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NAME RAJA SOLEHUDDIN SHAH BIN RAJA TAUFIK IC. NO. 881226-08-5549 MATRIX NO. 881226085549001 EMAIL dean_roger88@yahoo.com TEL. NO 017-3083470 TUTOR YAMUNA RANI PALANIMALLY
The management accounts in the company uses a more non- manufacturing based accounts where the calculations might defer from a manufacturing company. Valuation of products are also more complex as the artwork and antics value differently to different set of buyers. Which means that these products do not have a fixed market value but depends on the eye of the beholder. This include price changes from purchase to auctions.
To prepare information for the manger to assist in planning and decision making To assist the manager in running and controlling the organisation To motivate the manager and staff in their work so as to strive for excellence and reach their goals To evaluate performance and divisions in an organisation.
The role of management accounting differs from that of public accounting, since management accountants work at the beginning of the value chain, supporting decision making, planning and control, while audit and tax functions involve checking the work after the fact. Management accountants are valued business partners, directly supporting an organization's strategic goals. With a renewed emphasis on good internal controls and sound financial reporting, the role of the management accountant is more important than ever.
It obviously takes more people to do the work than it does to check the work. In fact, of the five million finance function professionals in the U.S., more than 90% work inside organizations as management accountants and finance professionals. Some common job titles for management accountants in organizations of all sizes and structure include:
Staff Accountant Cost Accountant Senior Accountant Corporate or Division Planner Financial Analyst Budget Analyst Internal Auditor Finance Manager Controller Vice President, Finance Treasurer Chief Financial Officer (CFO) Chief Executive Officer (CEO)
Cost classifications
According to management accounting, cost can be classified into several categories according to the context where the cost is used. The purpose of classifying cost is so that accurate decisions can be made by considering the correct cost category. Cost classification is important because different objectives require different types or class of costs. In general, cost can be classified in four categories;
Fixed cost is the cost that does not vary with production level. At Global Persepsi, fixed cost is the showroom that the art and antiques are being kept in. The cost are fixed as the location is permanently own by the organization. Variable cost that varies according to changes in production units or activity units. As Global Persepsi does not manufacture any good but instead buy and sell already made art, therefore the variable costs usual consists of the cost of transferring and transporting the product in a per artwork basis.
Mixed cost is the cost that contains components of fixed cost and variable cost. According to Global Persepsi, this cost does not apply to their organization as their fixed and variable cost are two separate costs.
A manufacturing operation that processes raw materials to finished goods. A nonmanufacturing can be divided into two, which are commercial operation that carries out the activity of buying and selling, and a service operation that provides a service to others. Since Global Persepsi in not a manufacturing company, it falls into the non-manufacturing operation category, more specifically the commercial operation.
Manufacturing cost is the same as production cost, that is, the cost involved in making a product or finished. But since Global Persepsi is not a manufacturing organization as mentioned earlier, this cost is irrelevant to the subject. Non-manufacturing cost is like the cost of traded goods for a commercial firm, marketing cost and administrative cost. The cost of traded goods is the cost of obtaining the goods for resale. Marketing cost is divided into sales and administrative costs. Administrative cost is the cost of running the operations of an organization. This can be applied to Global Persepsi, as they do obtain artworks for resale and this is included in their overall costs.
Product cost
Period cost
Product cost is the cost that is provided directly to the product. At Global Persepsi, the product price during purchase of the artworks usually differs from the price that it is being sold during auctioning. There marked up price is then considered as product cost + profit.
Period cost is the cost that is charged as an expense in the in the period it occurs and this cost is not inventories. Period cost in Global Persepsi is usually the cost of preserving the artworks in the showroom before it's being auctioned. This could include lighting bills and air conditioning.
Product costing has undergone a dramatic metamorphosis in America over the past 50 years, as Textile World's Frank Wilson noted: "In the 1940s, cost estimates normally included nothing more than total manufacturing costs. In the late '50s direct costing was implemented to separate variable [cost of materials, cost of transportation] and fixed [interest payments on equipment and facilities, rent, property taxes, executive salaries] costs." Indeed, Lessner remarked that "fifty years ago, when manufacturing was far less automated than it is today, the costs of materials, labor and overhead were just about evenly divided. Now, production of a product's various components is often so synchronized on highly automated production lines that there is little or no need to maintain component inventories; thus, the old costing formulas, still used by many industries, are no longer applicable. Further complicating the costing equation is the trend in manufacturing to focus more attention on quality, flexibility and responsiveness, to meet customer needs. This makes production-line cost analysis more difficult because each line requires small, but significant, changes in production techniques." As a result,
today's managers and business owners have found that the limited information available through older job costing methods is inadequate for making informed decisions in the contemporary business environment. With this in mind, companies have increasingly turned to detailed, long-range examinations that provide a more accurate representation of a product's true costs and benefits. "Companies are discovering that their competitiveness is enhanced when purchasing, manufacturing, logistics, and product design groups begin using total life cycle costing," wrote Joseph Cavinato in Chilton's Distribution. "Total life cycle cost recognizes that the purchase price of an item is only part of its total cost, just the beginning of a series of costs to be accumulated by the firm, its downstream customers, and users until the end of the product's life." This analysis is further enhanced when companies include suppliers/vendors in the process, because the costing process can help create a partnership relationship that enables both parties to move away from competitive stances on pricing, delivery dates, etc., toward cooperative initiatives that optimize the expense of creating and maintaining new products.
their services. After all, the services that they offer are in essence, their "product" line. "Banks, insurance companies, restaurants, airlines, law firms, hospitals, and city governments all record the costs of producing various services for the purposes of planning, cost control, and decision making," wrote Hilton. Therefore, this theory is aligned with Global Persepsi as a non- manufacturing organization. The inventory does not consist of raw materials but instead include finished artworks. However it's not as complex as the variety of raw materials found in the inventory of a manufacturing organization. Even so, the complexity lies in the different types of artwork that need individual costing that gives GPE the slight difference from other non manufacturing organizations.
Recommended solutions
As a non-manufacturing company, Global Persepsi is no different to other organization in the field. However, the nature of it's product inhibits the company to use conventional cost methods to evaluate the costing of it's products. Hence the accountant spend more time evaluating the value of the products to apply the figures into product costing. Because the products have no specific or permanent value , the accounts are often altered from time of purchase, during storage and finally after auctioned. Not much improvement can be done since this alone is the most efficient way to keep track of the costs involved.
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