Cost Accounting 1. B r e a k e v e n A n a l y s i s. S t r a t e g y I m p l e m e n t a t i o n B a l a n c e d S c o r e c a r d s

Cost Accounting 1 B r e a k e v e n A n a l y s i s S t r a t e g y I m p l e m e n t a t i o n B a l a n c e d S c o r e c a r d s S t r a t e g y M o n i t o r i n g R e s p o n s i b i l i t y S e g m e n t s C o s t A s s i g n m e n t A b s o r p t i o n ( F u l l ) v s. V a r i a b l e ( D i r e c t ) C o s t i n g H i g h - L o w M e t h o d 2A-1

NOTES 2A-2

S U M M A R Y N O T E S I. BREAKEVEN ANALYSIS 損 益 分 岐 点 分 析 Breakeven analysis determines the sales required (in dollars or units) to result in zero profit or loss from operations. After breakeven has been achieved, each additional unit sold will increase net income by the amount of the contribution margin per unit. 損 益 分 岐 点 分 析 は 利 益 ゼロ( 損 失 ゼロ)という 結 果 に 必 要 な 売 上 ( 金 額 あるいは 単 位 )を 決 定 す る 売 上 が 損 益 分 岐 点 を 超 えた 後 は 追 加 販 売 された1 単 位 ごとに 貢 献 利 益 の 金 額 が 純 利 益 を 増 加 させる 公 式 S : 売 上 高 S - VC - FC = OI OI : Operating income p n -v n -FC = OI VC: 変 動 費 S - αs -FC = OI FC: 固 定 費 α : 変 動 費 率 p: 販 売 単 価 n : 販 売 数 量 V: 単 位 あたり 変 動 費 BEP in dollars: S - VC - FC = 0 Target income: S - VC - FC = Target income Margin of safety (M/S) :Sales-BEP in sales A. Standard Formulas 基 準 公 式 1. Breakeven Point in Units 損 益 分 岐 点 販 売 量 Total fixed costs Breakeven point in units Contribution margin per unit 2. Breakeven Point in Dollars 損 益 分 岐 点 売 上 高 a. Multiply the breakeven units and the selling price per unit: 上 記 1で 計 算 された 損 益 分 岐 点 販 売 量 に 販 売 単 価 を 掛 けて 算 出 する Unit price Breakeven point in units Breakeven point in dollars b. Contribution margin ratio approach: 貢 献 利 益 率 アプローチでは 総 固 定 費 を 貢 献 利 益 率 で 割 って 損 益 分 岐 点 売 上 高 を 計 算 す る Total fixed costs Breakeven point in dollars Contribution margin ratio B. Required Sales for a Desired Profit 求 められる 利 益 に 必 要 な 売 上 高 Breakeven analysis can be extended to calculate the required sales to produce a desired net income by treating the desired net income as another fixed cost. 損 益 分 岐 点 分 析 は 必 要 な 純 利 益 をその 他 固 定 費 として 扱 うことで 必 要 な 売 上 高 の 計 算 が 出 来 る Total fixed cost + desired profit Required sales (units or $'s)= C/M % or C/M per unit 2A-3

C. Breakeven Chart 損 益 分 岐 点 チャート 2014 Edition Business Final Review D. Margin of Safety 安 全 余 裕 度 The margin of safety is the excess of sales over breakeven sales. 安 全 余 裕 度 は 損 益 分 岐 点 売 上 を 上 回 る 売 上 高 の 超 過 分 である 1. The margin of safety expressed in dollars is calculated as follows: 安 全 余 裕 度 は 以 下 のように 計 算 される Total sales in dollars Breakeven sales in dollars Margin of safety in dollars 2. The margin of safety can also be expressed as a percentage of sales: 安 全 余 裕 度 は 売 上 に 対 する 割 合 (%)として 表 すこともできる 2A-4

II. STRATEGY IMPLEMENTATION Balanced Scorecard 戦 略 実 施 バランススコアカード Strategy is often implemented through control processes. The balanced scorecard (generally a senior management or executive tool) is one such control mechanism that gathers information on multiple dimensions of an organization's performance defined by critical success factors necessary to accomplish firm strategy. Critical success factors can be classified within various categories and are commonly displayed as: 戦 略 はしばしば 管 理 プロセスを 通 して 実 行 される バランススコアカード( 一 般 的 にはシニアマネジメ ントあるはエグゼクティブ 向 けツール)はそのような 管 理 メカニズムの 一 つである それは 企 業 の 戦 略 を 達 成 するために 必 要 とされる 必 須 成 功 要 因 を 定 義 し 組 織 の 業 績 について 多 面 的 な 情 報 収 集 を 行 うツ ールである 必 須 の 成 功 要 因 は 様 々なカテゴリーに 分 類 可 能 で 一 般 的 に 以 下 のように 表 示 される A. Financial Performance 財 務 業 績 This category includes critical financial performance measures, such as current ratio or gross margin. このカテゴリーは 流 動 比 率 あるいは 粗 利 益 といった 必 須 の 財 務 業 績 評 価 を 含 む B. Internal Business Processes 内 部 ビジネスプロセス This category includes critical business process measures, such as through-put time. このカテゴリーは スループットタイム( 業 務 処 理 時 間 )といった 必 須 のビジネスプロセス 評 価 を 含 む C. Customer Satisfaction or Advancement of Innovation 顧 客 満 足 あるいは 革 新 の 向 上 This category includes critical customer satisfaction measures, such as customer retention. このカテゴリーは 顧 客 維 持 率 といった 必 須 の 顧 客 満 足 度 評 価 を 含 む D. Human Resource Development 人 材 開 発 This category includes critical human resource measures, such as employee retention, innovations, suggestions made and accepted, etc. このカテゴリーは 雇 用 維 持 率 実 施 された 革 新 の 数 提 案 され 実 施 された 提 案 の 数 のような 必 須 の 人 材 評 価 を 含 む III. STRATEGY MONITORING Responsibility Segments 戦 略 モニタリング 責 任 区 分 Responsibility segments, sometimes referred to as strategic business units (SBUs), are highly effective in establishing accountability for financial dimensions of the business. Performance reporting for each SBU measures their financial responsibility. SBUs are often subdivided into additional categories, including product lines, geographic areas, or customers. Specific SBU classifications include: 責 任 区 分 は 戦 略 的 事 業 単 位 とも 呼 ばれ 事 業 の 財 務 的 側 面 の 責 任 を 設 定 する 上 で とても 有 効 であ る 各 SBUの 実 績 報 告 はそれぞれの 財 務 責 任 を 測 定 する 手 段 となる SBUはしばしば 製 品 ライン 地 域 的 エリア あるいは 顧 客 を 含 めた 追 加 カテゴリーに 分 類 される 特 定 のSBU 分 類 は 以 下 を 含 む A. Cost SBU Managers are held responsible for controlling costs in a cost SBU. マネージャーは 費 用 管 理 に 責 任 を 負 う B. Revenue SBU Managers are held responsible for generating revenues in a revenue SBU. マネージャーは 収 益 に 責 任 を 負 う 2A-5

C. Profit SBU Managers are held responsible for producing a target profit (i.e., accountability for both revenue and costs) in a profit SBU. マネージャーは 目 標 利 益 の 達 成 に 責 任 を 負 う ( 例 収 益 と 費 用 の 両 方 の 責 任 ) D. Investment SBU Managers are held responsible for the return on the assets invested in an investment SBU. The return must be equal to or greater than the management minimum required rate of return. マネージャーは 資 産 の 投 資 効 果 に 責 任 を 負 う 投 資 利 益 は 最 少 必 要 利 益 率 と 同 等 あるいは それ 以 上 でなければならない 2A-6

IV. COST ASSIGNMENT Absorption (Full) vs. Variable (Direct) Costing コスト 配 分 全 部 原 価 計 算 VS 直 接 原 価 計 算 Absorption costing represents GAAP basis computations of gross profit, while variable (direct) costing develops contribution margins compatible with break-even analysis. 全 部 原 価 計 算 はGAAPベースでの 総 利 益 の 計 算 を 表 しており 直 接 原 価 計 算 は 損 益 分 岐 点 分 析 で 使 用 される 貢 献 利 益 の 計 算 に 使 用 される A. Absorption (Full Costing) Approach 全 部 原 価 計 算 アプローチ Absorption costing capitalizes fixed factory overhead as part of inventory in accordance with GAAP. Therefore, absorption costing includes direct materials, direct labor, and fixed and variable overhead. 全 部 原 価 計 算 は 固 定 製 造 間 接 費 を 在 庫 の 一 部 として 資 産 勘 定 に 計 上 する Revenue Less: Cost of goods sold Gross profit Less: Operating expenses Net income XXX ( XXX) XXX ( XXX) XXX B. Variable (Direct) Costing 直 接 原 価 計 算 In variable (direct) costing, only variable manufacturing costs (direct materials, direct labor, and variable factory overhead) are included in inventory. Fixed factory overhead is excluded from inventory and treated as a period cost: 直 接 原 価 計 算 は 変 動 製 造 費 用 ( 直 接 材 料 直 接 労 働 変 動 製 造 間 接 費 )のみ 棚 卸 資 産 勘 定 に 含 む 固 定 製 造 間 接 費 は 期 間 費 用 として 扱 う Sales Less: Variable costs Contribution margin Less: Fixed costs Net income XXX ( XXX) XXX ( XXX) XXX 2A-7

C. Income Effect 所 得 効 果 * Net income is higher under absorption costing because fixed manufacturing overhead cost is deferred in inventory as inventories increase. このケースでは 固 定 製 造 間 接 費 用 は 棚 卸 資 産 が 増 加 するにつ れて 繰 延 となるので 純 利 益 は 全 部 原 価 計 算 でより 高 くなる ** Net income is lower under absorption costing because fixed manufacturing overhead cost is released from inventory as inventories decrease. このケースでは 固 定 製 造 間 接 費 用 は 棚 卸 資 産 が 減 少 するにつれ て 費 用 計 上 されるので 純 利 益 は 全 部 原 価 計 算 でより 低 くなる V. HIGH-LOW METHOD 高 低 法 The high-low point method is used to estimate the fixed and variable portions of cost. It assumes that the differences between costs at the highest and lowest production levels are due directly to variable costs. Variable and fixed costs are calculated as follows: 高 低 法 は 固 定 費 と 変 動 費 の 見 積 もりに 使 用 される 最 高 の 生 産 量 レベルと 最 低 の 生 産 量 レベルにお ける 費 用 の 差 異 を 変 動 費 用 によるものと 仮 定 する 方 法 である A. Computation of Variable Cost per Unit 単 位 ごとの 変 動 コストの 計 算 Costs at high Costs at low Activities at high Activities at low Changes in costs Variable cost per unit Changes in activities B. Computation of Total Fixed Costs 合 計 固 定 費 用 の 計 算 Total cost (Variable cost per unit Activity) = Fixed costs 2A-8

NOTES 2A-9

M U L T I P L E - C H O I C E Q U E S T I O N S Q U E S T I O N 1 In Year 1, its first year of operations, Duke Manufacturing incurred the following costs when it produced 200,000 and sold 160,000 units of its only product, Blue: Manufacturing costs Fixed $360,000 Variable 320,000 Selling and admin costs Fixed 180,000 Variable 80,000 How much lower would Duke's net income for Year 1 have been if it had used variable costing instead of absorption costing? 1. $72,000 2. $54,000 3. $68,000 4. $94,000 Q U E S T I O N 2 Presented below is the production data for the first six months of the year for mixed costs incurred by Mouton Corporation: Month Cost Units January $14,700 1,800 February 15,200 1,900 March April 13,700 14,000 1,700 1,600 May 14,300 1,500 June 13,100 1,300 July 12,800 1,100 August 14,600 1,500 Mouton Corporation uses the high-low method to analyze mixed costs. Variable cost per unit and fixed cost are respectively: VC FC 1. $1.00 $13,100 2. $3.00 $9,500 3. $1.00 $12,800 4. $2.00 $15,200 2A-10

Q U E S T I O N 3 William Company is experiencing profit problems and is analyzing its manufacturing cost behavior, which it does not really understand. Which of the following statements is/are correct with respect to cost volume profit analysis? I. An assumption of cost volume profit analysis is that all costs behave in a nonlinear fashion in relation to production. II. An assumption of cost volume profit analysis is that selling prices vary no more than 10%, up or down, within the relevant range of William's production. III. Contribution margin is defined as revenue less fixed costs. 1. I, II, and III are correct. 2. I only is correct. 3. II and III only are correct. 4. None of the listed choices are correct. Q U E S T I O N 4 Lampassas Corporation manufactures product Lam at its manufacturing facility. At annual sales of $900,000 for Year 1, product Lam had the following unit sales price and costs: Sales price $ 20 Prime cost 6 Manufacturing overhead: Variable 1 Fixed 7 Selling & administrative costs: Variable 1 Fixed 3 Profit $ 2 What was product Lam's breakeven point in dollars? 1. $500,000 2. $750,000 3. $630,000 4. $900,000 Q U E S T I O N 5 Belton Corporation is considering manufacturing and selling a new product. Based on potential sales of 1,000 units per year, the new product has estimated traceable costs of $1,200,000. What is the price that Belton must charge to obtain a 20% profit margin on sales? 1. $2,000 2. $1,200 3. $1,500 4. $1,000 2A-11

<SOLUTION> Question 1 Explanation Choice 1 is correct. In this question, they want to know what net income would have been for a company under both absorption costing and variable (or direct) costing. The company was in its first year of production, so there was no beginning inventory, but there was an ending inventory of 40,000 units (200,000-160,000). The difference between absorption costing and variable costing is in the treatment of fixed manufacturing costs. With absorption costing, fixed manufacturing costs are considered a product cost and are included in inventory; with variable costing, fixed manufacturing costs are considered period costs and are expensed in the period incurred. With either method, fixed selling and administrative costs are considered a period cost. In this question, fixed manufacturing costs were $360,000. Because 200,000 units were produced, fixed manufacturing cost per unit was $1.80 per unit ($360,000 / 200,000). 40,000 units remained in ending inventory, so the inventory cost attributable to the fixed manufacturing costs if absorption costing had been used would have been $72,000 ($1.80 x 40,000). This cost would have been expensed in Year 1 if variable costing had been used. Net income for Year 1 would thus have been $72,000 lower if variable costing had been used. Question 2 Explanation Choice 2 is correct. In this question, they want to know the cost function from a set of data for units and costs using the high-low method. The high level is the 1,900 units in February, and the low level is the 1,100 units in July. The costs for those months are $15,200 and $12,800. None of the other months are relevant because the high-low method uses only the high and low months. The slope of the line is the change in cost of $2,400 ($15,200 - $12,800) divided by the change in activity of 800 (1,900-1,100), or $3 per unit. The total cost of $15,200 less the variable cost of $5,700 for those units ($3 x 1,900), yields fixed cost of $9,500. 2A-12

Question 3 Explanation Choice 4 is correct. The question requires evaluation of the validity of a series of statements about cost volume profit analysis. "None of the above" is available if none of the statements are correct. Statement I says that an assumption of cost volume profit analysis is that all costs behave in a nonlinear fashion in relation to production. Actually, the assumption is that all costs behave in a linear, not nonlinear, fashion. Statement I is incorrect. Statement II says that an assumption of cost volume profit analysis is that selling prices vary no more than 10%, up or down, within the relevant range of William's production. Actually, the assumption is that selling prices are unchanged. Statement II is incorrect. Statement III says that contribution margin is defined as revenue less fixed costs. Contribution margin is actually defined as revenue less variable costs. Statement III is incorrect. Question 4 Explanation Choice 2 is correct. The question requires computation of the breakeven point in dollars for a product. Certain cost and other data are provided. Annual sales are $900,000, and the sales price is $20 per unit. That means 45,000 units were sold. $900,000 is one of the answers, but it cannot be the correct answer because there was a profit of $2 per unit and the question is asking for breakeven. On a unit basis, total fixed overhead was $10 ($7 $3). At 45,000 units, total fixed costs were $450,000. To determine the breakeven point, it is necessary to determine the variable cost per unit. Prime cost (direct materials and direct labor) is given, and so are variable overhead and variable selling and administrative costs. Total variable costs are thus $8 ($6 $1 $1). The breakeven equation for this question can be written as 20X 8X 450,000, where X is the units sold at the breakeven point. Solving for X produces 37,500 units at $20 per unit, or $750,000 ($20 37,500). Question 5 Explanation Choice 3 is correct. The question requires computation of the target price for a new product. Certain cost and other data are provided. Traceable costs are 80% of sales. If traceable costs are $1,200,000, sales are $1,500,000 ($1,200,000 /.80) and profit on sales is 20% ($1,500,000 - $1,200,000 = $300,000). If projected unit sales are 1,000 units, then the unit price would be $1,500. 2A-13

NOTES 2A-14