Advanced Decision Management: Advanced Cost Estimation Worksheet

Submitted By chicchicchic
Words: 3640
Pages: 15
Open Document
ACFI 3416 Advanced Decision Management

Marking Tutor: Ashok Patel

Content

1.0 Cost Estimation Worksheet 1

2.0 Rationale for the Amendments 3

2.1 Purchasing Overheads 3

2.2 Stores Overhead 3

2.3 Labour Overhead 3

2.4 Training &Retention Costs 4

2.5 General Overhead 4

3.0 Further processing of by-product from CardiAce-Q10 5

3.1 Increase in concentration of active ingredient from 15% to 25% 5

4.0 Costing system 6

4.1 Backgrounds of TAC & ABC 6

4.2 Differences between TAC, ABC and the costing system Duohelix Biolabs Ltd adopted 6

4.3 Standard Costing System and suitability of Duohelix Biolabs Ltd 7

5.0 Joint and By-product costing 8

5.1 Physical measurement method (PMM) 8

5.2 Relative sales value at the point of separation (RSV) 9

5.3 Notional sales value method (NSV) 9

2.0 Rationale for the Amendments

2.1 Purchasing Overheads

According to the cost review, it is accepted to recover 3.80% on the stocked material and 0.60% on the Just-in-time (JIT) material.

It is reasonable to separately recover purchasing cost on stored material and JIT material. An entity is more likely to spend more money and time to looking for the qualified material with fair price. The three different products consist different percentage of stocked material and JIT material spent. Therefore, it will bring more accuracy and fairness to the cost estimating system and avoid demotivation to the sales staffs.

It is also recommended in the cost review that the charge on JIT material will have an increase from 0.60% to 0.70% considering the legal cost incurred in the process of implementing annual purchase contracts. In order to allocation the cost, several problems have to be considered. Has the cost allocated to the accounting year it occurred or has the cost allocate to the following accounting year on a certain basis. If the cost has been taken into account to the accounting year when it incurred which is 20 months ago, it should be considered as an overhead already then. If it has been allocated to this year, the amount charge has to be negotiated and it will not be an increase of 0.10%.

2.2 Stores Overhead

It is suggested by the cost review that the handling cost was separated out from the total store overhead and charged on 0.80% separately. What is more, the stores overhead would be charged on a different basis with 18.00% on all stocked material and 6.00% on other material instead of recovering 9.40% on all stocked material.

It is more reasonable and accurate to separate the handling cost out with the recovery rate of 0.85% on both stocked material and JIT material since the stores overhead consist the handling cost of the two kinds of material. And the rest of the cost, which is exclusively related to the stocked material, will be allocated to it solely. Since the High Risk Material spends larger amount of money on insurance cost and inspection cost on the security system, it would be fairer to separate High Risk Material from the stocked material. In this case, the recovery rate for High Risk Material and other material should be 18.00% and 6.00% respectively instead of 9.40% charging on all material because of the insurance cost and inspection cost incurred due to the High Risk Material. However, it should be noted that part of the High Risk Material might be High Risk JIT material, which are issued within 2 hours, therefore, there is no insurance and inspection cost incurred. It will be more sensible to separate the High Risk JIT material out and work out the new recovery rate for the High Risk Material.

2.3 Labour Overhead

Under current costing system, labour overhead was recovered at a rate of 27% on total staff expenses. It is suggested by the cost review that labour overhead is recovered at 21.25% for the supervisory grades and 18.25% on other grades if the supervisory grade staffs out of the
Show More

Related Documents: Advanced Decision Management: Advanced Cost Estimation Worksheet

Essay on Costs and Total Cost

selling for $2 each. Total fixed costs are $4000 and total variable costs are $4000. 1) In the short-run this firm should A) shut down B) increase output produced C) stay in business D) unable to determine due to insufficient information 2) In the long-run this firm should A) shut down B) increase output produced C) stay in business D) unable to determine due to insufficient information 3) and 4) Initially, a perfectly competitive, constant cost industry, is in long run equilibrium…

Words 1402 - Pages 6

Essay on Costs and Cost Question

A cost estimating technique based on estimating individual work items and summing them to get a project total. Select one: a. Analogous Estimates b. Bottom-Up Estimates c. Definitive Estimate d. Parametric Estimate Question 2 Correct Mark 1.00 out of 1.00 Flag question Question text A document that describes how cost variances will be managed on the project Select one: a. Analogous Estimate b. Cost Management Plan c. Earned Value Management d. Estimate at Completion Question…

Words 910 - Pages 4

Midterm: Variable Cost and Cost Essay

such as research and development, product design, and distribution. B. Firms like Amazon are permitted to inventory shipping-out costs because those costs are key components of earning sales revenue. C. The following three costs all include direct labor as a component: product costs, manufacturing costs, conversion costs. D. The cost object determines which costs are direct and which are indirect. E. The firm’s mandatory managerial accounting reports are prepared according to Generally Accepted…

Words 2556 - Pages 11

Essay on Google: Cost and Cost Accounting

the cost behavior, i.e. the way costs change with the levels of activity. The answers to these questions are very much pertinent for a management accountant or a financial analyst since they are basic for a firm’s projections and profits which ultimately become the basis of all financial decisions. It is, therefore, necessary for a financial analyst to have a reasonably good working knowledge about the basic cost concepts and patterns of cost behavior. All these come within the ambit of cost accounting…

Words 485 - Pages 2

Cost Pool Cost Essay examples

Role of finance: plan for accuire and utilize resources to maximize the efficiency and value 4c’s ­ costs (cost must be continuosly monitored to ensure), cash (Business must have sufficient cash on hand to meet payment obligation), capital (Business must raise capitals), control (Must control their resources) Importance of Finance over Time: when most healthcare services organizations were reimbursed on the basis of costs incurred, the role of finance was secondary. Today however the finance functions has increased in importance…

Words 1097 - Pages 5

Cost Of College

With the high cost of college and student loans, people are left asking if college is still worth it. In most cases, college is not worth it in today's America due to the high cost, student loans, and amount of time required. There are cases where college is indeed worth it, but there are alternatives and it isn't worth it for the large majority of people as it is just not necessary. There are often better options today that are cheaper and require less time. In today's America, college is not worth…

Words 503 - Pages 3

Cost Of Education

The Cost Of Higher Education In today’s world it is nearly a necessity to go onto college to get a good paying job to support a family. With the average cost of college rising yearly it is becoming more difficult for a middle to lower class family to support one or more of their children going onto a higher level of education. Education, the exact definition according to the dictionary states that it is the process of receiving or giving systematic instruction, especially at a school or university…

Words 1097 - Pages 5

Opportunity Cost

1a.) Opportunity cost is best described by Pearson’s as, “The opportunity cost of any action is the value of what is given up-the next-highest-ranked alternative- because a choice was made” (Miller [30]). Before enrolling in this Economics course, I was unaware that there was an opportunity cost of every decision I make. Becoming aware of opportunity cost has rewired my way of thinking. If I want to go to Jiu-Jitsu, for example, I ask myself what is the cost of going tonight and is the best use of…

Words 1242 - Pages 5

The Cost Of Ww1

The Costs of WWII WWII went down as the deadliest war in history. Historians estimate that between thirty and sixty million soldiers lost their lives. Six million of those lives weren’t even fighting in the War. Throw in death camps because of what they believed in. Three hundred thousand Japanese were gone in a matter of seconds due to the destructive ability of the atomic bomb. In the Battle of Stalingrad alone, there were one million Soviet deaths. This war was more deadlier than WWI because…

Words 391 - Pages 2

The Cost Of Iphones

company foxconn and contributes according to the National Graduate Institute for Policy Studies in tokyo .8% $1.9 billion to the US trade deficit. It employs one million people. The iphone contributes to the chineese economy for sure. Consider the costs of the iphones “innovation” The factory workers, because that is all they are zero skill, work a minimum of 12 hours a day for around $400 maybe per month, wired magazine broke the story that 12 kill themselves every 3 months, to reduce their liability…

Words 605 - Pages 3