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ima course work (Автосохраненный)
ima course work (Автосохраненный)
Course work
On the topic: «Costs classification for decision-making»
Prepared by:
Student of studying group
IFF18-2
Nikiforov Alexey Vadimovic
Academic advisor:
Yurasova Irina Olegovna
Moscow 2021
Федеральное государственное образовательное бюджетное
учреждение высшего образования
Финансовый Университет при Правительстве Российской
Федерации
(Финансовый университет)
Курсовая работ
На тему: «Классификация издержек для принятия управленческих
решений»
Выполнил:
Студент учебной группы
МФФ18-2
Никифоров Алексей Вадимович
Научный руководитель:
Юрасова Ирина Олеговна
Москва 2021
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CONTENTS
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INTRODUCTION
Modern economic trends of development such as globalization, stiffer
competition, fluctuations of consumers’ demand, shorter live-cycles of technologies
arising, higher products’ quality demand as well as rising costs requires the managers
of the enterprises to be effective in the field of costs controlling and allocating. In its
own term such requirements make the managers to be familiar with the latest
standards of the management accounting and be capable of implementing them
properly. One of such standards – cost management based on cost classification.
Classification of costs for managerial purposes should meet the main requirement to
be based on signs that allow differentiating costs to manage them in various aspects. It
helps to create forecasts for determination of costs level by accounting, control,
organization of planning, volume of management. Supply chain analysis usually
requires the use of cost concepts for calculating metrics and for the purposes of
decision-making. Thus the managerial accounting is about identifying of and
interpreting the information concerning costs for the pursuit of the goals of the
organization. The current course paper is devoted to the classification of costs and
impact of such distinction for the purposes of decision-making in managerial
accounting. The main findings of the current paper may be applicable for possible
development and adjustments for the costs classification and decision making, as the
latter influences the former.
The subject of the work would be the principles of costs division for decision
making, real practices implemented by companies and recent case studies.
Various research papers and text book serve as the theoretical and
methodological basis for the current course work. Al the references are provided as
the references in the bottom of pages and in a special page in the end of the current
work.
In the introduction the relevance of the current work was provided and proved,
the main goals and purpose were stated.
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THEORETICAL ASPECTS OF COSTS CLASSIFICATION
To start with, we should give the definition to the word “cost”. Cost is the
monetary measure of the resources given up to attain some objectives such as
acquiring a good or service. The cost classification allows objective identification of
existing cost groups, the process of their formation and interrelations between
different parts. Cost classification helps not only predict and take into account costs
but establish the degree of their impact on the production efficiency as well.
Depending on goal and methodological approaches there are several classifications of
costs1:
by natural characteristics
by changes in the volume or levels of activity
by functions
by tractability of the product
by association with product or period
by relation to accounting period
the nature of data
manager’s relevancy of decision making & analysis
All those classifications contain several definite types of costs relating to each
classification correspondingly. Below they are disclosed with all the definitions given.
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Labor – the second as without it the form, shape and even the very
nature of material cannot be changed and turned into finished good or
product. In its own turn may be divided into two types: direct labor and
indirect labor
Other – all other manufacturing costs are classified third elements due to
the situation when certain other costs are not incurred.
Fixed costs: a cost which is not immediately influenced by changes in the cost
driver. Cost driver is the activity that affects the costs. On per unit basis, fixed
costs varies inversely with changes in the level of production. So, fixed costs is
one that remains unchanged despite changes in the output or activity. Such
examples as rent payments, taxes on real estate, salaries of supervisors are
examples for fixed costs.
Variable costs: the type of cost which changes in the direct proportion to the
changes provoked by the cost driver. A cost which varies in total in direct
proportion to changes in activity levels, a variable cost must be a constant
amount per unit. For instance, wages, raw materials, sales commissions relate
to this type of costs.
Mixed costs: it is the type of cost which is semi-variable (semi-fixed) which
has both fixed and variable features. So mixed costs has both a variable and
fixed elements. Thereby in per unit basis such costs do not exactly move in
direct proportion with the changes in activity nor remains constant with
changes in activity. For example, telephone cost may be an example of a mixed
cost.
Step costs: this type of cost is called like that due to its increase in steps
(jumps) such as that over one range of output the cost remains the same. A step
can be variable or fixed as well. Step variable costs have small steps and step
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fixed costs gave big steps. For instance, the wages of canteen staff can be taken
as the example for such type of costs. The costs remain fixed up to a certain
level of output but beyond it if the number of workers increases, it is required
to cater the needs of additional workers, resulting in a change of canteen staff
wages.
Direct cost: are costs that are incurred for a particular cost unit and can be
conveniently linked with that particular cost unit. Direct costs are those
primarily incurred for and can be identified as part of the cost of a given
product. If the cost object is specified any cost distinctly relating to it may
be called direct costs. Cost of direct material, direct labor or even direct
charges may be examples of direct costs.
Indirect costs: costs which are indirect are those of a more general nature
which cannot be identified primarily as the part of the cost of a given item
and without which this very item cannot be manufactured. Those costs
might not be allocated to the cost object with the usage of one or more
appropriate predictions or arbitrarily chosen bases. Rent, taxes, interest rates
may illustrate indirect costs.
Period costs: refer to those items of cost which are recognized as expenses for
the period in one they were incurred and are charged against the revenue for the
period. Hence, period costs are charged in the profit and loss account in the
period in which they are incurred as they relate to the passage of time, rather
than being associated closely with the manufacturing process. Salaries for sales
personnel, administrative expense, selling expenses are just some examples of
long list of the period costs.
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Product costs: refer to the items of cost which are included in the cost of
inventory and become expenses when the product is sold subsequently. Thus
the product costs are those which are assigned to inventory as they are closely
associated with production activities rather than with the time. Product costs
associated with making or acquiring inventory are also called “inventoriable
costs”, meaning that the amount of inventory remains unsold that is the portion
of product cost stored. During the time period of sale, the product costs are
recognized as the expenses called “cost of goods sold” (COGS). Direct labor,
direct materials or manufacturing overheads create product costs for the goods
manufactured.
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changes in labor, rent and many other may be provided as examples of revenue
expenditures.
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