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| Question | Answer |
| Controlling Tasks - History | Originally: to record transactions Then: to plan for the future So: Plan, implement, amend; record, report; gather information; compare theory to practice |
| Controlling Definition | Taking actions that implement the planning decisions, evaluating past performance, and providing feedback and learning to help future decision making. (Charles Horngren) |
| Controlling - Translation | Management Accounting - internes Rechnungswesen Managerial Accounting - interne Unternehmensrechnung |
| Controlling Cycle | Planning -> Implementing -> Amending Operational cyc.e (mid-term, ~1 year) gives info to amend Strategic cycle (long-term, 3-5 years) |
| Controlling in BA | Connected with: Decision Theory, Finance, Financial Accounting, Operations Research |
| Definitions: 1) Finance 2) Decision Theory 3) Operations Research | 1) Management of money and other assets 2) Identifying values and other relevant issues when making a decision to optimize it 3) Mathematical or scientific analytical methods to help make better decisions |
| Difference Financial and Management Accounting | 1) Financial: legally req.; reporting on past performance to external users e.g. Balance Sheet, Profit & Loss Calculation, Notes 2) Management: optional; helping managers make decisions (tied to Cost Accounting) |
| Cost Accounting - Objectives | 1) objective oriented steering of the total output process 2) cost effective analysis 3) calculation of profit |
| Cost Accounting - Field | 1) Cost type: which (type of) costs incur? 2) Cost centre: where did the costs incur? 3) Cost object: for which purpose did the costs incur? |
| Fundamentals: Level of operating assets | - Value of goods/services - Costs -> Cost Accounting |
| Costs vs Non-operating expenses | 1) Costs: Normal, operational, relating to current period 2) Non-operating expenses: extraordinary, relating to other periods, external |
| Definitions: 1) Cash-outflow 2) Expenses 3) Costs | 1) The total outgoing funds from a company in a given period of time 2) General term that refers to a company's financial obligations to other parties 3) An amount that has to be paid or given up in order to get something |
| Definitions: 1) Operating Expenses 2) Non-operating Expenses 3) Basic Costs 4) Outlay Costs 5) Extra Costs | 1) An operating expense is a day-to-day expense incurred in the normal course of business (on income statement) 2) Opposite (e.g. interest on borrowed money, one-time or unsual costs) 3) costs of direct materials, direct labors and direct expenses 4) Involves an actual expenditure of cash |
| Definitions of "costs": 1) Schmalenbach 2) Koch 3) Riebel | 1) Value-based; output-related, valuated, consumptions of goods/services 2) Payment-based; non-compensated expenses, related to manufacturing&selling of a product 3) Decision-oriented; additional non-compensated expenses, due to the decision to create the respective cost object |
| Production Function | r=a*x factor volume=prd coefficient*prd volume |
| Cost Function | C=q*r=q*a*x Costs=price of input*input volume |
| Other cost functions: 1) Total Costs 2) Average costs (costs per unit) 3) Marginal Costs | 1) C=C(x) 2) c=c(x)=C/x 3) C'=C'(x)=dC/dx |
| Definitions: 1) Direct Costs 2) Common costs (overhead costs) 3) Variable costs 3) Fixed costs | 1) Caused by one single object; can be directly allocated to cost object by cause 2) caused by several cost objects; can be allocated by cost area accounting 3) Varying on output volume 4) Not depending on output volume |
| More Definitions: 1) Artificial Common Costs 2) Stepwise adjustable costs 3) Special direct costs | 1) Can be directly assigned to cost object, but simpler to handle as common costs 2) Both fixed and variable; do not change in a certain range, but adjust at some point 3) Common cost with regard to single produced unit; direct cost with regard to lot size or total order |
| Objectives of Cost Type Accounting | 1) Clarification which costs have to be taken into account 2) First recording of all cost types 3) Basis for later cost assignment that has to be EXACT, NOT OVERLAPPING, UNEQUIVOCAL to cost centres/objects 4) Planning&monitoring of cost types 5) Information basis for decision making |
| Type of used production factors | Costs of: material, personnel, service, working material & public charges&contributions, taxes |
| Operational functions | Costs of: 1) Procurement 2) Manufacturing 3) Sales and distribution 4) Administration |
| Way to allocate costs | 1) General: Common & Direct Costs 2) Special: Special direct costs & artificial common costs |
| 1) Variability with activity level 2) Way to record costs 3) Way to handle in cost centre acc. | 1) Fixed & variable costs 2) Costs equalling expenses, imputed costs 3) Primary & secondary costs |
| Chart of accounts for cost types | 1) List of all cost types; clustering based on selected criteria 2) Example: Manufacturing costs: (Direct & Common) Personnel & (Direct & Common) Material Costs |
| Fundamentals of Cost Type Accounting: 1) Clarity 2) Unity 3) Completeness 3) Efficiency | ADD CONTENT (read up yourself) |
| Documentation and recording of selected cost types: material costs: 1) Documentation | 1. determination of consumption volume 2. valuation of determined consumption volume |
| Documentation and recording of selected cost types: material costs 1) Inventory method 2) Sub-account method 3) Retrograde method --> Valuation [leave this here?] | ADD CONTENT (read up yourself) |
| 1) Personnel costs 2) Split of personnel into direct and common costs | 1) Wages, salaries, social costs by legal regulation, social costs on voluntary basis (perks), further personnel costs 2) Direct: Wages (Production Wage, Piece rate wage) Common: Salaries (Time rate wage), Social costs |
| Recording of selected cost types: service costs | 1) Examples: costs of transportation & repair & advertising, travel costs, consulting costs 2) Public services: public charges, contributions, taxes 3) Difficulty of public charges with regard to costs: Public charges & contribution, cost based taxes |
| Recording of selected cost types: imputed costs | 1) No expenses: extra costs 2) Expenses differing from costs: Outlay costs 3) Types of imputed costs: imputed depreciations, interest, rental charges, risks, entrepreneurial profit |
| Imputed Depreciations | Consumption of fixed assets/Systematic reduction --> Economic view: 1) fair consumption 2) of one period 3) for a fixed assets which can be used for several periods |
| Imputed costs: depreciations caused by 1) consumption 2) economic reasons 3) caused by time -->Total effect | 1) consumption by usage & time, depletion 2) technological progress, decline in value caused by reduced cost of replacement & by misinvestment 3) expiration date of leasing agreements & of patents & and of license agreements --> generally caused by a combination of several effects |
| Types of depreciations: 1) Systematic (fixed assets) 2) Extraordinary (fixed & working assets) | 1) Financial (Initial value, legal standard) & imputed (decider's choice) -> imputed depreciations 2) Financial -> imputed risks |
| Imputed costs: depreciations: Preconditions | 1) Volume which can be used has been determined 2) (expected) economic life has been estimated |
| Methods of depreciation | 1) Linear depreciation: constant annual amount of depreciation 2) Degressive: decreasing annual amount, switch to linear during economic lifetime 3) Progressive: increasing annual amount 4) Variable: fluctuating annual amount, activity-based depreciation amount, definition of an allocation base (activity quantity) |
| Example "Linear Depreciation" | I: basis of depreciation (initial or repurchase value) L: estimated economic lifetime (in years) D: annual depreciation R: estimated liquidation proceeds/costs at the end of lifetime |
| Misestimation of economic life | 1) Linear depreciation of the fixed asset 2) Effective eco. life exceeds expectations 3) Detection during eco. usage UNDERSTAND? |
| Possibilities of amendment for misestimation: 1) No change of depreciation 2) Recalculation based on book value 3) Recalculation based on initial value 4) Cause-fair amendment | 1) Extension of eco. life; maintenance of former depreciation amount 2) Extension of eco. life; distribution of remaining book value on remaining eco. life 3) Extension of eco. life; recalculation based on initial value and (amended) eco. life; charge of recalculated annual depreciations in the remaining periods of life 4) Charge of "cause fair annual depreciation amount" (future periods); no amendment of mistakes in past by additional (future) mistakes --> Recalculation based on initial value UNDERSTAND? |
| Imputed Costs: Imputed Interest | • capital is only temporary available („consumption by time“) • financial accounting: only expenses on liabilities (interest) but not equity (dividend) are taken into account • opportunity costs of working capital |
| Calculation of Imputed Interests 1) Capital Employed 2) Interest Rate 3) Calculation | 1) total assets non operating assets (e.g. unused buildings, certain securitites) operating assets 2) • orientation: long-term interest rate of capital market • structure of company‘s capital (liabilities versus equity) imputed interest = operating assets x interest rate |
| Calculation of Imputed Interests: Way of Calculation 1) Interest on residual value 2) Interest on average value | 1) • base of calculation: remaining operating assets at the end of period (residual value) • Imputed interest reduced during economic lifetime (because of depreciation) 2) • base of calculation: average operating assets • imputed interest do not variate during economic lifetime |
| Imputed Costs: Imputed Risks 1) Idea 2) Types | 1) • entrepreneurial acting may cause some risks • such risks can be covered by insurance contracts but the company may also cover them itself • in the long run all occurring risks should be covered by the respective imputed risk charges 2) • inventory risks, • risks of manufactoring, • risks of development, • risks of sales, • other risks |
| Imputed Costs: Imputed Rental Charges and Imputed Entrepreneurial Profit 1) Imputed Rental Charge 2) Imputed Entrepreneurial Profit | 1) • fictive rental charge for company-owned, operatively used buildings • no charge of expenses in financial accounting • concept for harmonisation of the total company imputed rental charge • charge of an imputed rental charge not depending whether the building is company owned or externally rented 2) • only possible for sole proprietor(ship) and partnership • idea: costs charge for a (not occurring) salary of a CEO • Benchmark: salary of an employed CEO of a similar company |
| 1) Outcomes of Cost Type Accounting 2) Objectives of Cost Centre Accounting | 1) recording of all costs: • by-cause, • by volume • structured cost types (Prerequisites of further calculations) 2) • assignment by-cause • of involved cost types • to the respective divisions of the company |
| Objectives of Cost Assignment 1) Internal relations 2) Cost effectiveness 3) Calculation 4) Cost determination | 1) • illustration of relations within a company, e.g. internal services 2) • monitoring of cost effectiveness within those company areas responsible for cost volumes 3) • improvement of calculation due to better cost assignment 4) • provision of relevant costs for planning |
| Definition: Cost Centre | • place of cost appearance • place of cost assignment -> operative (part) area independently settled in cost accounting („unit of assignment“) |
| Cost Centre: Principles 1) Area of responsibility 2) Allocation base 3) Posting 4) Efficiency 5) -> Granularity of Cost Centres | 1) • independent unit of responsibility • preferably also a local unit 2) • Identification of reasonable allocation bases for cost calculation and cost monitoring 3) • cost documents (→ cost types) must be exactly but also simply posted to cost centres 4) • balancing when determining cost centres: on the one hand exactness, on the other hand clarity and efficiency 5) -> • Too many cost centres has a negative impact on efficiency principle • granularity must consider cost calculation as well as cost monitoring purposes |
| (Potential) Factors for Cost Centres | • size of enterprise • sector • production program/production process • organisational clustering • intended level of cost calculation and cost monitoring |
| Classifying Cost Centres 1) Functions 2) Way of Settlement 3) Cost Center Plan | 1) • material cost centres • manufacturing cost centres • sales cost centres • administration cost centres • research & development cost centres • general cost centres 2) • primary cost centres: costs of PCCs are directly assigned to cost objects and not to other cost centres • service cost centres: CCs whose activities are assigned to other CCs (internal service calculation) and not (directly) to cost objects 3) Outcome: cost centre plan being a list of all cost centres |
| 1) Primary Cost Centre 2) Service Cost Centre | 1) • assignment of cost centre costs to cost objects („final cost centre“) • calculation of per-unit costs of the products and services sold by company • sometimes also service cost centres services done by primary cost centres e.g. internal repairing service 2) • assignment of cost centre costs to other cost centres („secondary cost centres“) • calculation of per-unit costs of internal services • sometimes also primary cost centre services done by service cost centres e.g. transportation services for external clients |
| Cost Allocation Sheet (CAS) 1) Cost Centres 2) Primary common cost assignments 3) Secondary common cost assignments | 1) CCs: Service & Primary 2) Assignment of primary common cost to cost centres (by-cause principle) 3) Implementation of an internal service calculation (Calculation of rates for service cost centre services) Calculation of rates for primary cost centres Cost monitoring (Control) |
| Process CAS: 1) Assignment of Common Costs 2) Internal Service Calculation | 1) • direct costs have already been assigned to cost objects (no involvement of CAS) • balancing of cost type volumes to be assigned to cost centres • assignment by cause of common costs to all cost centres (primary and service cost centres) 2) • allocation of service cost centre costs to service receiving primary cost centres • implementation for all service cost centres providing services total cost of service cost centres have been assigned to primary cost centres. |
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