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MAF PRACTICAL MONSTER SUMMARY
TRADITIONAL ALLOCATION
Methods
Simultaneous – Use cost driver other dept. e.g. S = 425 + 100/500 M Already counts the thing in equation so allocate normal (won’t add up) Step down – Check which dept. is doing the higher % in the other dept. (read horizontally) For 2nd^ S.D only allocate the % of the PD e.g. 35/85 and 51/85 (not / by 100)
Allocation basis
Machine insurance – Value Building insurance – Area, unless BV given Depreciation – BV or Machine value or cost Supervisor – no. of emp. Or DLH Heat and light – Area Power – KWH Canteen – no. of emp. Maintenance – MH or maintenance hrs Cleaning – Floor area Capital intensive means MH
Cost card
All DLH acc. To DLH rate Overheads is tricky, check what the CD is When CD is DLH use LH similar to DLH all. but at FOAR rate from table
MU on cost, normal MU on SP, (CP/ (100 – MU)) Read carefully, if its for a JOB CC or Product CC, with JCC its according to like e.g. 18units
General
Depreciation – BV/RUL When calc. Product cost (PC) don’t forget to include VMO from hi-lo Look out when they say e.g. supervisor does equal work in all dept. When there’s no Job Cost Card, and you get the FOAR, all. to MH and DLH as per table like if the product did 300/400 MH, allocate that amount to it in the product cost.
Formats
PRODUCTION DEPT SERVICE DEPT TOTAL
BASIS DEPT 1 DEPT 2 DPET 1 DEPT 2
DM NA NA NA NA NA NA
IDM Given X X X X XX Supervision Equal X X X X XX Rent FA X X X X XX Mac. Ins Value X X X X XX Buil. Ins FA X X X X XX Electricity Power X X X X XX Depreciation BV X X X X XX Total XX XX XX XX XXXX Revised all. (Simultaneous)
XX XX XX XX
Dept 1 X X (XX) - Dept 2 X X - (XX) Total XX XX MH DLH Rate Rx/ MH Rx/DLH
ACTIVITY BASED COSTING
Methods
Plant wide – Total FC/ DLH or MH = FOAR 1 Get total MH or DLH and / by production to get MH or DLH per product 2 2 also affects DL Then 1* Check 2009 test, reallocate then AC VC If the activity is linked to MH or DLH use that as the CD and not production or no.units e.g. Machining – MH Cushioning – DLH Get per driver, then * by total driver, then get per unit e.g. R161.75 per order = 100 orders, 1200 units(production) 161.75 * 100/ 1200 = R13. Multiple divisions Produced 155k units and each set up does 10 units Thus 155k/10 = 15 500 Set ups Also set ups = R78 000 thus 78k/15.5 = 5.03 per setup Then divide per set up to get the per unit so divide by 10 Batches Get total batches for both products Eg.set up PD1 * batches of PD1 + set up PD2 * batches for PD2 = total set ups for production Total set up cost/no. of set ups = cost per set up Cost per set up * set up for PD 1/ production for PD1 = unit cost Do same for PD 2, Watch out for MH and its allocation
Cost card
Get you cost per driver See how many products in 1 driver Divide accordingly, look at set up e.g. before (5.03) DM, DL and VMO normally come from traditional allocation Check hi-lo FMO or FOAR comes from ABC
General
DM are apportioned with total cost sometimes, use certain % for that product. Always use current system as denominator for the % change questions Sometimes they give inspection for no reason, like trick no CD 2010 exam is ultimate When asked for profit know you must use Sales – COS (DM, DL, OH)
Formats
Single product ACTIVITY COST DRIVER RATE Purchasing X Total PO Per order Treatment X Total treatment Per treatment Cutting X Total set up Per set up Assembly X Total DLH Per DLH Cushioning X Total MH Per MH Despatch X Total notes Per notes XX Multiple products CD R NO. MOVEMETNS
DRIVER PER
MOVEMENT
Set ups X Divide X = X ( 1 ) PO X Divide X = X ( 2 ) Deliveries X Divide X = X ( 3 )
AC VC
Method
Do stock check: OP + Production – CS = Sales Check FO (sometimes from hi-lo ) Total FO/ normal capacity = FOAR (sometimes from ABC or O.A) Do cost card for AC + VC ( no FOAR) Check for over/under: FOARproduction units = ABSORBED ACTAUL = GIVEN Thus, when Absorbed > actual = OVER + Absorbed < actual = UNDER – Sometimes the statement needs to be done in month/quarter, divide actual accordingly Actual – budgeted (units) * FOAR = Over/under recovery (2009) VC stuff always according to sales units In VC, FMO = FOAR (get from cost card of AC) * Production units (if not given then use actual) AC splits it manufacturing and no-manufacturing VC splits it variable and fixed Make sure you use the right FOAR for e.g. o/s, production and c/s. RECONCILIATION (o/sFOAR – c/sFOAR)* Start with AC, work towards getting VC Make sure correct FOAR used for o/s and c/s When AC to AC , do opposite for changing year (add o/s, less c/s) For current year (less o/s, add c/s)
When doing FO for VC statement, add all the FO costs in you AC CC (not the FOAR, but the FOAR * CD ), then take that amount and multiply it by production.
General
When doing 2 products, like Saam X, and Sing Y, make sure when they give costs to allocate it accordingly. E.g. they gave total Fixed costs as 226k but u must use joint allocation to show the fixed costs incurred for each product. For Hi-lo take it according to highest and lowest units not cost (2011 test1) Fixed S+A, use on budgeted amounts, not actual because its fixed. Take you budgeted S+A and minus the variable (budgeted) to get the fixed. (Your actual variable + fixed won’t = budgeted amount of total (S+A) 2015 Test OS valued at current system , production and CS at ABC, last para on 1st^ pg. The S+A expenses, F always stays the same, hence use the total S+A minus the V of last year to get fixed Once you get F you can add the new V (acc. to actual sales for CY) to get total S+A 2014 Test For over/under recovery, the total FC was over 2 products, thus divide by 2 in each statement Whenever costs allocated in total, divide to get pre product
Commission X Contribution XXX Fixed production cost XX Fixed S + A X NET PROFIT BEFORE REMUNERATION XXXX Factory manager remuneration X NET PROFIT XXXXX
RECONCILIATION
Can have different years/ different FOARS = 2017 hectic AC Profit XX Plus (+) O/S * FOAR X Less (-) C/S * FOAR (X) VC Profit XX AC to AC profits 2016 Profit (unchanging) XXX Less O/S (variable cost) (X) Add O/S 2016 X Less C/S 2016 (X) Less O/S 2017 (CY) (X) Add C/S 2017 (CY) X 2017 Profit XXX
CVP ANALYSIS
Formulae
- BEP =Total FC (manufacturing and non-manufacturing) / SP pu – VC pu Or Total FC/ Contribution pu
- BE rev= BEP*selling price or Total FC/ PV ratio
- PV ratio= Contributions/Sales
- Obtain a certain profit e.g. 10000, FC + Target profit /contribution
- Profit from sales= Contributions*Sales-FC
- Additional sales volume= Additional amount /contribution pu
- Profit= (Sales rev *PV ratio) – FC
- Operating leverage= Contribution margin /Profit
- If contribution margin is 0.4 then VC is 60% of sales
- MOS = Actual sales – BE sales / Actual sales = In a % form Figures in units It can be negative which means okay if 1st^ year since business sales become positive later on Method Get contribution by taking Sales – all VC (check OA/ ABC and also AC VC) Then get WC = check sales and get proportion (1) Take (1) and multiply respectively to contribution Then its FC/WC = (2)…… Take (2) * sales proportion
PROCESS COSTING
Method (2010 unique one, 2018 good format) Draw + understand timeline = % O/WIPS, % C/WIPS, % Inspection point Also check how DM, DL, FOC are incurred (e.g. evenly or beginning or end) O/WIPS + started = Total IN = Total OUT (1) Take (1) – O/WIPS – C/WIPS – Completed = Loss That gives us expected output , get N.loss as % of output A.loss is the balancing figure N.loss % of good input, take expected output / (100 – N.loss%) e.g. Expected / 100 – 10 so Expected / 90
Since Input – N.loss = Expected output (all past IP for good input) Cost allocation: Do N.loss = get DM + DL/FOC amounts Do equivalent units but without N.loss (Shortcut table) = get proportion Use proportion and allocate N.loss respectively, only where it passes inspection point General Know difference between WAM and FIFO, no opening stock in WAM all is started and completed Prior year cost included in current period cost calc. For FIFO you minus O/WIPS to get started and completed Process 1 transferred in must be a separate column, treated like DM Check conversions properly and include on timeline Know the difference between good input and total input When working out NL and AL equivalent units, don’t look at opening WIP or closing instead the % of that material incurred, If 100% materials at the start and IP is 50% then for materials both NL and Al are full, but in terms of conversion of incurred evenly then only 50% of the units are recorded. When working out the denominator for allocating the Normal loss total, include all units passing IP but exclude NL units, can include Al units. Formats FIFO – WAM there’s no O/S in S+C Equivalent units table (take out N.loss for shortcut method when all.) IN OUT PROCESS 1 DM CONVERSION O/WIPS (%) X X X X X Started / (trans. In)
X
Completed X X X X C/WIPS (%) X X X X N.loss X X X X A.loss X X X X TOTAL X X XX XX XX
DM X
DL X
FOC X
N.loss – DM (1) * prop. X N.loss – DL+FOC (2) * prop X N.loss allocated only if passed inspection point! 2010 Test2 special ones
JOINT COSTING
Method (refer to textbook for the formats) Physical measure – proportion units to the total units Over laka MV at split off – Proportion (units *SP) to total (units * SP)
NRV – Can ask span things (Hi-lo) Just get sales – all VC further = NRV Allocate the proportion of NRV GP % - 1. Do the NRV method
- Take sales – JC of NRV = PROFIT
- Profit/sales = %
- Take % * sales value = GP
- Write all the Sales ( 1 ), all GP ( 2 )
- ( 1) – (2 ) = Cost of goods ( 3 )
- Then (3) – further costs = JC allocation 2017 Test Read the dates carefully, check per annum or per month FO from traditional table, only for cleaning because that’s required for this product When product split 80%, 20% (know tis is the by-product), check how much its sold for in the beginning of the question
RELEVANT COSTING
Special order Raw materials NO Is it in stock? Current Market Price
Is there OT available? Opportunity cost YES Hourly rate Limiting factor Step 1: Identify the production Sales + CS = Required Then Required – OS =Production Step 2: Identify limiting factor Get the total required in measurement for both products and compare the required to the available resources It is LF when there is a shortage of availability Step 3: Calc. the contribution per unit Sales – all VC Step 4: Calc. contribution per LF Take cont/unit and divide it by the LF measurement Then rank the products (if negative, don’t produce at all) Step 5: Get optimal production Allocate in accordance to the ranks until availability is finished Sometimes they ask for optimal sales mix, so show it according to what you calculated. O/S + production – CS = Sales Method Make sure that you write the things that are irrelevant , marks given for that
Learning curves As a worker becomes more familiar with a task the average time to perform it decreases Formula Y= ax^b(power of b) Y = cumulative average time per unit a = Time to produce first unit x = cumulative output B = log learning rate/log Eg. Person develops a product, learning rate is 80%. Takes 22 Min for the first product Cal average time when 4 units are produced Y = 224^ log80%/log = 14.08 units Cal total time for 4 units 4 units * 14.08 = 56.32 min Cal time for the 4th^ unit First cal time for 3 units Y = 223^-0. =15. 15.46 * 3 = 46.34 min Take total time for 4 units minus total time for 3 units 56.32 – 46.34 = 9.98 min Alternate way Eg. First 20 units take 20 hours, LR is 90% Cal time for 40 units = 2020. 2015 test 1 eg First unit takes 15 hours Total time for 2 units takes 22. 5 hours a
