Machines and have had related to the increasing rationalization is becoming increasingly important. With the calculation of the MSS machine costs are determined significantly more accurately, so the quality of the calculation is improved.

In the calculation of the machine hour rate will be multiplied by the time required for the specific task in machine time. This machine-dependent production overheads (FGK) are in production costs with added. For the remainder of the FGK simply RGK (residual overheads) made which are calculated as a percentage of the FL, as otherwise the FGK also.

The proposal calculation

Once you have determined the cost, you will not know at what price we should offer his product. Therefore, at the cost nor the gain you want to make added. Now you still expects the front into the things to which later may pull back the customer. These are the customer's account, the agent's commission and the customer discount. Because of these things the customer later (assuming 100% each) are peeled off again arises in the forward calculation a problem with the percentage basis. This is then more than 100 (in the hundreds). The schema can be seen that:

How to determine the unit cost of a product for accurate pricing

The unit cost calculation of a product (pricing procedure)

In the calculation, the cost unit cost for the entire operation can be determined. If we divide this cost by the number of units sold we obtain the cost per piece. Cost carrier is that which in operation ultimately "carry" all costs must - and this is ultimately for every single product; because all costs must be back "earned" by selling the products. (Cost carrier = the product).

Output figures for the calculation are the overheads sums for the cost centers as well as the direct costs of materials and labor. Direct costs are those costs that can be directly allocated to a product (1. The production material (FM) = exactly the material that is incorporated into the product. 2. The manufacturing wages (FL) = wages for the workers who directly create the product and assemble).


Problem with Changes in inventories:
Cost of production include all costs incurred for the production of the products. In the end, however, are only interested in the cost of products, which were actually sold. Therefore, at this point, the cumulative change must be considered. If we sell more than we produce, so are the HKE too low (the cost of products which have been simply removed from the warehouse missing until then). So the value of the products withdrawn from the warehouse must be added in this case. If we have been taken more out of the camp and sold as is produced as an inventory reduction, its value must be added. Accordingly reverse is true in the inventory at stimulating. Therefore, beware!

Inventory reduction should expect (add)
Inventory at stimulating preview (subtract) .

What is meant by the concept of organization design?

The following suggested response draws largely on the text material, with some more formal integration of the internal versus external assessment dimensions and more explicit statements about their joint importance.


Organization design is the process of assessing and selecting the structure and formal system of communication, division of labor, coordination, control, authority, and responsibility necessary to achieve an organization's goals. Organization design decisions often require the diagnosis of multiple factors both internal and external to the organization. Organization design represents the outcomes of an assessment and decision-making process that includes environmental factors, strategic choices, and technological factors. An effective organization design should do three things: 

 

(1) ease the flow of information and decision making in meeting the demands of customers, suppliers, and regulatory agencies; 

(2) clearly define the authority and responsibility for jobs, teams, departments, and divisions, and 

(3) create the desired balance of integration (coordination) among jobs, teams, departments, and divisions, with fast response to changes in the environment. 

 

To achieve these beneficial results, the external environment must be systematically assessed (including characteristics of the present and possible future environments and their demands on the organization). Organization design decisions often involve the diagnosis of multiple factors, including an organization's culture, power and political behaviors, and job design.

Difference between normal and abnormal loss

A normal loss of units falls within a tolerance level expected during production. Management creates a range of tolerance of spoiled units specified by the accepted quality level, as mentioned in the beginning of this chapter. If a company had set its quality goal as 98 percent of goods produced, the company would have been expecting a normal loss of 2 percent. Any loss in excess of the AQL is an abnormal loss. Thus, the difference between normal and abnormal loss is merely one of degree and is determined by management.

A variety of methods can be used to account for units lost during production.

Selection of the most appropriate method depends on two factors: 

 

(1) the cause of the decrease and 

(2) management expectations regarding lost units. 

 

Understanding why units decreased during production requires detailed knowledge of the manufacturing process. Management’s expectations are important to determine the acceptable loss quantities from defects, spoilage, or shrinkage as well as the revenue and cost considerations of defective and spoiled units.

Some companies may estimate the normal loss to be quite high because the lowest cost material, labor, or overhead support is chosen.

What are the two methods of costing cost flows under process costing

There are two methods of costing cost flows under process costing. The two methods of accounting for cost flows in process costing are 

(1) weighted average method and 

(2) First In First Out (FIFO) Method. 

 

These methods relate to the manner in which cost flows are assumed to occur in the production process. In a very general way, these process costing approaches could be related to the cost flow methods used in financial accounting.

In a small and retail business firm, the weighted average method is followed to find out an average cost per unit of an inventory. This cost is calculated by dividing the total cost of goods available by total units available sale. Total cost and total units are found by adding purchases to beginning inventory. Costs and units of the current period are not distinguished in any way from those on hand at the end of the prior period.

In contrast, in the FIFO method of accounting for merchandise inventory which separates goods by when they were purchased and at what cost. The costs of beginning inventory are the first costs sent to Cost of Goods Sold; units remaining in the ending inventory are assigned costs based on the most recent purchase prices.


Use of these methods of costing the production of a manufacturing company is similar to their use by a retailer. The weighted average method calculates a single average cost per unit of the combined beginning inventory and current period production. The FIFO method separates beginning inventory and current period production and their costs so that a current period cost per unit can be calculated. The denominator used in the cost formula to determine unit cost differs depending on which of the two methods is used.

The bond indenture may contain a provision stating that the corporation may pay up a bond before its maturity at a specified price. This is called an early retirement of the bond. If the price paid is greater than the book value of the bond, the difference is a loss. If it is less than the book value, the difference is a gain. 

Neither losses nor gains are to be considered extraordinary. The book value of a bond is equal to the balance in the bonds payable account minus any discount, plus any premium. It is important to make sure that the discount or premium account has been amortized right up to the retirement date.

The journal entry for a retirement closes the bonds payable account and the related discount or premium, credits cash, and recognizes the gain or loss.



On January 1, 19X1 Knowledgiate Corporation issued a $100,000 bond (5-year life) at 103. After 2 years it retired the bond at 104 (as specified in the indenture). At this point, the bond accounting appear as follows:

The book value is thus $101,800 ($100,000 + $1,800). Since the retirement price is $104,000 (1.04 × $100,000), the difference of $2,200 is a loss. 

 

The journal entry is:

Bonds Payable           100,000
Bond Premium               1,800
Loss on Retirement       2,200
Cash                                          104,000

If there is an unamortized bond issue cost relating to the bond, it should be written off at this point, thus enlarging the loss, or in a gain situation, reducing the gain.

How to calculate manufacturing cycle efficiency (MCE)

Dividing value-added processing time by total cycle time provides a measure of efficiency referred to as manufacturing cycle efficiency (MCE). (A service company would compute service cycle efficiency by dividing actual service time by total cycle time.) If a company’s production time were 3 hours and its total cycle time were 24 hours, its manufacturing cycle efficiency would be 12.5 (3 24) percent.

 

MCE = (Value-added manufacturing time , Manufacturing cycle time)

Although the ultimate goal of 100 percent efficiency can never be achieved, typically, value is added to the product only 10 percent of the time from receipt of the parts until shipment to the customer. Ninety percent of the cycle time is waste. A product is much like a magnet. The longer the cycle time, the more the product attracts and creates cost.

A just-in-time manufacturing process seeks to achieve substantially higher efficiency by producing components and goods at the precise time they are needed by either the next production station or the consumer. Thus, a significant amount of idle time (especially in storage) is eliminated. Raising MCE can also be achieved by installing and using automated technology, such as flexible manufacturing systems.

ACCRUALS OF BOND INTEREST

Up to this point all the situations that we have discussed dealt with an interest payment date of December 31. If the payment date is other than December 31, an adjustment entry must be made on December 31 to accrue the interest from the last payment date and also to amortize the discount or premium as well.

On May 1, 19X1 Berger Corporation issues a $10,000, 10%, 4-year bond at 96. The bond pays interest semiannually on November 1 and May 1. The entries are:

May 1, 19X1         

Cash                 9,600                  

Bond Discount   400
Bonds Payable             10,000

Nov. 1, 19X1 

Interest Expense   500
Cash                           500

Interest Expense   50
Bond Discount      50
400 ÷ 4 years × 1/2 year.

Dec. 31, 19X1 

Interest Expense    166.67
Interest Payable            166.67
10,000 × 10% × 2/12 (To accrue 2 months of interest.)

This entry will be reversed on January 1, 19X2, if the company makes reversing entries.

Dec. 31, 19X1 

Interest Expense   16.67
Bond Discount           16.67
400 ÷ 4 × 2/12.