4ACA1_041130384_TMA2.doc.docx - TMA 2 – Advanced Cost and Management Accounting 2017 Answer Question 1 Indirect costs can be defined as the cost are

4ACA1_041130384_TMA2.doc.docx - TMA 2 – Advanced Cost and...

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TMA 2 – Advanced Cost and Management Accounting 2017: Answer Question 1 Indirect costs can be defined as the cost are related to the specific cost object but cannot be attributed to it in a cost-effective way. For example, salaries of production supervisors (administrate & supervise production division), legal and accounting costs, and so on. Why manager need to allocate indirect costs to the cost object? The reasons are: i. To provide useful information for an economic decisions. - The manager can use the accurate cost information to make important decisions in respect of which products or services should be produced or offered and in what quantities. - The cost information such as detailed analysis of costs, calculation of production costs, stocks control information and so on. ii. For motivation purpose which to encourage managers and other employees. - Costs derived from more than one business functions are usually included to attention to managers how costs in different functions are related to each other. For examples of business functions: production, research and development (R&D), marketing, human resource, accounting and finance. - Product designers comprise all the costs of other functions in the value chain (i.e.: production, research and development (R&D), marketing) in forecasting their product costs. - The main purpose is to emphasize how different product design alternatives affect total costs. 1
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iii. To justify costs or compute reimbursement amounts. - To compute costs that can be reimbursed according to the stipulated terms in the particular contract. - In other word, determine the cost of product at “fair price” which follow the requirement under law and government defense contract. - For instance, some countries that contract is excluded marketing costs for the cost- reimbursement purpose. iv. To measure income and assets. - This purpose is for reporting to external parties & tax authority. - In accordance with international accounting standard (GAAP), only manufacturing costs are inventoriable and allocated to products. 2
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Question 2 Four pitfalls when using a balanced scorecard should avoided by managers in an organization: (i) An uncertain strategy lead to a confused scorecard. - If managers are failed to specify and communicate a clear and detailed strategy can cause to the strategic actions did not match with all areas and functions within the organization. - Thus, the management or managers must determine and formulate a clear vision and mission to avoid misleading measurement in a corporation. (ii) Management style or cultural that disallow their people to take part in the company’s strategy process. - It is not a tool for impressive a strategy created by the top management. - It is a tool to allow all employees to develop their objectives and measures their efforts to assist the broader corporate strategy.
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  • Winter '16
  • Winnie Wong

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