Performance Mgt : PM (F5) | ACCA |Commerce|ACCAClasses|Cost

Define costing and distinguish direct costs from indirect costs using a jet manufacturing example; explain how overhead and support activities are allocated to determine true product cost.

Explore the concept of absorption costing, allocating direct costs and apportioning overhead across departments using a fair basis. Learn to absorb total costs into unit costs with practical steps.

Calculate the overhead absorption rate from budgeted overheads and activity, apply it to actual activity to obtain absorbed overheads, and adjust the cost of sales for over or under absorption.

Learn how marginal costing treats variable costs and opportunity costs, while fixed costs are written off as period expenses, not absorbed into unit cost.

Compare absorption costing and marginal costing by detailing a profit pro forma, including opening and closing inventory, variable costs, overhead absorption, and treatment of fixed costs.

Compare absorption costing and marginal costing using a two-period example from the BPP book, calculating inventories, overhead absorption, and net profit under each method.

Compare profits under absorption and marginal costing by tracing opening and closing inventories, variable costs, and overhead absorption, and explain how inventory levels affect the profit difference.

Master the concept of target costing and set a target selling price using features, competition, and market share. Derive the cost from price and margin to meet the profit.

Demonstrates target costing through a smartphone example: set a target selling price of 200 dollars, a 30 percent margin, and derive a target cost of 140 dollars to ensure profit.

Learn target costing by defining product specifications and a target selling price, then selecting a target profit margin to compute the target cost and reduce the cost gap.

The target cost gap is the difference between target and estimated cost. It uses 160 vs 140 to show a 20-dollar gap or zero gap and how to reduce it.

Identify ways to reduce the target cost gap without sacrificing quality, such as using cheaper inputs, more efficient labor, standardised components, and eliminating non-value features, tailored to the situation.

Explain how target costing applies to services only when services are homogeneous and standardized, despite challenges from heterogeneity, intangibility, inseparability, and no ownership transfer.

Apply life cycle costing to services, products, and construction projects to plan costs, compare with actuals, and manage project stages, revenue timing, and the customer lifecycle.

Analyze costs and revenues across the product life using lifecycle costing, from development to disposal, and identify profitability across development, production, growth, majority, and decline.

Explore lifecycle costing by dividing a product’s life into five stages—development, introduction, growth, maturity, and decline—and analyze how costs and revenues, marketing, and cost control shape profit.

Lifecycle costing uses market surveys to set selling price and budgeted units, estimates total costs from market research to disposal, and computes the unit cost to assess profitability.

Learn two key throughput accounting formulas—throughput per bottleneck resource and the throughput accounting ratio—and how they indicate profit, break-even, or loss to guide production decisions.

Identify the binding constraint in a production line, understand throughput accounting fundamentals - fixed costs, variable material costs, and the goal of minimizing inventory to improve cash generation and profitability.

Explore throughput accounting's focus on throughput equals sales minus material cost, with all other costs treated as fixed, and contrast it with traditional costing and inventory implications tied to bottlenecks.

Identify the bottleneck with the lowest capacity, exploit and elevate it under throughput accounting and Theory of Constraints, align the production plan to maximize throughput, and avoid unnecessary inventory.

Reveal the full profitability of a product across its life. Enable proactive design out costs, faster time to market, quicker break-even, and longer, more profitable lifecycles.

This lecture applies throughput accounting to identify the bottleneck resource, compute unit throughput, rank products by throughput per machine hour, and design a max-throughput production plan within 4000 hours.