Care to read my mail- let’s chat F5

Dear Students,
Welcome to my first online lecture of the series of lectures titled
”let’s chat”. First of all, it is an educating and revision tool to
students. Secondly, it is an exam-focused tool that teaches students
application of knowledge gained or to be gained to answering real
practical questions. And thirdly, it is a confirmation tool to AMG of
knowing the number of students that check their e-mails daily and
those who read. Hey, i’m sounding too formal, shey? See me smiling!
Like i have always said learning should be fun as play. So far, we’ve
discussed:
1. Some of the quantitative techniques in budgeting
a. High/low method
b. Regression Analysis
These topics may not be tested as full questions but rather as a
process in a question(s).
How do i know the examiner wants me to use high/method?
1. Remember that we use high/low method to separate costs into fixed
and variable elements.
2. the separation uses past data.
3. if in a question you are given past data in the form of
a. two or more activity levels with their corresponding costs and
b. there is the need to separate costs into their fixed and
variable elements.
You may have to use high/low method. NB: The method is not describe here.
4. you may need to do this under the following topics:
a. Decision making (DEC. 2008, Q3, with learning curve, similar
principle tested in Q1)
b. Life cycle costing (Dec ’08, Q4)
c. Target costing (Dec ’07, Q1)
d. Pricing (internal and external)
e. Performance measurement
5. Regression analysis was specifically tested in Dec. 2009( last exam
session), Q3b.
We have done revision of Marginal and Absorption costing.
MARGINAL COSTING TECHNIQUE (MCT) VS (ABSORPTION) ACT
1.MCT uses only variable costs in product costing, ACT uses all costs
both variable and fixed
2. MCT and ACT will produce the same profit if we don’t have changes
in inventory
3. MCT is the friend of sales and opening inventory
4. ACT is the friend of production and closing inventory
5. profit difference = changes in inventory multiply by Fixed
cost/unit…………. and so on and so forth.
We have dealt with costing of overheads under the traditional
absorption costing system and the new approach Activity based costing.
We have also dealt with other new approaches such as:
1. Target costing
2. Throughput accounting
3. Backflush accounting
4. Life Cycle costing
Limitations of the traditional method include the following:
1. Absorption of overheads
Absorption costing absorbed production cost on labour hours, this
approach is no longer appropriate because there are other factors that
cause costs to be incurred. ( ABC serves as an alternative)
2. Process costing
Traditional costing accumulate costs process by process, from raw
material to W.I.P, from W.I.P to finished goods. (Backflush accounting
tries to solve this)
3. Controlling out costs
Traditional method controls out cost during production process rather
than at the design stage. (lifecycle and target costing help out)
4. Focusing on production cost
Traditional method focuses attention on production cost and in actual
sense many costs are driven by customers. (customer profitability
analysis solves this, this method is outside your syllabus)
5. Variance analysis
Traditional costing allows management to do things wrong the first
time and thereafter put in place control measures. New approaches are
based on Total Quality Management- do it right the first time.
6. No disincentive for inventory
Management produce more units to lower the production cost per unit
even when they know the units produced cannot be fully sold thereby
hiding their inefficiency. New approaches discourage producing for
inventory- maintain zero inventory level by employing Just-In-Time
system.
Philosophy of new approaches to costing
1. smooth, steady flow of production
2. faster time to get to the market
3. zero inventory level, using JIT.
4. do it right the first you do it, using TQM.
5. volume with varieties (not just volume)
Gosh, what a long mail! I promise subsequent mails won’t be this long.
This is not really the style of our F5, SORRY YOUR F5, whatever!
hahhahahahahah- see me laughing!
If you got this mail say, ”whatup g”.
I love you all!
AMG