Andrew Johnson, 17th President of the United States

Andrew Johnson, 17th President of the United States Andrew Johnson (December 29, 1808–July 31, 1875) was the seventeenth president of the United States. He took office after the assassination of Abraham Lincoln in 1865 and was president through the contentious early days of Reconstruction. His vision of Reconstruction was rejected and his presidency was not successful. He was impeached by Congress, averting removal from office by one vote, and was not re-nominated in the following election. Fast Facts: Andrew Johnson Known For:  Seventeenth president of the United States, impeachmentBorn:  December 29, 1808 in Raleigh, North CarolinaParents: Jacob Johnson and Mary Polly McDonough JohnsonDied:  July 31, 1875 in Carters Station, TennesseeEducation: Self-educatedSpouse: Eliza McCardleChildren: Martha, Charles, Mary, Robert, and Andrew Jr.Notable Quote: Honest conviction is my courage; the Constitution is my guide. Early Life and Education Andrew Johnson was born on December 29, 1808, in Raleigh, North Carolina. His father died when Johnson was 3 years old and his mother soon remarried. Johnson was raised in poverty. Both he and his brother William were bound out by their mother as indentured servants to a tailor, working for their food and lodging. In 1824, the brothers ran away, breaking their contract after two years. The tailor advertised a reward for anyone who would return the brothers to him, but they were never captured. Johnson then moved to Tennessee and worked in the tailors trade. He never attended school and he taught himself to read. In 1827, Johnson married Eliza McCardle when he was 18 and she was 16. She was well-educated and tutored him to help him improve his arithmetic and reading and writing skills. Together they had three sons and two daughters.   Rapid Rise in Politics At age 17, Johnson opened his own successful tailor shop in Greenville, Tennessee. He would hire a man to read to him as he sewed and he took an increasing interest in the Constitution and famous orators. Showing political ambition from an early age, Johnson was elected the mayor of Greenville at age 22 (1830–1833). A Jacksonian Democrat, he then served two terms in the Tennessee House of Representatives (1835–1837, 1839–1841). In 1841 he was elected as a Tennessee state senator. From 1843–1853 he was a U.S. representative. From 1853–1857 he served as governor of Tennessee. Johnson was elected in 1857 to be a U.S. senator representing Tennessee. Dissenting Voice While in Congress, Johnson supported the  Fugitive Slave Act  and the right to own slaves. However, when states started to secede  from the Union in 1861, Johnson was the only southern senator who did not agree. Because of this, he retained his seat. Southerners viewed him as a traitor. Ironically, Johnson saw both secessionists and abolitionists as enemies to the Union. During the war, in 1862, Abraham Lincoln made Johnson the military governor of Tennessee. Becoming the President When President Lincoln ran for reelection in 1864, he chose Johnson as his vice president. Lincoln chose him to help balance the ticket with a Southerner who was also pro-Union. Johnson became president upon Abraham Lincolns assassination on April 15, 1865, just six weeks after Lincolns inauguration. Reconstruction Upon succeeding to the presidency, President Johnson attempted to continue with Lincolns vision of  Reconstruction. To heal the nation, Lincoln and Johnson both prioritized leniency and forgiveness for those who seceded from the Union. Johnsons Reconstruction plan would have allowed Southerners who swore an oath of allegiance to the federal government to regain citizenship. He also favored a relatively quick return of power to the states themselves. These conciliatory measures were never really given a chance by either side. The South resisted extending any civil rights to blacks. The ruling party in Congress, the  Radical Republicans, believed Johnson was being far too lenient and was allowing former rebels too much of a role in the new governments of the South. The Radical Republican plans for Reconstruction were more severe. When the  Radical Republicans  passed the Civil Rights Act in 1866, Johnson vetoed the bill. He did not believe that the North should force its views on the South, but instead favored allowing the South to determine its own course. His vetoes on this and 15 other bills were overridden by the Republicans. These were the first instances of presidential vetoes being overridden.  Most white Southerners also opposed Johnsons vision of Reconstruction. Alaska In 1867, Alaska was purchased in what was called Sewards Folly. The United States purchased the land from Russia for $7.2 million upon Secretary of State  William Sewards  advice. Even though many saw it as folly at the time, it eventually proved to have been a very wise investment. Alaska provided the United States with gold and oil, increased the size of the country drastically, and removed Russian influence from the North American continent. Impeachment And continual conflicts between the Congress and the president eventually led to the impeachment trial of President Johnson.  In 1868, the  House of Representatives  voted to impeach President Andrew Johnson for dismissing his  Secretary of War Stanton  against the order of the Tenure of Office Act, which they had just passed in 1867. Johnson became the first president to be impeached while in office. (The second president would be  Bill Clinton.) Upon impeachment, the Senate is required to vote to decide if a president should be removed from office. The Senate voted against this by only one vote. Post-Presidential Period In 1868, after just one term, Johnson was not nominated to run for the presidency. He retired to Greeneville, Tennessee. He attempted to re-enter the U.S. House and Senate but lost both elections. In 1875, he ran for the Senate again and was elected. Death Soon after taking office as U.S. senator, Johnson died on July 31, 1875. He had suffered a stroke while visiting family in Carters Station, Tennessee. Legacy Johnsons presidency was full of strife and dissension. He disagreed with much of the population and leadership on how to administer Reconstruction. As evidenced by his impeachment and the close vote which almost removed him from office, he was not respected and his vision of Reconstruction was disdained. Most historians see him as a weak and even failed president, however his time in office saw the Alaska purchase and, in spite of him, the passage of both the 13th and 14th amendments: freeing the slaves and extending rights to the former slaves. Sources Castel, Albert E. The Presidency of Andrew Johnson. Regents Press of Kansas, 1979.Gordon-Reed, Annette.  Andrew Johnson. The American Presidents Series. Henry Holt and Company, 2011.â€Å"Life Portrait of Andrew Johnson.† C-Span.Trefousse, Hans L. Andrew Johnson: A Biography. Norton, 1989

Seattles Suburbs History. Essays - Century 21 Exposition

Seattles Suburbs History. Essays - Century 21 Exposition Seattle's Suburbs History. Preamble Learning about what has changed has made us realize more than ever how constant change is. The way we see things around us is not the way they always have been and more important, are only an intermediate stage to where ever they will be tomorrow. Talking to people who saw what has changed to get here allows us to see the direction we have come, and finally the direction we are going. Outlined in this paper are six different angles viewing different parts of the past that collectively help us to find that direction. World's Fair Three of the prime events that attracted people to Washington in the 20th Century were the World's Fairs. The first of Washington's World Fairs was the Alaskan-Yukon-Pacific Exposition in 1909, which was located on the 250 acre University of Washington campus. The fantastic buildings, most of which still stand today, were designed by the famous Olmstead Brothers' landscape and architecture firm for the $150 million project. Among the celebrities at the exposition were President Howard Taft and industrialist Henry Ford. The Alaskan-Yukon-Pacific exposition opened on June 1st and closed on October 15th . However, no A-Y-P structure was as prominent as the futuristic Seattle Space Needle of the Century 21 World's Fair in Seattle in the year 1962. This, along with the wondrous monorail and Pacific Science Center were all leftover from the great fair. Lasting for almost six months, the '62 Seattle World's Fair attracted approximately ten million visitors, and, as Jack Crawford put it, "It was one busy place." Among the exhibits were the various ethnic and state booths, the hydroelectric waterfall, and the great fountain made from plumbing parts, which has just recently been remodeled. All during the fair, various acts played in the Seattle Opera House. Inside the future exhibit was the famous Bubble-ator elevator, which now resides down in sunny Redondo, California as greenhouse. A lot of wonderful memories were produced at this illustrious event; Gene Duarte recalls, "I remember hearing East Indian music for the first time and falling down on the floor laughing. I was se! ven, and it was the funniest thing I had ever heard." As civic boosters had had hoped, it brought national attention to Seattle, and in spite of early problems, the 1962 Seattle World's Fair became a financial success. Twelve years later, Spokane held EXPO '74 for which the city tore down old buildings and cleaned up the pollution, the theme being the environment. 'Nam 'Nam. What most people seem to remember about the Vietnam War here in Seattle were the big protests. The protesters opposed military escalation and fought to bring the GI's home. Kathy Duarte-Wilson remarks, "People were very scared of being drafted. We wore POW bracelets in honor of those who went to war. They were almost a fad. Then there were the flower children," she laughs, "I remember wanting to be one when I grew up." Some GI's were pulled out of Vietnam when President Nixon's first troop reduction order was acted upon in July of 1969 at McChord Air Force Base. Two days later there was a combination military parade, welcome home celebration, plus antiwar protest filling the streets of Seattle. The antiwar campaign really heated up in the May of 1970. Days of protesting went on against the bombing of Cambodia and the killings of four student demonstrators by national guardsmen in Kent State University in Ohio and two killed by state police in Jackson State College in Mississippi. Ten thousand protesters blocked Interstate-5 in Seattle in a march from the University of Washington to the federal courthouse down town. Boeing Depression When asked about a time remembered for hardship and kindness, the Boeing depression is often the top of the list. When the Boeing company went through hardship the entire state felt the repercussions. When nearly ? of all the people in the region worked for Boeing, layoffs created vast unemployment causing a severe regional depression. "Last one out of Seattle, please turn out the lights" read the sign off the side of the highway, echoing much of the feelings of the region's population. The utter lack of jobs and opportunity lead to a large migration of people away from

Construction Adjudication Law - Legal problem Coursework

Construction Adjudication Law - Legal problem - Coursework Example The architects in question who did the preliminary design had the obligation to check the ground conditions and foundation requirements. PCL bears a partial responsibility for the design flaw. The matter is referred to adjudication under clause 9.2 of the JCT Design and Building Contract. There were a number of issues with the adjudication process and this include a reliable information that the CEO of PDP and the Adjudicator went for a weekend in a country hotel where they were overhead discussing things related to the case. From the case study, there is the need for the following things and matters to be examined in relation to the relevant rules about: 1. The scope of the Adjudicator's obligations and whether it was met or not. 2. The independence of the Adjudicator. 3. The impartiality of the Adjudicator's processes in dealing with the case 4. The ability of the case to be escalated to a court dispute. Scope of Adjudication The main issue of contention is to define the actual que stion and the actual point of law that the adjudicator of the case at hand was supposed to handle. This is in response to the accusation of the CEO of PDP that the adjudicator addressed the wrong question. ... ication of the relevant provision, it can be said that the obligation of the Adjudicator in this case is to identify the procedure that was used by the contracting party and which party deserves to be held responsible for the damage. In other words, the Adjudicator has to examine the contract between PDP and PCL and identify who is responsible for the determination of the soil condition and the point in the contract that it went wrong. The evidence of both parties were to be examined and a conclusion could be drawn. However, in this case, it is apparent that the Adjudicator did not spend too much time studying those documents. Rather, he examined just two variables, the architects and PCL's relative positions. He did not go deep into the contract, neither did he set out a fair procedure. Hence, it can be concluded that he did not operate within the scope of the contract. Independence of the Adjudicator The Adjudicator happened to be the brother-in-law of the MD of PCL. This shows cle arly that they had an informal relationship that could have implications for the independence of the Adjudicator. The Adjudicator, as a professional, has codes of ethics in the profession he belongs to, whether he is a legal professional or a construction expert. Every adjudicator needs to be independent and be seen to be independent in his decisions and procedures3. In a landmark ruling in a construction arbitration case in France, which is part of European Union Law, it was stated that â€Å"An Arbitrator should not have any commercial or other similar connection with either party which may give rise to suspicion in the mind of a reasonable person that he may be biased†4. The implication is that there should be no relationship that exists between an adjudicator and any of the parties that

Sports Cricket Essay Example | Topics and Well Written Essays - 2000 words

Sports Cricket - Essay Example Such lost for the English people can be considered as a wake up call and thus can be perceived as main reason for the continuous kindling and motivation of the sport in participation of the two countries and even other countries. This is due to the fact that the even is continuously attracting participants from different parts of the world and the members of the international community. From the onset of the tradition of the sports cricket, The Ashes can be considered as the most important. The influence that the said event made already transcends the world of sports. In fact, it can be considered to have influenced the different aspects of the society. This can be perceived in terms of the social, economic, cultural and even the political aspects (Birley, 2003) Through the ages, the Ashes had surpassed the different challenges that a game can meet. The said sports can, in fact, be considered as an institution already. The said status of the game can be attributed to the stretch of long and colourful history that the event already surmounted. The establishment of the Ashes as an important event in cricket can be regarded as the most influential event. In terms of the history of the game itself, the most important part can be identified as the earliest and the latest years, although the continuous drive to present and organize the Test contributes largely for each year of commencement (Cricinfo, 2006). The early years are essential for the recognition of the Ashes due to the fact that the early part of the development of the tournament represents the establishment of the rules and the internal workings and even the administration of the game. On the other hand the latter years, which can be recognized as simultaneously occurring through the development of the modern time, can be recognized and commended due to the fact that the event was able to survive even through the through the introduction of a number of pastimes, events, sports and other form of entertainment (Birley, 2003). The charisma of the game can be attributed to the fact that the rivalry of the two participating countries can be considered as an attractive factor. The hype of the competition along with a number of different factors that even heighten the excitement of the event can be recognized as on of the reasons behind the status of The Ashes (Birley, 2003). There are important factors that can be considered that make the event, the Ashes, as one of the recognized and popular sports in the international community and the world. These factors can be considered as consciously or unconsciously being tackled through the involvement in the game, though as a participant or as an observer. Included in the said factors are the media and other social factors such as the race, the class and the gender, making the event an attraction in both the positive and the negative sense of the word. Due to the effects of these factors, it can be perceived important to be able to present the interaction of the said concepts. One of the approaches to be able to achieve the particular goal is through the determination of the effects of the portrayal of the media, in different forms, on the other factors such as t

Application Architecture Case Study Example | Topics and Well Written Essays - 1000 words

Application Architecture - Case Study Example This is done using special Internet addresses that have been reserved for this purpose. These special addresses are invalid in the Internet itself. The hosts using these addresses may communicate among themselves, but they cannot access the Internet directly†. NAT In order to make it easy for the network administrator, the NAT translates all the personal and confidential IP addresses into inclusive IP addresses. This will require an incremental change devoid of host and routers modification. Furthermore, the NAT has its own drawbacks for instance; its performance is slow since each packet is processed before translating it. Therefore the ‘IP traceability’ also becomes complicated because data packets are hard to trace. 3 Tunneling Tunneling is also referred as port forwarding. Port forwarding is often used for establishing a secure data channel from head office to the remote office corporate network by utilizing the Internet. One of the methods for deploying a tunn eling protocol is to configure the WAN connection with port number along with allocation of the required service. For example, for accessing remote desktop for a payroll application, port number 3389 will be used with the service named as ‘RDP service’ along with the specific IP address of the computer. As discussed earlier, PPTP developed by Microsoft. Likewise, PPTP is required for transmitting encrypted data over the VPN. Besides, no data encryption is available on port forwarding configuration as compare to tunneling because every tunneling route needs to be defined. This may create complex configurations that are difficult to manage. 4 Access Control List In a router, firewall, multi-layer switches etc.; the Access Control List is characterized. If a data packet attempts to pass through a router, it will take in security rules and policies. In the same way, the user’s rights on the files and directories are identified related to the ACL operating system. In order to check quality, the files and folders are read, write and executed. Thus, the ACL offers security for the network data administration, system files and folders. 5 Sub Netting Sub netting is described in â€Å"document RFC 950, originally referred to the subdivision of a class-based network into sub networks, but now refers more generally to the subdivision of a CIDR block into smaller CIDR blocks† (Subnetting, n.d). In IPv4, a single subnet only encloses 254 assignable IP addresses. The issues related to the broadcast are always triggered, generating network congestion and disruption in services. Therefore, these IP addresses should be managed properly in order to control congestion. However, o overcome the above mentioned issues, the IP addresses are divided into smaller class C networks for better performance related to network management and security. In addition, to operate a corporate network, sub netting is needed in order to allocate private IP addresses to inb ound networks as the global IP addresses are limited. The global IP addresses can be configured on the bases of WAN (Wide Area Network) devices. 6 Virtual Local Area Network (VLAN) The Virtual Local Are

Peformance of pizza hut as a company

Peformance of pizza hut as a company Pizza Hut was develop in 1958; there are 5000 restaurants in UK and 20000staff. The number of the staff in the specific organisation is 38 persons, the turnover is very low, 20%, and it is very active in the global market and is one huge organisation. Pizza Hut history starts in Wichita. Kansas in 1958 by two brothers (Frank and Dan Carney) who had the idea of developing a pizza restaurant, a new concept in America and very quickly the dream came true. They borrowed $600 from one of their mothers and they rented a small building on a busy road in Wichita, they also bought some second hand equipment and they became very rich with a big and successful organisation. Pizza Hut franchises were launched in 1958. Although the Pizza Hut chain was able to develop both in the United States and overseas. Today, franchisees and joint venture partnerships account for nearly half of the Pizza Huts total restaurants. (www.everything2.com). Then Pizza Hut started to be international, the first international restaurant was in Canada in 1968. Pizza Hut started branching out quickly in the entire world, in Mexico, Australia, Europe, Africa and the Far East. Also Pizza Hut was cooperate with PepsiCo, actually was acquired by PepsiCo. Pizza Hut was share its position with the products of PepsiCo. PepsiCo in cooperation with Pizza Hut, KFC, and Taco Bell were make the largest restaurant group, the Trion global restaurant, in the world, in October 1997. Background information Theory Pizza Hut is with no doubt one global successfully organisation, which belongs to public sort of organisations. However, for a successful organisation, the culture is a necessity that will eventually lead to a good environment in the organization. Culture is the values and norms of an organisation, which determine its corporate behaviour and the behaviour of people within the organisation. (Thompson, 2001, p 1124). According with Pizza Huts information website (www.pizzahut.com) the staff is very friendly to the customers and that is the reason why, the customers are always coming again and again. For example, if the employees are working into a friendly environment then automatically they are friendlier to customers and as customers love to come to the restaurants because of the friendly environment. The working environment between the employees is very friendly and they all work like one team. Teamwork is a huge and important thing. A working team is obviously important for an organisation, a working team player is a person who can manage the roll of the self to fit the needs of a team. (Belbin, 2000, p 111) The structure of Pizza Hut starts from the restaurant manager, who decides for everything, he takes all the decisions. Then there is the area manager who replaces restaurant managers, after that there is the regional manager, the human resources, the director of operations and finally the chief executive officers. For an organisation, is important to be organised prioritised lists and well-planned schedules disperse the illusion of chaos(Lindenfield, 2003, p 73). In an organisation like Pizza Hut, there should be a functional strategy, strategies like marketing or finance. The strategies for the various functions carried out by an organisation, including marketing, production, financial management, information management, research and development, and human resource management.(Thompson, 2001, p 1125) from the information provided the company do satisfy all the needs of disabled people in the organisation, they use equipment which is friendly and not harmful at all to the environment. Also Pizza Hut food is also healthy and they produce pizzas with fresh ingredients. Additionally, Pizza Hut has recently started recycling. From now and then, the food packages are recycled and are just the first step of the recycling process. Furthermore, Pizza Hut is a flexible organisation which had being advertised by radio and of course television, through all media and through their main website, thus they have new marketing opportunities for captivating m ore customers, and as they considered is a very flexible organisation because they always change things. Management style Management in an organisation is everything because they all end up to this and because the managers can achieve and had the profit they want to if they work corrected. Manager is a person who has all the responsibilities, takes all decisions but also shared some responsibilities such as financial control, planning with directors. Management, is the process by which an organisation establishes its objectives, formulates actions (strategies) designed to meet these objectives in the desired time- scale, implements the actions, and assesses progress and results (Thompson, , 2001, p 1128). The manager must be democratic and his main activities are planning/coordinating, staffing, training/developing, decision making/problem solving, handling paperwork, exchanging routine information, monitoring/controlling performance, monitoring/reinforcing, disciplining/punishing, interacting with the outsiders, managing conflict, socializing/politicking (Wright, 1996, page 18). But beside the manager, leadership plays an important role as well. In a journal is written that there are no universal leadership characteristics. What works for one will not work for another. For all those who aspire to leadership, the challenge is simple-deceptively so. To be a more effective leader, you must be yourself-more- with skills(Goffee, Jones, 2006, p 47) according by Pizza Hut leaders are the main planners of the organisation. Leaders adopting an international perspective have some advantages, however defined, and that the educator is lacking an essential breadth if practice remains bound by the values and approaches which have emerged over time in any one location(Lumby, 2006, p 7). Leader is a generic term used to describe a manager who is responsible for changes in the corporate strategy. (Thompson, 2001, p 1128). In addition to this, leaders are very friendly and they dont behave selfishly, but instead of that, they work like one and they had harmonic relationship with each other. Whats more, they are really good friends. But the personality of a leader should have the charisma to sell ideas and automatically be ready for action. Understanding of leadership in which the focus on, leader is rejected, but asserts that the so-called leadership that relies on leaders is essentially flawed.(Gallagher, 2002, p 24) Any leader should have some personal features by make him a successful leader, like being always on time, being committed and being ready for action. Staying power is one of the most important yet least recognised attributes of successful leaders.(Black, 2003, p 25) Pizza hut manage to achieve that through their website and especially with advertisements in the media and every year they give financial information and they have 70 franchised delivery units, 118 companies owned, and they have weekly sales, food costs and utility costs. The manager of the restaurant is responsible for the employment of staff and what qualifications do they look for. They ask for skills in IT, they ask for the necessary things that a cashier must be aware of and also they look for customers skills. Moreover, they need good communication skills and they want employees with interpersonal abilities. In some cases they do train staff and if they have previous employment they ask for interpersonal abilities. Pizza Hut offered any rewarded or benefits to staff for motivating them. Another constraint upon organisations is wide acceptance of the idea that people want more from the employment relationship than just money: that they want rewards and satisfactions that are often psychological in nature(Elgood, 1988, p 10). External Influences on the organisation and Management of Change External influences are the main influences that an organisation may change, for instance external influences are influences such as competitors or the global market which is closely related to organisations (Elgood, 1988). The competitors of Pizza Hut, there are many such as McDonalds, Subway, but the most important one is Frankie Benny. The company tries to compete that by constantly introduce new products every 3-4 months. Each company has positive and negative aspects so the positive aspects of this organisation was anything new they produced, and the negative was taken away and delivery, also after Christmas time there are not many customers because customers spent their money. Another negative aspect that influences Pizza Hut is the building work around, that make people avoid eating at the organisation. In addition to this, seasonal changes are also a reason that can cause negative influence to Pizza Hut, for instance there are not any clientele in summer time because obvious ly most of them are going for holiday. But success is the ability to go from one failure to another with no loss of enthusiasm (Churchill, 2003, p 20). External Analysis of the Organisations Environment Technological Development: The business already used technology more than before, such as new equipment. Economic Trends: Pizza Hut in UK support a charity, the Starlight Childrens Foundation. That charity is brightening the lives of some very ill children, trying to entertainment them and makes their wishes come true. Environmental Issues: Pizza Hut has recently started to use recycle packages. Legislation: Pizza Hut fill all the laws that government applied, they have all the necessities that a business should have. Ethical Issues: In an organisation such as Pizza Hut, should use food products that are not harmful or causing any environmental problems. Sheet indicating image, marketing The new way of marketing at Pizza Hut is very interesting, they do use the psychology. Many different voices was respond to the question Whos called the Hut?. That is a smart way of advertising Pizza Hut because firstly is a nice, funny view and secondly people are trying to imitate voices. People were imitate and that happened when it sank in. Conclusion Management is a generic term and subject to many interpretations. Our concern is with management within a structured organisational setting and involving the exercise of formal authority over the work of other people. The nature of management is variable. It relates to all activities of the organisation and is undertaken at all levels. Management is essentially an integrating activity which permeates all other aspects of the organisation.(Mullins, 2002, p 195) Culture is based in the behaviour of people in the organisation. For example, the way that staff is behave shows the environment, leading to create the culture. Culture means the values and norms of an organisation, which determine its corporate behaviour and the behaviour of people within the organisation (Thompson, 2001, p 1124). The term organisation means a consciously co-ordinated social unit created by groups in society to achieve specific purposes, common aims and objectives by means of planned and coordinated activities(Mullins, 2002, p 907). Organisation in a business and they have the same goals. Belonging to an organisation means that people were working peacefully and not egoistically. Leader is close related with manager, for example, a leader is responsible for changes in an organisation. But also leadership is influenced the behaviour of other people because of any change. In that case, leader should be democratic and friendly to the staff. According with all the managerial aspects I have analyse above the Pizza Hut as a company considered to be able to achieve all the criteria that the market is asking for development and recognition. Finally Pizza Hut is a well managed company with all prospects for improvement and monopoly.

Robber Barons Essay -- essays research papers

The Robber Barons, as they were called, were the kings of American Industry and American Society during the late 1800's and early 1900's. Rich beyond the average man's wildest dreams, these industrialists were often criticized for their philosophies and their ways of making money. Robber Barons can also be viewed as immoral, greedy, and corrupt, and the evidence to support such a view is not difficult to find. Bribery, illegal business practices, and cruelty to workers were not uncommon in this period, and many of the most respected industrialists were also the most feared and hated. Many people consider Rockefeller a robber of industry because of his forcible ways of gaining his monopolies. Rockefeller was fond of buying out small and large competitors. If the competitors refused to sell they often found Rockefeller cutting the prices of his Standard Oil or in the worst cases, their factories mysteriously blowing up. Rockefeller was obsessed with controlling the oil market and used many of undesirable tactics to flush his competitors out of the market. Rockefeller was also a master of the rebate game. He was one of the most dominant controllers of the railroads. He was so good at the rebate that at some times he skillfully commanded the rail road to pay rebates to his standard oil company on the traffic of other competitors. He was able to do this because his oil traffic was so high that he could make or break a section of a railroad a railroad company by simply not running...

Acca Notes

S T U D Y T E X T PERFORMANCE MANAGEMENT BPP Learning Media is the sole ACCA Platinum Approved Learning Partner – content for the ACCA qualification.In this, the only Paper F5 study text to be reviewed by the examiner: †¢ †¢ †¢ †¢ †¢ †¢ †¢ †¢ We discuss the best strategies for studying for ACCA exams We highlight the most important elements in the syllabus and the key skills you will need We signpost how each chapter links to the syllabus and the study guide We provide lots of exam focus points demonstrating what the examiner will want you to do We emphasise key points in regular fast forward summaries We test your knowledge of what you've studied in quick quizzes We examine your understanding in our exam question bank We reference all the important topics in our full indexBPP's i-Pass product also supports this paper. FOR EXAMS IN 2011 First edition 2007 Fourth edition November 2010 ISBN 9780 7517 8921 8 (Previous ISBN 9870 7517 6367 6) British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by BPP Learning Media Ltd BPP House, Aldine Place London W12 8AA www. bpp. com/learningmedia Printed in the United Kingdom We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions.The suggested solutions in the exam answer bank have been prepared by BPP Learning Media Ltd, except where otherwise stated. All our rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of BPP Learning Media Ltd.Your learning materials, published by BPP Learning Media Ltd, are printed on paper sourced from sustainable, managed forests.  © BPP Learning Media Ltd 2010 ii Contents Page Introduction Helping you to pass – the O NLY F5 Study Text reviewed by the examiner! Studying F5 The exam paper v vii xi 3 21 33 41 49 63 73 95 123 157 173 199 215 233 267 287 319 337 365 387 403 419 463 Part A Specialist cost and management accounting techniques 2a 2b 2c 2d 2e 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Costing Activity based costing Target costing Lifecycle costing Throughput accounting Environmental accounting Cost volume profit (CVP) analysis Limiting factor analysis Pricing decisions Short-term decisions Risk and uncertainty Objectives of budgetary control Budgetary systems Quantitative analysis in budgeting Budgeting and standard costing Variance analysis Behavioural aspects of standard costing Performance measurement Divisional performance measures Further performance management Part B Decision-making techniques Part C BudgetingPart D Standard costing and variances analysis Part E Performance measurement and control Exam question bank Exam answer bank Index Review form and free prize draw Contents iii A note about copyright Dear Customer What does the little  © mean and why does it matter? 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By incorporating the examiner’s comments and suggestions regarding the depth and breadth of syllabus coverage, the BPP Learning Media Study Text provides excellent, ACCA-approved support for your studies. NEW FEATURE – the PER alert!Before you can qualify as an ACCA member, you do not only have to pass all your exams but also fulfil a three year practical experience requirement (PER). To help you to recognise areas of the syllabus that you might be able to apply in the workplace to achieve different performance objectives, we have introduced the ‘PER alert’ feature. You will find this feature throughout the Study Text to remind you that what you are learning to pass your ACCA exams is equally useful to the fulfilment of the PER requirement. Tackling studying Studying can be a daunting prospect, particularly when you have lots of other commitments.The different features of the text, the purposes of which are explained fully on the Chapter features page, will help you whilst studying and improve your chances of exam success. Developing exam awareness Our Texts are completely focused on helping you pass your exam. Our advice on Studying F5 outlines the content of the paper, the necessary skills the examiner expects you to demonstrate and any brought forward knowledge you are expected to have. Exam focus points are included within the chapters to highlight when and how specific topics were examined, or how they might be examined in the future.Using the Syllabus and Study Guide You can find the syllabus and Study Guide on page xi of this Study Text Testing what you can do Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can recall what you have learnt. We include Questions – lots of them – both within chapters and in the Exam Question Bank, as well as Quick Quizzes at the end of each chapter to test your knowledge of the chapter content. Introduction v Chapter features Each chapter contains a number of helpful features to guide you through each topic.Topic list Topic list Syllabus reference Tells you what you will be studying in this chapter and the relevant section numbers, together the ACCA syllabus references. Puts the chapter content in the context of the syllabus as a whole. Links the chapter content with ACCA guidance. Highlights how examinable the chapter content is likely to be and the ways in which it could be examined. What you are assumed to know from previous studies/exams. Summarises the content of main chapter headings, allowing you to preview and review each section easily. Demonstrate how to apply key knowledge and techniques.Definitions of important concepts that can often earn you easy marks in exams. Tell you when and how specific topics were examined, or how they may be examined in the future. Formulae that are not given in the exam but which have to be learnt. T his is a new feature that gives you a useful indication of syllabus areas that closely relate to performance objectives in your Practical Experience Requirement (PER). Introduction Study Guide Exam Guide Knowledge brought forward from earlier studies FAST FORWARD Examples Key terms Exam focus points Formula to learn Question Case StudyGive you essential practice of techniques covered in the chapter. Provide real world examples of theories and techniques. Chapter Roundup Quick Quiz Exam Question Bank A full list of the Fast Forwards included in the chapter, providing an easy source of review. A quick test of your knowledge of the main topics in the chapter. Found at the back of the Study Text with more comprehensive chapter questions. Cross referenced for easy navigation. vi Introduction Studying F5 The F5 examiner wants candidates to be able to apply management accounting techniques in business environments.The key question you need to be able to answer is ‘what does it all ac tually mean? ‘ Modern technology is capable of producing vast amounts of management accounting information but it has to be used to help managers to make good decisions and manage effectively. The emphasis in this paper is therefore on practical elements and application to the real world. The examiner does not want to trick you and papers will be fair. The F5 examiner The examiner for this paper is Ann Irons, who replaced Geoff Cordwell from the December 2010 sitting onwards.Ann Irons has written several articles in Student Accountant, including one on how to approach the paper (September 2010 issue). Make sure you read these articles to gain further insight into what the examiner is looking for. Syllabus update The F5 syllabus has been updated for the June 2011 sitting onwards. The full syllabus and study guide can be found in this Study Text on pages xi to xviii. The main changes are the omission of backflush accounting and the inclusion of environmental accounting and cost volume profit (CVP) analysis. The syllabus order has also been changed, which has been reflected in this Study Text.A full summary of the changes to the F5 syllabus is given on the next page.. Introduction vii viii Introduction Introduction ix 1 What F5 is about The aim of this syllabus is to develop knowledge and skills in the application of management accounting techniques. It covers modern techniques, decision making, budgeting and standard costing, concluding with how a business should be managed and controlled. F5 is the middle paper in the management accounting section of the qualification structure. F2 concerns just techniques and P5 thinks strategically and considers environmental factors.F5 requires you to be able to apply techniques and think about their impact on the organisation. 2 What skills are required? †¢ †¢ †¢ †¢ †¢ You are expected to have a core of management accounting knowledge from Paper F2 You will be required to carry out calculation s, with clear workings and a logical structure You will be required to interpret data You will be required to explain management accounting techniques and discuss whether they are appropriate for a particular organisation You must be able to apply your skills in a practical context 3 How to improve your chances of passing †¢ †¢ †¢ †¢ †¢ †¢ †¢ There is no choice in this paper, all questions have to be answered. You must therefore study the entire syllabus, there are no short-cuts Practising questions under timed conditions is essential. BPP's Practice and Revision Kit contains 20 mark questions on all areas of the syllabus Questions will be based on simple scenarios and answers must be focused and specific to the organisation Answer plans will help you to focus on the requirements of the question and enable you to manage your time effectively Answer all parts of the question.Even if you cannot do all of the calculation elements, you will still be ab le to gain marks in the discussion parts Make sure your answers focus on practical applications of management accounting, common sense is essential! Keep an eye out for articles as the examiner will use Student Accountant to communicate with students Read journals etc to pick up on ways in which real organisations apply management accounting and think about your own organisation if that is relevant 4 Brought forward knowledge You will need to have a good working knowledge of basic management accounting from Paper F2.Chapter 1 of this Study Text revises costing and brought forward knowledge is identified throughout the text. If you struggle with the examples and questions used to revise this knowledge, you must go back and revisit your previous work. The examiner will assume you know this material and it may form part of an exam question. x Introduction The exam paper Format of the paper The exam is a three-hour paper containing five compulsory 20 mark questions. You also have 15 min utes for reading and planning. There will be a mixture of calculations and discussion and the examiner's aim is to cover as much of the syllabus as possible.Syllabus and Study Guide The F5 syllabus and study guide can be found on the next page. Introduction xi xii Introduction Introduction xiii xiv Introduction Introduction xv xvi Introduction Introduction xvii xviii Introduction Introduction xix Analysis of past papers The table below provides details of when each element of the syllabus has been examined and the question number in which each element appeared. Further details can be found in the Exam Focus Points in the relevant chapters. Covered in Text chapter June 2010 Dec 2009 June 2009 Pilot PaperSPECIALIST COST AND MANAGEMENT ACCOUNTING TECHNIQUES 2a 2b 2c 2d 2e 3 4 5 6 7 8 9 9 10 8 Activity based costing Target costing Life cycle costing Throughput accounting Environmental accounting DECISION-MAKING TECHNIQUES Cost-volume-profit analysis Multi-limiting factors and the use of linear programming and shadow pricing Pricing decisions Make-or-buy and other short-term decisions Dealing with risk and uncertainty in decision-making BUDGETING Objectives Budgetary systems Types of budget Quantitative analysis in budgeting Behavioural aspects of budgeting STANDARD COSTING AND VARIANCE ANALYSIS 11 12 12 13 13 14 15 16 Budgeting and standard costing Basic variances and operating systems Material mix and yield variances Planning and operational variances Behavioural aspects of standard costing PERFORMANCE MEASUREMENT AND CONTROL The scope of performance measurement Divisional performance and transfer pricing Performance analysis in not-for-profit organisations and the public sector 4 4 2 4 2 2 1 1 3 2 2 5 3 5 3 3 1, 4 4 4 1 1 2 1 xx Introduction Exam formulae Set out below are the formulae you will be given in the exam. If you are not sure what the symbols mean, or how the formulae are used, you should refer to the appropriate chapter in this Study Text. Chapter in Study Text Learning curve Y = axb Where Y a x b LR = cumulative average time per unit to produce x units = the time taken for the first unit of output = the cumulative number of units = the index of learning (log LR/log 2) = the learning rate as a decimal 10 Regression analysis y = a + bx b= a= 10 n ? xy ? ? x ? y n ? x 2 ? (? ) 2 ?y b? x ? n n (n? x 2 ? (? x)2 )(n? y 2 ? (? y)2 ) 5 r= n? xy ? ? x ? y Demand curve P b a = a – bQ = change in price change in quantity = price when Q = 0 MR = a – 2bQ Introduction xxi xxii Introduction P A R T A Specialist cost and management accounting techniques 1 2 Costing Topic list 1 Costing 2 The problem of overheads 3 A revision of absorption costing 4 Overhead absorption 5 Marginal costing 6 Absorption costing and marginal costing compared Introduction Part A of this Study Text looks at specialist cost and management accounting techniques. This chapter serves as a revision of concepts you will have covered in your previous studies.I n the following chapter we will be looking at more complex techniques so it is important that you are familiar with the key concepts and terminology in this chapter. If you want to get free study material of CAT, ACCA, CIMA, CFA, CIA visit : freefor911. wordpress. com 3 Exam guide This chapter serves as an introduction to your study of cost and management accounting techniques, as knowledge is assumed from Paper F2 Management Accounting and is still examinable at this level. Questions in this paper will focus on interpretation rather than doing calculations. 1 Costing FAST FORWARD Costing is the process of determining the costs of products, services or activities.Cost accounting is used to determine the cost of products, jobs or services (whatever the organisation happens to be involved in). Such costs have to be built up using a process known as cost accumulation. In your earlier studies you will have learnt how to accumulate the various cost elements which make up total cost. Abso rption costing cost accumulation system 2 The problem of overheads FAST FORWARD Indirect costs, or overheads, are costs incurred in making a product or providing a service, but which cannot be traced directly to the product or service. Absorption costing is a means of incorporating a fair share of these costs into the cost of a unit of product or service provided.If a company manufactures a product, the cost of the product will include the cost of the raw materials and components used in it and cost of the labour effort required to make it. These are direct costs of the product. The company would, however, incur many other costs in making the product, which are not directly attributable to a single product, but which are incurred generally in the process of manufacturing a large number of product units. These are indirect costs or overheads. Such costs include the following. †¢ †¢ Factory rent and rates Machine depreciation †¢ †¢ Supervision costs Heating and lig hting 4 1: Costing ? Part A Specialist cost and management accounting techniques Key termsA direct cost is a cost that can be traced in full to the product, service or department that is being costed. An indirect cost or overhead is a cost that is incurred in the course of making a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department. In some companies, the overheads cost might greatly exceed the direct production costs. It might seem unreasonable to ignore indirect costs entirely when accumulating the costs of making a product, and yet there cannot be a completely satisfactory way of sharing out indirect costs between the many different items of production which benefit from them. 2. Using absorption costing to deal with the problem of overheads Traditionally, the view has been that a fair share of overheads should be added to the cost of units produced. This fair share will include a portion of all production overhead expenditure and possibly administration and marketing overheads too. This is the view embodied in the principles of absorption costing. 2. 1. 1 Theoretical justification for using absorption costing All production overheads are incurred in the production of the organisation's output and so each unit of the product receives some benefit from these costs. Each unit of output should therefore be charged with some of the overhead costs. 2. 1. 2 Practical reasons for using absorption costing (a) Inventory valuations Inventory in hand must be valued for two reasons. i) (ii) For the closing inventory figure in the statement of financial position For the cost of sales figure in the income statement The valuation of inventories will affect profitability during a period because of the way in which the cost of sales is calculated. Cost of goods sold = (b) Pricing decisions Many companies attempt to set selling prices by calculating the full cost of production or sales o f each product, and then adding a margin for profit. ‘Full cost plus pricing' can be particularly useful for companies which do jobbing or contract work, where each job or contract is different, so that a standard unit sales price cannot be fixed. Without using absorption costing, a full cost is difficult to ascertain. c) Establishing the profitability of different products This argument in favour of absorption costing states that if a company sells more than one product, it will be difficult to judge how profitable each individual product is, unless overhead costs are shared on a fair basis and charged to the cost of sales of each product. cost of goods produced + the value of opening inventories – the value of closing inventories 2. 2 Using marginal costing to deal with the problem of overheads For many purposes absorption costing is less useful as a costing method than marginal costing. In some situations, absorption costing can be misleading in the information it su pplies.Advocates of marginal costing take the view that only the variable costs of making and selling a product or service should be identified. Fixed costs should be dealt with separately and treated as a cost of the accounting period rather than shared out somehow between units produced. Some overhead costs are, Part A Specialist cost and management accounting techniques ? 1: Costing 5 however, variable costs which increase as the total level of activity rises and so the marginal cost of production and sales should include an amount for variable overheads. 3 A revision of absorption costing FAST FORWARD Absorption costing is a traditional approach to dealing with overheads, involving three stages: allocation, apportionment and absorption.Apportionment has two stages, general overhead apportionment and service department cost apportionment. Key term Absorption costing is a method of product costing which aims to include in the total cost of a product (unit, job and so on) an approp riate share of an organisation's total overhead, which is generally taken to mean an amount which reflects the amount of time and effort that has gone into producing the product. You should have covered absorption costing in your earlier studies. We will therefore summarise the simpler points of the topic but will go into some detail on the more complex areas to refresh your memory. Knowledge brought forward from earlier studiesAbsorption costing †¢ †¢ Product costs are built up using absorption costing by a process of allocation, apportionment and overhead absorption. Allocation is the process by which whole cost items are charged directly to a cost unit or cost centre. Direct costs are allocated directly to cost units. Overheads clearly identifiable with cost centres are allocated to those cost centres but costs which cannot be identified with one particular cost centre are allocated to general overhead cost centres. The cost of a warehouse security guard would therefore be charged to the warehouse cost centre but heating and lighting costs would be charged to a general overhead cost centre.The first stage of overhead apportionment involves sharing out (or apportioning) the overheads within general overhead cost centres between the other cost centres using a fair basis of apportionment (such as floor area occupied by each cost centre for heating and lighting costs). The second stage of overhead apportionment is to apportion the costs of service cost centres (both directly allocated and apportioned costs) to production cost centres. The final stage in absorption costing is the absorption into product costs (using overhead absorption rates) of the overheads which have been allocated and apportioned to the production cost centres. Costs allocated and apportioned to non-production cost centres are usually deducted from the full cost of production to arrive at the cost of sales. †¢ †¢ †¢ †¢ Question Cost apportionmentBriefly discuss the type of factors which could affect the choice of the bases an organisation can use to apportion service department costs. 6 1: Costing ? Part A Specialist cost and management accounting techniques Answer (a) (b) (c) (d) (e) The type of service being provided The amount of overhead expenditure involved The number of departments benefiting from the service The ability to be able to produce realistic estimates of the usage of the service The resulting costs and benefits Question More cost apportionment A company is preparing its production overhead budgets and determining the apportionment of those overheads to products. Cost centre expenses and related information have been budgeted as follows.Total $ 78,560 16,900 16,700 2,400 8,600 3,400 40,200 402,000 100 35,000 25,200 45,000 Machine shop A $ 8,586 6,400 Machine shop B $ 9,190 8,700 Assembly $ 15,674 1,200 Canteen $ 29,650 600 Maintenance $ 15,460 – Indirect wages Consumable materials Rent and rates Buildings insurance P ower Heat and light Depreciation (machinery) Value of machinery Power usage (%) Direct labour (hours) Machine usage (hours) Area (sq ft) Required 201,000 55 8,000 7,200 10,000 179,000 40 6,200 18,000 12,000 22,000 3 20,800 – 15,000 – – – – 6,000 – 2 – – 2,000 Using the direct apportionment to production departments method and bases of apportionment which you consider most appropriate from the information provided, calculate overhead totals for the three production departments. AnswerTotal $ Indirect wages 78,560 Consumable materials 16,900 Rent and rates 16,700 Insurance 2,400 8,600 Power Heat and light 3,400 Depreciation 40,200 166,760 Reallocate – Reallocate – Totals 166,760 A $ 8,586 6,400 3,711 533 4,730 756 20,100 44,816 7,600 4,752 57,168 B $ 9,190 8,700 4,453 640 3,440 907 17,900 45,230 5,890 11,880 63,000 Assembly $ 15,674 1,200 5,567 800 258 1,133 2,200 26,832 19,760 – 46,592 MainCanteen tenance $ $ 29,650 15,460 600 – 2,227 742 320 107 – 172 453 151 – – 33,250 16,632 (33,250) – – (16,632) – – Basis of apportionment Actual Actual Area Area Usage Area Val of mach Direct labour Mach usage Part A Specialist cost and management accounting techniques ? 1: Costing 7 4 Overhead absorption FAST FORWARDAfter apportionment, overheads are absorbed into products using an appropriate absorption rate based on budgeted costs and budgeted activity levels. Having allocated and/or apportioned all overheads, the next stage in absorption costing is to add them to, or absorb them into, the cost of production or sales. 4. 1 Use of a predetermined absorption rate Knowledge brought forward from earlier studies Step 1 Step 2 Step 3 The overhead likely to be incurred during the coming year is estimated. The total hours, units or direct costs on which the overhead absorption rates are based (activity levels) are estimated. Absorption rate = estima ted overhead ? budgeted activity level 4. 2 Choosing the appropriate absorption base Question Absorption basesList as many possible bases of absorption (or ‘overhead recovery rates') as you can think of. Answer (a) (b) (c) (d) (e) (f) (g) (h) A percentage of direct materials cost A percentage of direct labour cost A percentage of prime cost A percentage of factory cost (for administration overhead) A percentage of sales or factory cost (for selling and distribution overhead) A rate per machine hour A rate per direct labour hour A rate per unit The choice of an absorption basis is a matter of judgement and common sense. There are no strict rules or formulae involved. But the basis should realistically reflect the characteristics of a given cost centre, avoid undue anomalies and be ‘fair'.The choice will be significant in determining the cost of individual products, but the total cost of production overheads is the budgeted overhead expenditure, no matter what basis of abs orption is selected. It is the relative share of overhead costs borne by individual products and jobs which is affected. Question Absorption rates Using the information in and the results of the question on page 7, determine budgeted overhead absorption rates for each of the production departments using appropriate bases of absorption. 8 1: Costing ? Part A Specialist cost and management accounting techniques Answer Machine shop A: Machine shop B: Assembly: $57,168/7,200 = $7. 94 per machine hour $63,000/18,000 = $3. 50 per machine hour $46,592/20,800 = $2. 24 per direct labour hour 4. 3 Over and under absorption of overheads FAST FORWARDUnder-/over-absorbed overhead occurs when overheads incurred do not equal overheads absorbed. The rate of overhead absorption is based on estimates (of both numerator and denominator) and it is quite likely that either one or both of the estimates will not agree with what actually occurs. Actual overheads incurred will probably be either greater tha n or less than overheads absorbed into the cost of production, and so it is almost inevitable that at the end of the accounting year there will have been an over absorption or under absorption of the overhead actually incurred. †¢ †¢ Over absorption means that the overheads charged to the cost of sales are greater than the overheads actually incurred.Under absorption means that insufficient overheads have been included in the cost of sales. Suppose that the budgeted overhead in a production department is $80,000 and the budgeted activity is 40,000 direct labour hours, the overhead recovery rate (using a direct labour hour basis) would be $2 per direct labour hour. Actual overheads in the period are, say $84,000 and 45,000 direct labour hours are worked. $ Overhead incurred (actual) 84,000 90,000 Overhead absorbed (45,000 ? $2) Over-absorption of overhead 6,000 In this example, the cost of production has been charged with $6,000 more than was actually spent and so the cost that is recorded will be too high.The over-absorbed overhead will be an adjustment to the profit and loss account at the end of the accounting period to reconcile the overheads charged to the actual overhead. Question Under and over-absorption The total production overhead expenditure of the company in the questions above was $176,533 and its actual activity was as follows. Machine shop A Machine shop B Assembly Direct labour hours 8,200 6,500 21,900 Machine usage hours 7,300 18,700 – Required Using the information in and results of the previous questions, calculate the under- or over-absorption of overheads. Answer $ Actual expenditure Overhead absorbed Machine shop A Machine shop B Assembly $ 176,533 ,300 hrs ? $7. 94 18,700 hrs ? $3. 50 21,900 hrs ? $2. 24 57,962 65,450 49,056 172,468 4,065 Under-absorbed overhead Part A Specialist cost and management accounting techniques ? 1: Costing 9 4. 4 The reasons for under-/over-absorbed overhead The overhead absorption rate is pre determined from budget estimates of overhead cost and activity level. Under or over recovery of overhead will occur in the following circumstances. †¢ †¢ †¢ Actual overhead costs are different from budgeted overheads. The actual activity level is different from the budgeted activity level. Actual overhead costs and actual activity level differ from those budgeted. QuestionOver and under-absorption Elsewhere has a budgeted production overhead of $180,000 and a budgeted activity of 45,000 machine hours. Required Calculate the under-/over-absorbed overhead, and note the reasons for the under-/over-absorption in the following circumstances. (a) (b) (c) Actual overheads cost $170,000 and 45,000 machine hours were worked. Actual overheads cost $180,000 and 40,000 machine hours were worked. Actual overheads cost $170,000 and 40,000 machine hours were worked. Answer The overhead recovery rate is $180,000/45,000 = $4 per machine hour. (a) Actual overhead Absorbed overhead (45, 000 ? $4) Over-absorbed overhead $ 170,000 180,000 10,000Reason: Actual and budgeted machine hours are the same but actual overheads cost less than expected. (b) Actual overhead Absorbed overhead (40,000 ? $4) Under-absorbed overhead $ 180,000 160,000 20,000 Reason: Budgeted and actual overhead costs were the same but fewer machine hours were worked than expected. $ (c) Actual overhead 170,000 160,000 Absorbed overhead (40,000 ? $4) Under-absorbed overhead 10,000 Reason: A combination of the reasons in (a) and (b). 10 1: Costing ? Part A Specialist cost and management accounting techniques 5 Marginal costing FAST FORWARD In marginal costing, inventories are valued at variable production cost whereas in absorption costing they are valued at their full production cost.Marginal cost is the cost of one unit of a product/service which could be avoided if that unit were not produced/provided. Contribution is the difference between sales revenue and variable (marginal) cost of sales. Margi nal costing is an alternative to absorption costing. Only variable costs (marginal costs) are charged as a cost of sales. Fixed costs are treated as period costs and are charged in full against the profit of the period in which they are incurred. Knowledge brought forward from earlier studies Key terms Marginal costing †¢ In marginal costing, closing inventories are valued at marginal (variable) production cost whereas, in absorption costing, inventories are valued at their full production cost which includes absorbed fixed production overhead.If the opening and closing inventory levels differ, the profit reported for the accounting period under the two methods of cost accumulation will therefore be different. But in the long run, total profit for a company will be the same whichever is used because, in the long run, total costs will be the same by either method of accounting. Different accounting conventions merely affect the profit of individual periods. †¢ †¢ Quest ion Absorption and marginal costing A company makes and sells a single product. At the beginning of period 1, there are no opening inventories of the product, for which the variable production cost is $4 and the sales price $6 per unit.Fixed costs are $2,000 per period, of which $1,500 are fixed production costs. Normal output is 1,500 units per period. In period 1, sales were 1,200 units, production was 1,500 units. In period 2, sales were 1,700 units, production was 1,400 units. Required Prepare profit statements for each period and for the two periods in total using both absorption costing and marginal costing. Answer It is important to notice that although production and sales volumes in each period are different, over the full period, total production equals sales volume. The total cost of sales is the same and therefore the total profit is the same by either method of accounting.Differences in profit in any one period are merely timing differences which cancel out over a longe r period of time. Part A Specialist cost and management accounting techniques ? 1: Costing 11 (a) Absorption costing. The absorption rate for fixed production overhead is $1,500/1,500 units = $1 per unit. The fully absorbed cost per unit = $(4+1) = $5. $ Sales Production costs Variable Fixed Add opening inventory b/f Less closing inventory c/f Production cost of sales Under-absorbed o/hd Total costs Gross profit Other costs Net profit (300? $5) (300? $5) Period 1 $ 7,200 $ Period 2 $ 10,200 Total $ $ 17,400 6,000 1,500 7,500 – 7,500 1,500 6,000 – 6,000 1,200 (500) 700 5,600 1,400 7,000 1,500 8,500 – 8,500 100 8,600 1,600 (500) 1,100 1,600 2,900 14,500 1,500 16,000 1,500 14,500 100 14,600 2,800 (1,000) 1,800 (b) Marginal costing The marginal cost per unit = $4. Sales Variable production cost Add opening inventory b/f Less closing inventory c/f Variable prod. cost of sales Contribution Fixed costs Profit Period 1 $ 7,200 6,000 – 6,000 1,200 4,800 2,400 2,00 0 400 $ Period 2 $ 10,200 5,600 1,200 6,800 – 6,800 3,400 2,000 1,400 $ Total $ 11,600 1,200 12,800 1,200 11,600 5,800 4,000 1,800 $ 17,400 (300? $4) (300? $4) Question Direct labour Direct materials Production overhead Standard production cost per unit 3 hours at $6 per hour 4 kilograms at $7 per kg Variable Fixed Marginal and absorption costing $ 18 28 3 20 69RH makes and sells one product, which has the following standard production cost. Normal output is 16,000 units per annum. Variable selling, distribution and administration costs are 20 per cent of sales value. Fixed selling, distribution and administration costs are $180,000 per annum. There are no units in finished goods inventory at 1 October 20X2. The fixed overhead expenditure is spread evenly throughout the year. The selling price per unit is $140. Production and sales budgets are as follows. Six months ending Six months ending 31 March 20X3 30 September 20X3 Production 8,500 7,000 Sales 7,000 8,000 12 1: Costing ? Part A Specialist cost and management accounting techniquesRequired Prepare profit statements for each of the six-monthly periods, using the following methods of costing. (a) (b) Marginal costing Absorption costing Answer (a) Profit statements for the year ending 30 September 20X3 Marginal costing basis Six months ending 31 March 20X3 $'000 $'000 Sales at $140 per unit 980 Opening inventory – Std. variable prod. cost (at $49 per unit) 416. 5 416. 5 Closing inventory (W1) 73. 5 343 637 Variable selling and so on costs 196 Contribution 441 Fixed costs: production (W2) 160 selling and so on 90 250 Net profit 191 Profit statements for the year ending 30 September 20X3 Absorption costing basis Six months ending 31 March 20X3 $'000 $'000 Sales at $140 per unit 980 Opening inventory – Std. cost of prod. at $69 per unit) Closing inventory (W1) (Over-)/under-absorbed overhead (W3) Gross profit Selling and so on costs Variable Fixed Net profit 586. 5 586. 5 103. 5 483. 0 (10. 0) 473 507 196 90 286 221 224 90 314 234 Six months ending 30 September 20X3 $'000 $'000 1,120 73. 5 343. 0 416. 5 24. 5 392 728 224 504 160 90 250 254 (b) Six months ending 30 September 20X3 $'000 $'000 1,120 103. 5 483. 0 586. 5 34. 5 552. 0 20. 0 572 548 Part A Specialist cost and management accounting techniques ? 1: Costing 13 Workings 1 Opening inventory Production Sales Closing inventory Marginal cost valuation (? $49) Absorption cost valuation (? $69) 2 3 Normal output (16,000 ? 2) Budgeted output Difference ? std. ixed prod. o/hd per unit (Over-)/under-absorbed overhead Six months ending 31 March 20X3 Units – 8,500 8,500 7,000 1,500 $73,500 $103,500 Six months ending 30 September 20X3 Units 1,500 7,000 8,500 8,000 500 $24,500 $34,500 Budgeted fixed production o/hd = 16,000 units ? $20 = $320,000 pa = $160,000 per six months Six months ending 31 March 20X3 8,000 units units 8,500 500 units ? $20 ($10,000) Six months ending 30 September 20X3 8,000 units 7,000 units 1, 000 units ? $20 $20,000 6 Absorption costing and marginal costing compared FAST FORWARD If opening and closing inventory levels differ profit reported under the two methods will be different.In the long run, total profit will be the same whatever method is used. 6. 1 Reconciling the profit figures given by the two methods The difference in profits reported under the two costing systems is due to the different inventory valuation methods used. (a) If inventory levels increase between the beginning and end of a period, absorption costing will report the higher profit because some of the fixed production overhead incurred during the period will be carried forward in closing inventory (which reduces cost of sales) to be set against sales revenue in the following period instead of being written off in full against profit in the period concerned.If inventory levels decrease, absorption costing will report the lower profit because as well as the fixed overhead incurred, fixed production ov erhead which had been carried forward in opening inventory is released and is also included in cost of sales. (b) 6. 2 Example: Reconciling profits The profits reported for period 1 in the question on page 11 would be reconciled as follows. Marginal costing profit Adjust for fixed overhead in inventory (inventory increase of 300 units ? $1 per unit) Absorption costing profit $ 400 300 700 Exam focus point Remember that if opening inventory values are greater than closing inventory values, marginal costing shows the greater profit. 14 1: Costing ?Part A Specialist cost and management accounting techniques 6. 3 Marginal versus absorption costing: reporting to management FAST FORWARD Marginal costing is more useful for decision-making purposes, but absorption costing is needed for financial reporting purposes to comply with accounting standards. We know that the reported profit in any period is likely to differ according to the costing method used, but does one method provide a more re liable guide to management about the organisation's profit position? With marginal costing, contribution varies in direct proportion to the volume of units sold. Profits will increase as sales volume rises, by the amount of extra contribution earned.Since fixed cost expenditure does not alter, marginal costing gives an accurate picture of how a firm's cash flows and profits are affected by changes in sales volumes. With absorption costing, in contrast, there is no clear relationship between profit and sales volume, and as sales volume rises the total profit will rise by the sum of the gross profit per unit plus the amount of overhead absorbed per unit. Arguably this is a confusing and unsatisfactory method of monitoring profitability. If sales volumes are the same from period to period, marginal costing reports the same profit each period (given no change in prices or costs). In contrast, using absorption costing, profits can vary with the volume of production, even when the volume of sales is constant.Using absorption costing there is therefore the possibility of manipulating profit, simply by changing output and inventory levels. 6. 4 Example: Manipulating profits Gloom Co budgeted to make and sell 10,000 units of its product in 20X1. The selling price is $10 per unit and the variable cost $4 per unit. Fixed production costs were budgeted at $50,000 for the year. The company uses absorption costing and budgeted an absorption rate of $5 per unit. During 20X1, it became apparent that sales demand would only be 8,000 units. The management, concerned about the apparent effect of the low volume of sales on profits, decided to increase production for the year to 15,000 units.Actual fixed costs were still expected to be $50,000 in spite of the significant increase in production volume. Required Calculate the profit at an actual sales volume of 8,000 units, using the following methods. (a) (b) Absorption costing Marginal costing Explain the difference in profits cal culated. Solution (a) Absorption costing Sales (8,000 ? $10) Cost of production (15,000 ? $9) Less: over-absorbed overhead (5,000 ? $5) $ 135,000 (25,000) (110,000) (30,000) 63,000 33,000 $ 80,000 Closing inventory (7,000 ? $9) Profit Part A Specialist cost and management accounting techniques ? 1: Costing 15 (b) Marginal costing Sales Cost of sales Cost of production (15,000 ? $4) Closing inventory (7,000 ? $4) Contribution Fixed costs Loss $ $ 80,000 0,000 ((28,000) 32,000 48,000 50,000 (2,000) The difference in profits of $35,000 is explained by the difference in the increase in inventory values (7,000 units ? $5 of fixed overhead per unit). With absorption costing, the expected profit will be higher than the original budget of $10,000 (10,000 units ? ($10 – 9)) simply because $35,000 of fixed overheads will be carried forward in closing inventory values. By producing to absorb overhead rather than to satisfy customers, inventory levels will, of course, increase. Unless th is inventory is sold, however, there may come a point when production has to stop and the inventory has to be sold off at lower prices.Marginal costing would report a contribution of $6 per unit, or $48,000 in total for 8,000 units, which fails to cover the fixed costs of $50,000 by $2,000. The argument above is not conclusive, however, because marginal costing is not so useful when sales fluctuate from month to month because of seasonal variations in sales demand, but production per month is held constant in order to arrange for an even flow of output (and thereby prevent the cost of idle resources in periods of low demand and overtime in periods of high demand). Question Absorption v marginal costing A clothing manufacturer makes a specific brand of jeans which it sells at a standard price of $100 per pair. The manufacturer’s costs are as follows.Standard variable production cost: $16 per pair Total fixed production cost per month: $240,000 (10,000 pairs are planned to be p roduced per month) Total fixed non-production costs: $300,000 per month In Month 1, when the opening inventory is 1,000 pairs, production of 10,000 pairs is planned and sales of 8,000 pairs are expected. In Month 2, sales are planned to be 9,000 pairs and production is still 10,000 pairs. Required (a) What would be the net profit for Months 1 and 2 under (i) (ii) (b) Absorption costing Marginal costing What comments could you make about the performance of this business? 16 1: Costing ? Part A Specialist cost and management accounting techniques Answer (a) Absorption standard cost per unit = $16 + 240,000/10,000 = $40 Absorption costing Month 1 Month 2 $’000 $’000 $’000 $’000 800 900 Marginal costing Month 1 Month 2 $’000 $’000 $’000 $’000 800 900Sales 8,000 @$100 Cost of sales Opening inventory (1,000 @ $40) Production (10,000 @ $40) Less: closing inventory* (3,000 @ $40) Gross profit Contribution Less other costs Fixed product ion Fixed non-production 40 400 (120) (320) 480 120 400 (160) (360) 540 1,000 @ $16 10,000 @ $16 3,000 @ $16 16 160 (48) (128) 672 (240) (300) 48 160 (64) (144) 756 (240) (300) (300) 180 (300) 240 (540) 132 (540) 216 * Closing inventory = 1,000 + 10,000 – 8,000 (b) The absorption costing net profit is higher than the marginal costing net profit in both months because inventories are rising. Under absorption costing, where inventories are increasing, a greater amount of the fixed production cost is carried forward n the closing inventory valuation than was brought forward in the opening inventory valuation. This means that the impact of these costs on profit is delayed under absorption costing. Under marginal costing, the full impact of the fixed production costs on profit is immediate. The business is profitable and sales have increased. However, a build up of inventories in the clothing manufacturing industry is unwise as demand is subject to tastes and fashion. The business needs to respond rapidly to changes in demand or it will become rapidly uncompetitive. Part A Specialist cost and management accounting techniques ? 1: Costing 17 Chapter Roundup †¢ †¢ Costing is the process of determining the costs of products, services or activities.Indirect costs, or overheads, are costs incurred in making a product or providing a service, but which cannot be traced directly to the product or service. Absorption costing is a means of incorporating a fair share of these costs into the cost of a unit of product or service provided. Absorption costing is a traditional approach to dealing with overheads, involving three stages: allocation, apportionment and absorption. Apportionment has two stages, general overhead apportionment and service department cost apportionment. After apportionment, overheads are absorbed into products using an appropriate absorption rate based on budgeted costs and budgeted activity levels. Under-/over-absorbed overhead occurs wh en overheads incurred do not equal overheads absorbed.In marginal costing, inventories are valued at variable production cost whereas in absorption costing they are valued at their full production cost. If opening and closing inventory levels differ profit reported under the two methods will be different. In the long run, total profit will be the same whatever method is used. †¢ Marginal costing is more useful for decision-making purposes, but absorption costing is needed for financial reporting purposes to comply with accounting standards. †¢ †¢ †¢ †¢ †¢ †¢ 18 1: Costing ? Part A Specialist cost and management accounting techniques Quick Quiz 1 Here are some terms you should have encountered in your earlier studies. Match the term to the definition.Terms Direct cost Prime cost Overhead Classification by function Fixed cost Variable cost Product cost Avoidable cost Controllable cost Relevant cost Cost centre Cost unit (b) (c) (d) (e) (f) (g) (h) (i ) (j) (k) (l) 2 3 Definitions (a) Specific costs of, say, an activity, which would not be incurred if the activity did not exist Total of direct costs Future cash flow which will be changed as the result of a decision Product produced by an organisation Dividing costs into production, administration, selling and distribution, research and development and financing costs Cost that can be traced in full to whatever is being costed Organisation's departments A cost that varies with the level of output A cost that is incurred in the course of making a product but which cannot be traced directly and in full to the product Cost that is incurred for a particular period of time and which, within certain activity levels, is unaffected by changes in the level of activity Cost identified with goods produced or purchased for resale and initially included in the value of inventory Cost which can be influenced by management decisions and actions †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢ € ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ is the process of determining the costs of products, activities or services. How is an overhead absorption rate calculated? A B C D Estimated overhead ? actual activity level Estimated overhead ? budgeted activity level Actual overhead ? actual activity level Actual overhead ? budgeted activity level 4 Over absorption means that the overheads charged to the cost of sales are greater than the overheads actually incurred. True False 5Fill in the blanks in the statements about marginal costing and absorption costing below. (a) (b) If inventory levels †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ between the beginning and end of a period, absorption costing will report the higher profit. If inventory levels decrease, †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ costing will report the lower profit. 6 Fill in the following blanks with either ‘marginal' or ‘absorption'. (a) (b) (c) (d) (e) Using †¦Ã¢â‚ ¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ costing, profits can be manipulated simply by changing output and inventory levels. Fixed costs are charged in full against the profit of the period in which they are incurred when †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ costing is used. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ costing fails to recognise the importance of working to full capacity. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ costing could be argued to be preferable to †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ costing in management accounting in order to be consistent with the requirements of accounting standards. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ costing should not be used when decision-making information is required. Part A Specialist cost and management accounting techniques ? 1: Costing 19 Answers to Quick Quiz 1 Direct cost Prime cost Overhead Classification by function Fixed co st Variable cost Product cost Avoidable cost Controllable cost Relevant cost Cost centre Cost unit Costing B True (a) (b) (a) (b) (c) (d) (e) Increase Absorption absorption marginal marginal absorption, marginal absorption (f) (b) (i) (e) (j) (h) (k) (a) (l) (c) (g) (d) 2 3 4 5 6 Now try the questions below from the Exam Question Bank Number Q1Level Introductory Marks 10 Time 18 mins 20 1: Costing ? Part A Specialist cost and management accounting techniques Activity based costing Topic list 1 Activity based costing 2 Absorption costing versus ABC 3 Merits and criticisms of ABC Syllabus reference A1 (a), (b) A1 (c) A1 (c) Introduction Chapter 2 covers Part A of the syllabus, specialist cost and management accounting techniques. It has been divided into five sub-chapters to reflect the examiner's emphasis that all five techniques are equally important and equally examinable. In this chapter we will be looking at the first alternative method of cost accumulation, activity based costin g (ABC).ABC is a modern alternative to absorption costing which attempts to overcome the problems of costing in a modern manufacturing environment. If you want to get free study material of CAT, ACCA, CIMA, CFA, CIA visit : freefor911. wordpress. com 21 Study guide Intellectual level A1 (a) (b) (c) Activity based costing Identify appropriate cost drivers under ABC Calculate costs per driver and per unit using ABC Compare ABC and traditional methods of overhead absorption based on production units, labour hours or machine hours 1 2 2 Exam guide There was a question on ABC in the Pilot Paper for F5. It was also examined in June 2008 and June 2010 and is therefore a crucial topic to understand. 1 Activity based costing FAST FORWARD /08, 6/10 An alternative to absorption costing is activity based costing (ABC). ABC involves the identification of the factors (cost drivers) which cause the costs of an organisation's major activities. Support overheads are charged to products on the basis of their usage of an activity. †¢ †¢ For costs that vary with production level in the short term, the cost driver will be volume related (labour or machine hours). Overheads that vary with some other activity (and not volume of production) should be traced to products using transaction-based cost drivers such as production runs or number of orders received. 1. 1 Reasons for the development of ABCThe traditional cost accumulation system of absorption costing was developed in a time when most organisations produced only a narrow range of products (so that products underwent similar operations and consumed similar proportions of overheads). And overhead costs were only a very small fraction of total costs, direct labour and direct material costs accounting for the largest proportion of the costs. The benefits of more accurate systems for overhead allocation would probably have been relatively small. In addition, information processing costs were high. In recent years, however , there has been a dramatic fall in the costs of processing information.And, with the advent of advanced manufacturing technology (AMT), overheads are likely to be far more important and in fact direct labour may account for as little as 5% of a product's cost. It therefore now appears difficult to justify the use of direct labour or direct material as the basis for absorbing overheads or to believe that errors made in attributing overheads will not be significant. Many resources are used in non-volume related support activities, (which have increased due to AMT) such as setting-up, production scheduling, inspection and data processing. These support activities assist the efficient manufacture of a wide range of products and are not, in general, affected by changes in production volume.They tend to vary in the long term according to the range and complexity of the products manufactured rather than the volume of output. The wider the range and the more complex the products, the more support services will be required. Consider, for example, factory X which produces 10,000 units of one product, the Alpha, and factory Y which produces 1,000 units each of ten slightly different versions of the Alpha. Support activity costs in the factory Y are likely to be a lot higher than in factory X but the factories produce an identical number of units. For example, factory X will only need to set-up once whereas Factory Y will have to set-up the 22 2a: Activity based costing ?Part A Specialist cost and management accounting techniques production run at least ten times for the ten different products. Factory Y will therefore incur more set-up costs for the same volume of production. Traditional costing systems, which assume that all products consume all resources in proportion to their production volumes, tend to allocate too great a proportion of overheads to high volume products (which cause relatively little diversity and hence use fewer support services) and too small a pr oportion of overheads to low volume products (which cause greater diversity and therefore use more support services). Activity based costing (ABC) attempts to overcome this problem. 1. Definition of ABC Key term Activity based costing (ABC) involves the identification of the factors which cause the costs of an organisation's major activities. Support overheads are charged to products on the basis of their usage of the factor causing the overheads. The major ideas behind activity based costing are as follows. (a) (b) (c) Activities cause costs. Activities include ordering, materials handling, machining, assembly, production scheduling and despatching. Producing products creates demand for the activities. Costs are assigned to a product on the basis of the product's consumption of the activities. 1. 3 Outline of an ABC systemAn ABC system operates as follows. Step 1 Step 2 Key term Identify an organisation's major activities. Identify the factors which determine the size of the costs of an activity/cause the costs of an activity. These are known as cost drivers. A cost driver is a factor which causes a change in the cost of an activity. Look at the following examples. Costs Ordering costs Materials handling costs Production scheduling costs Despatching costs Possible cost driver Number of orders Number of production runs Number of production runs Number of despatches Step 3 Step 4 Collect the costs associated with each cost driver into what are known as cost pools.Charge costs to products on the basis of their usage of the activity. A product's usage of an activity is measured by the number of the activity's cost driver it generates. Question Which of the following definitions best describes a cost driver? A B C D Any activity which causes an increase in costs A collection of costs associated with a particular activity A cost that varies with production levels Any factor which causes a change in the cost of an activity Cost driver Part A Specialist cost and mana gement accounting techniques ? 2a: Activity based costing 23 Answer D Any factor which causes a change in the cost of an activity. Exam focus pointABC is a popular exam topic. Questions on activity based costing often require a comparison with more traditional methods. The implications for the business of each approach is often required. 2 Absorption costing versus ABC 6/08, 6/10 The following example illustrates the point that traditional cost accounting techniques result in a misleading and inequitable division of costs between low-volume and high-volume products, and that ABC can provide a more meaningful allocation of costs. 2. 1 Example: Activity based costing Suppose that Cooplan manufactures four products, W, X, Y and Z. Output and cost data for the period just ended are as follows.Number of production runs in the Material cost Direct labour Machine Output units period per unit hours per unit hours per unit $ W 10 2 20 1 1 X 10 2 80 3 3 Y 100 5 20 1 1 80 3 3 Z 100 5 14 Direct labour cost per hour $5 Overhead costs Short run variable costs Set-up costs Expediting and scheduling costs Materials handling costs Required Prepare unit costs for each product using conventional costing and ABC. $ 3,080 10,920 9,100 7,700 30,800 Solution Using a conventional absorption costing approach and an absorption rate for overheads based on either direct labour hours or machine hours, the product costs would be as follows. W $ 200 50 700 950 10 $95 X $ 800 150 2,100 3,050 10 $305 Y $ 2,000 500 7,000 9,500 100 $95 Z $ 8,000 1,500 21,000 30,500 100 $305 Total $ Direct material Direct labour Overheads * Units produced Cost per unit 4,000 * $30,800 ? 440 hours = $70 per direct labour or machine hour. 24 2a: Activity based costing ? Part A Specialist cost and management accounting techniques Using activity based costing and assuming that the number of production runs is the cost driver for setup costs, expediting and scheduling costs and materials handling costs and that machi ne hours are the cost driver for short-run variable costs, unit costs would be as follows. W $ 200 50 70 1,560 1,300 1,100 4,280 10 $428 X $ 800 150 210 1,560 1,300 1,100 5,120 10 $512 Y $ 2,000 500 700 3,900 3,250 2,750 13,100 100 $131 Z $ 8,000 1,500 2,100 3,900 3,250 2,750 21,500 100 $215 Total $Direct material Direct labour Short-run variable overheads (W1) Set-up costs (W2) Expediting, scheduling costs (W3) Materials handling costs (W4) Units produced Cost per unit Workings 1 2 3 4 $3,080 ? 440 machine hours = $10,920 ? 14 production runs = $9,100 ? 14 production runs = $7,700 ? 14 production runs = Conventional costing unit cost $ 95 305 95 305 44,000 $7 per machine hour $780 per run $650 per run $550 per run ABC unit cost $ 428 512 131 215 Difference per unit $ + 333 + 207 + 36 – 90 Difference in total $ +3,330 +2,070 +3,600 –9,000 Summary Product W X Y Z (a) (b) The figures suggest that the traditional volume-based absorption costing system is flawed.It underal locates overhead costs to low-volume products (here, W and X) and over-allocates overheads to higher-volume products (here Z in particular). It underallocates overhead costs to smaller-sized products (here W and Y with just one hour of work needed per unit) and over allocates overheads to larger products (here X and particularly Z). 2. 2 ABC versus traditional costing methods Both traditional absorption costing and ABC systems adopt the two stage allocation process. 2. 2. 1 Allocation of overheads ABC establishes separate cost pools for support activities such as despatching. As the costs of these activities are assigned directly to products through cost driver rates, reapportionment of service department costs is avoided. 2. 2. Absorption of overheads The principal difference between the two systems is the way in which overheads are absorbed into products. (a) (b) Absorption costing most commonly uses two absorption bases (labour hours and/or machine hours) to charge overheads to p roducts. ABC uses many cost drivers as absorption bases (eg number of orders or despatches). Absorption rates under ABC should therefore be more closely linked to the causes of overhead costs. Part A Specialist cost and management accounting techniques ? 2a: Activity based costing 25 2. 3 Cost drivers The principal idea of ABC is to focus attention on what causes costs to increase, ie the cost drivers. a) The costs that vary with production volume, such as power costs, should be traced to products using production volume-related cost drivers, such as direct labour hours or direct machine hours. Overheads which do not vary with output but with some other activity should be traced to products using transaction-based cost drivers, such as number of production runs and number of orders received. (b) Traditional costing

Free Essays on Integration Of Web And TV

Contents EXECUTIVE SUMMARY 4 1.0 INTRODUCTION 5 2.0 TECHNOLOGY OVERVIEW 5 3.0 TECHNOLOGY APPLICATIONS 12 4.0 TECHNOLOGY IMPLEMENTATION ERROR! BOOKMARK NOT DEFINED. 5.0 TECHNOLOGY EVALUATION 15 6.0 TECHNOLOGY PROJECTIONS 18 APPENDIX A - SUBJECT INDEX 22 BIBLIOGRAPHY 24 Executive Summary Purpose Methods Results Conclusions Evaluation – how feasible is the iTV, potential usage (all the possible applications), impact on business organizations. 1.0 INTRODUCTION The integration of web and television technologies is a complex issue - not necessarily for technical reasons but more so, because its evolution hinges greatly on a plethora of contributing technologies, companies, governments, and standards bodies on a global scale. For the purposes of this business report, we refer to the integration of web and television technologies as the evolution of Interactive Television (iTV). By definition, iTV attempts to bring the interactivity and personalisation of the web to the world of broadcast news and entertainment in television (Radha et al: 1998, p1). 2.0 STATUS OF ITV IN AUSTRALIA As with the rest of the world, Australia too is in the verge of developing interactive television (iTV). Australia’s major developers and providers of iTV are iTV|world, ICE Interactive (ICE) and Cable and Wireless Optus (CWO). iTV|world as of currently leads in developing and providing integrated technical and creative services, tools and products for the deployment of iTV (itvworld.com/press/press260401.html). As of October last year, Australia’s five main networks, ABC, SBS, Seven, Nine and Ten had agreed to adopt the European interactive platform, MHP (Multi Home Platform) which is based on Sun’s Java API (Application Program Interface) as the standard for iTV (http://australia.internet.com/r/article/jsp/sid/10059). Results from CWO reveal that main applications of iTV in Australia would be games, trivia and spo... Free Essays on Integration Of Web And TV Free Essays on Integration Of Web And TV Contents EXECUTIVE SUMMARY 4 1.0 INTRODUCTION 5 2.0 TECHNOLOGY OVERVIEW 5 3.0 TECHNOLOGY APPLICATIONS 12 4.0 TECHNOLOGY IMPLEMENTATION ERROR! BOOKMARK NOT DEFINED. 5.0 TECHNOLOGY EVALUATION 15 6.0 TECHNOLOGY PROJECTIONS 18 APPENDIX A - SUBJECT INDEX 22 BIBLIOGRAPHY 24 Executive Summary Purpose Methods Results Conclusions Evaluation – how feasible is the iTV, potential usage (all the possible applications), impact on business organizations. 1.0 INTRODUCTION The integration of web and television technologies is a complex issue - not necessarily for technical reasons but more so, because its evolution hinges greatly on a plethora of contributing technologies, companies, governments, and standards bodies on a global scale. For the purposes of this business report, we refer to the integration of web and television technologies as the evolution of Interactive Television (iTV). By definition, iTV attempts to bring the interactivity and personalisation of the web to the world of broadcast news and entertainment in television (Radha et al: 1998, p1). 2.0 STATUS OF ITV IN AUSTRALIA As with the rest of the world, Australia too is in the verge of developing interactive television (iTV). Australia’s major developers and providers of iTV are iTV|world, ICE Interactive (ICE) and Cable and Wireless Optus (CWO). iTV|world as of currently leads in developing and providing integrated technical and creative services, tools and products for the deployment of iTV (itvworld.com/press/press260401.html). As of October last year, Australia’s five main networks, ABC, SBS, Seven, Nine and Ten had agreed to adopt the European interactive platform, MHP (Multi Home Platform) which is based on Sun’s Java API (Application Program Interface) as the standard for iTV (http://australia.internet.com/r/article/jsp/sid/10059). Results from CWO reveal that main applications of iTV in Australia would be games, trivia and spo...