Basic

Managemen
t Accounting
Concept

1
Cost Assignment:
Direct Tracing, Driver
Tracing and Allocation

COST

Cost Objects

Cost is the cash or cash-equivalent value

sacrificed for goods and service that is
expected to bring a current or future benefit
to the organization.

Cost objects is any item such as a

product, customer, department,
project, activity.

Opportunity cost is the benefit given up or

sacrificed when one alternative is choosen
over another.
Expenses is expired cost.

Activity is a basic unit of work

performed within an aorganizaton and
can also be described as an
aggregation of action within
organization useful to managers for
purpose of planning, controllong, and
decision making.

Accuracy of Assignments
Traceability. Indirect cost are costs that cannot be easily and accurately
traced to a cost object. Direct costs are those costs that can be easily and
accurately traced to a cost object. Traceability is simply the ability to assign a cost
to a cost object in an economically feasible way by means of a cause-and-effect
relationship.
Methods of Tracing Tracing costs to cost objects can occur in one of two ways:
(1) direct tracing or (2) driver tracing. Direct tracing is the process of identifying
and assigning costs that are exclusively and physically associated with a cost
object. Driver tracing is the use of drivers to assign costs to cost objects. In a cost
assignment context, drivers are observable causal factors that measure a cost
objects resource consumption.
Assigning Indirect Costs Assignment of indirect costs to cost objects is called
allocation.

2
Product and Service
Costs

Product and Service Costs

There are two types of output: tangible

products and services.
Tangible products are goods
produced by converting raw
materials through the use of labor
and capital inputs, such as plant,
land, and machinery.
Services are tasks or activities
performed for a customer or an
activity performed by a customer
using an organizations products or
facilities.

Different Costs for Different Purposes

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.

Direct Materials
Direct materials are those materials that are directly
traceable to the goods or services being produced.
Direct Labor
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.
Prime and Conversion Costs
Prime cost is the sum of direct materials cost and direct
labor cost. Conversion cost is the sum of direct labor cost
and overhead cost.
Selling and Administrative Costs

3
External Financial
Statements

Income Statement: Manufacturing Firm

Income Statement: Service Organization

4
Types of Management
Accounting Systems

FBM versus ABM Accounting System

Terimakasih