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Group 2 Valuation

This is about FBM AND ABM Accounting management systems

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Jacy Marie Ledesma
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17 views30 pages

Group 2 Valuation

This is about FBM AND ABM Accounting management systems

Uploaded by

Jacy Marie Ledesma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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BASIC MANAGEMENT

ACCOUNTING
CONCEPTS
Presented by Group 2
COST
ASSIGNMENT:
What is the
DIRECT TRACING,
relationship between
DRIVER TRACING
cost assignment and
AND ALLOCATION
management
accounting?
COST VS EXPENSES
what is
opportunity
cost?
COST OBJECTS
What is an
activity in
relation to cost
objects?
TRACEABILITY
1 2

Direct Indirect
Costs Costs
METHODS OF TRACING
1 Direct Tracing

2 Driver Tracing
ASSIGNING INDIRECT COSTS
ALLOCATION
COST
ASSIGNMENT
Accuracy and
SUMMARIZED
Allocation
COST ASSIGNMENT METHOD
PRODUCT AND SERVICE COSTS
TANGIBLE PRODUCTS
-are goods produce by converting
raw materials through the use of labor and
capital inputs, such as plant, land and
machinery.
- Manufacturing Organization

INTANGIBLE PRODUCTS
- are tasks or activities performed
for a customer or an activity performed by a
customer using an organization's products or
facilities
- Service Organization
INTERFACE OF SERVICES WITH MANAGEMENT ACCOUNTING
Product Cost
-is a cost assignment that supports a well-
specified managerial objective.

Internal Value Chain


-is the set of all activities required
to design, develop,produce, market distribute, and
service a product
INTERNAL VALUE CHAIN
PRODUCT COSTS AND EXTERNAL FINANCIAL REPORTING
Production costs
- are those costs associated with the manufacture
PRIME COST= DM+DL of goods or the provision of services.

Direct materials
- are those materials that are directly traceable
CONVERSION COST= to the goods or services being produced.
DL+OH
Direct labor
. -is labor that is directly traceable to the goods or
services being produced.
Overhead
. All production costs other than direct
materials and direct labor are lumped
into one category called overhead.
PRODUCT COSTS AND EXTERNAL FINANCIAL REPORTING

Nonproduction costs
-are those costs associated with the
functions of designing, developing, marketing,
distribution, customer service, and general
administration.

Divided into two general categories:


•Selling Costs noninventoriable or period costs.
•Administrative Costs
EXTERNAL
FINANCIAL
STATEMENTS
TO MEET EXTERNAL REPORTING
REQUIREMENTS, COSTS ARE CLASSIFIED
ACCORDING TO FUNCTION.

Production costs and selling


and administrative costs are
segregated.
Income Statement: Manufacturing Firm
Income Statement: Manufacturing Firm

Income statement follows the traditional format.

Income computed by following a functional


classification is frequently referred to as
absorption-costing (full-costing) income because
all manufacturing costs are fully assigned to the
product.
Two major functional categories of
expenses:

Cost of goods sold


Operating expenses
Cost of Goods Manufactured
Represents the total cost of goods completed
during the current period.
Income Statement: Service Organization

The cost of services sold is computed differently


from the cost of goods sold in a
manufacturing firm.

There are no beginning or ending finished goods


inventories.
Income Statement: Service Organization
TYPES OF
MANAGEMENT
ACCOUNTING
SYSTEMS
Functional-based
systems and Activity-based systems

Functional-based management (FBM) accounting systems


were in existence throughout the 1900s and are still widely
used in both manufacturing and service sectors.
Activity-based management (ABM)
are also used extensively, and their use is increasing—
particularly among organizations faced with product and
customer diversity, more product complexity, shorter
product life cycles, increased quality requirements, and
intense competitive pressures.
FBM VS ABM
ACCOUNTING SYSTEMS
1 Vertical Dimenstion
- describes how costs are assigned to cost
objects

2 Horizontal Dimension
- concerned with how the systems try to
improve operational efficiency and control
cost..
FBM MODEL ABM MODEL
FBM MODEL
These terms describe characteristics of
a traditional cost accounting system
and this focuces on the functional-
based costing.

FBM APPROACH

is to control assigned costs to


organizational units and then holds the
organizational unit manager responsible
for controlling the assigned costs.
ABM
APPROACH
ABM
ABM MODEL
MODEL
modern approach to cost accounting

focuses on the management of


activities with the objective of
improving the value received by the
customer and the profit received by
providing this value.
THANK
YOU
for your attention

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