MALİYET VE YÖNETİM MUHASEBESİ - Deneme Sınavı - 8

500 - 300 = 200 TL

6.000 / 200 = 30 units

Size of the company is not among the factors that taken into consideration while making pricing decisions by businesses.

The costing methods by the scope of product cost coverage are;

• Full Costing Method

• Normal Costing Method

• Variable Costing Method

• Direct Costing Method

• Throughput Costing Method

In this method, expenditures for all manufacturing related factors are included in the product cost.

In variable costing method, only the variable manufacturing costs are included in the product cost.

Direct costing method accepts only direct costs (direct materials cost and direct labor cost)

Throughput costing method, which is also called as super variable costing, does not have widespread use in practice. Under this method, only the direct material cost is the product cost, while all other manufacturing related expenditures are considered as period expenses to be reported in the income statement.

The strategy provides the general framework for long-term plans, which are the action plans for 5 to 10 years. This kind of plan is based on capital budgeting techniques. Management synchronizes the company’s capabilities with the long-term objectives by using the capital budgets. The capacity of the company for the following period is determined by using capital budgets. Capital budgeting is the process of evaluating.  the feasibility of a project, using some indicators such as rate of return, the time
needed to pay back, etc.

In this method, expenditures for all manufacturing related factors are included in the product cost (Lazol, 2011: 131). Direct materials cost, direct labor cost, and manufacturing overhead costs are all included in the product cost with their total lump sum amount. In other words, product cost covers all direct costs and all indirect costs, irrespective of whether these factors are really used in production at full capacity or not.

As the name states, in variable costing method, only the variable manufacturing costs are included in the product cost (Lazol, 2011: 132), irrespective of whether the cost in question is direct or indirect. Within the scope of variable costing method, all fixed costs are considered as period expenses, suggesting that fixed costs would still exist even if there were no production and this makes those factors irrelevant for calculating the manufacturing cost. Only the variable manufacturing costs are treated as product costs under variable costing method, variable non-manufacturing costs are excluded despite their variable nature.

Operating budgets reflect the company’s short-term plans related to the implementation of strategic projects, and result in the preparation of budgeted income statement. The scope and the number of operating budgets may change from company to company depending on the company’s characteristics, such as company size or the types of existing operations.

Throughput costing method, which is also called as super variable costing, does not have widespread use in practice. Under this method, only the direct material cost is the product cost, while all other manufacturing related expenditures are considered as period expenses to be reported in the income statement.

Materials requisition records are the records containing information about the cost of direct materials used on a specific job and in a specific department.

Managers prepare budgets with the objectives of;
a. allocating the company’s resources to each operation effectively,
b. communicating the objectives and goals to the subordinates,
c. motivating the superiors and subordinates towards the goals,
d. providing coordination among all divisions or employees,
e. comparing the actual and budgeted results, and take corrective actions, if necessary,
f. taking necessary precautions for the possible bottlenecks that the company may face in the following period.

Peanut butter costing is the name given to a costing system that broadly averages or spreads the cost of resources uniformly to cost objects

There are many benefits that result from the preparation and use of budgets. For example, businesses can better coordinate their activities, employees become more cost conscious and try to conserve resources, the company reviews its organization plan and changes it when necessary, etc. Benefits of budgeting can be explained as follows:

Efficient Resource Allocation

Communication

Coordination

Performance Evaluation

Time Management

Motivation

Similar to the fact that successful implementation of short-term plans constructs the way to reach the long-term objectives, attainment of objectives at narrow scope is the path to follow in order to reach the objectives at a broader sense.
Therefore, companies prepare different budgets that reveal objectives at a different scope;

Master budget

Operating budgets

Financial budgets

Functional Budgets

At the beginning of the budgeting process, budget director alerts every division to the need for gathering information to help to make predictions about the future. There are several resources for gathering the data. Historical data is also a possible source; however, it is not enough for accurate predictions. For example, the previous year’s production may provide good input for predicting the next year’s production, but unless it is supported by market research, it cannot be a reliable source for predictions.  Some companies apply a bottom-to-top approach and collect sales predictions from individual salespeople and combine together to have the forecast for the company, region or a product line. Then the upper-level managers consider some additional information to improve the accuracy of these sales forecasts; such as general economic conditions, competition, pricing policies, etc. On the other hand, some companies supplement the sales forecasts by using more formal approaches, such as econometric modeling, industry analysis and trend analysis. Budgeting relies on some other factors as usual. Costs and cash-related items, for example, have important roles in the budgeting process. The same factors that are considered in the sales forecast (inflation, exchange rates, competition, etc.) are used in forecasting the costs for the coming period.

Usually, engineering departments or industrial designers determine the expected usage of direct materials, by analyzing the input-output relationship and update the bill of materials records stored in the computer system of the company. For example, the bill of materials records of MGD Corp. shows that each leather shoe requires 0.70 m of leather. Bill of materials is a kind of recipe for production. It identifies the use of direct materials in production, including the sequence and required amount of materials to produce each finished unit.

The direct labor budget represents the number of hours and corresponding costs of direct labor needed for making the budgeted production. Similar to direct materials, the usage of direct labor hours per unit is determined with the help of technological relationships (such as time-motion analyses of engineers) between the number of labor hours and corresponding output units.