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Hello Everyone!
I do have those two Management Accounting: Costing related questions I really hope you could at least answer me. If you would try to answer at least one would be great.
Allocation and Re- apportion of overheads
1. Will at year end all „actual“ non production costs that are coded against a non production cost centre be reclassified against production cost centres or only „planned/ budgeted costs? Does this mean all non operational responsibility centres will be empty at year end?Unit Costing vs Total Cost Statement
2. Are the Total Costs from the „Total Cost Statement“ the same (=) the Total cost of production in „Unit Costing“ ? If yes how would I be able in real life to know about which costs we are talking about as the Production Costs in „Total cost statement are lower than the total cost of production in „Unit costing“I would really appreciate a response and hope you can help me answering those few questions as I unfortunately do not know who else to ask. Also I believe that it would really help me understanding the basic but bigger picture.
Kind regards
Martin
1. If by “non-operational responsibility centre” you mean a service cost centre, rather than a production cost centre, and you are allocating and apportioning overheads to find an absorption cost, then yes. Effectively, all the service centre costs are absorbed in the cost of manufacture, which will be ultimately expensed in cost of sales when the goods are sold.
Whether you are looking at planned/budgeted or actual costs depends on the task. If you are planning/budgeting for a future period, for management accounting purposes, clearly you will use planned/budgeted information. If, however, you were looking to calculate total absorption cost for financial statements you would use actual.
2. I have no idea what you are asking – “unit costing” is measuring the cost of a unit. If every “unit” is different (e.g. because no two customer orders are the same) you might use “job costing” for this (i.e. cost each specific job). If a lot of the same unit are made altogether you might use “batch costing” (i.e. cost of a batch divided by the number of units in each batch).Hi Kim2311,
Thank you for your quick response. I have to admit I did not know that this is the case.
I believe I do understand better thanks to your explanation but I still struggle a bit in understanding the process. Let’s say we have the following 2 examples, will this be how it’s going to be re- allocated?
GL Account no. | GL Account Description
4000 Cost of Sales
8000 Rental CostsCost Centre no. | Cost Centre Desc.
70000 rental Costs
10000 Production OverheadsExample no. 1)
We book a journal and re- allocate the rental fees only between the Cost Center and leave the GL account the same.
GL Account | Cost Centre | Debit | Credit
8000 Rental Costs | 70000 | | Cr
8000 Rental Costs | 10000 | Dr |Or example no. 2)
We book a journal and re- allocate the rental fees not only from the Cost Center but also to the different account.
GL Account | Cost Centre | Debit | Credit
8000 Rental Costs | 70000 | Cr |
4000 Cost of Sales | 10000 | Dr |I am sorry Martin but these forum are provided free of charge to students who are using opentuition resource in preparation for ACCA or other professional exams.
This is clearly work-related and has nothing to do with exam preparation.
Hi Kim,
In fact this is not work related as I do not work in Cost Accounting and I am currently trying to understand this topic for my exam but also for my potential work later of course.
My main issue with this topic is trying to understand how it is possible that we have on an Income Statement by the end of the year all these service overhead costs like for example Rent and Rates or Administration related expenses etc. mentioned in an extra section if they will be all “Re- apportioned” to production cost centres and into Inventory or Cost of Sales Account. There I am clearly missing something and I can not find any explanation anywhere. Sorry to bother with this but I am having my exam next week and I would like to fully grasp the topic instead of just learning the exercises. On the one hand I have read at some point that ONLY Production overheads will be absorbed but before the overheads being absorbed non production related overheads (Service costs) will be “Re- apportioned” to Production cost centres.
Probably I should ask which Overheads will “not” or never be “Re-apportioned” and included in the Production costs.
Sorry to bother you with this but it is bothering me that I obviously have there a knowledge hole that I just need to fill.
Please see the answer I posted under your new post https://opentuition.com/topic/re-apportion-overheads-to-later-perform-absorption-costing/
I cannot imagine what materials you are using as the terms and example you use are nothing like I have ever encountered. It is more likely that someone will be able to answer your posts if you reference the material you are referring to – preferably OpenTuition content – because we all have access to that.
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