Cost Control to Improve Profit

EMLV S5 Jill Tynan Wantz 2009/2010
EMLV JTW 1

Cost Control to Improve Profit • Presentation of the course
An intermediate course about the best use of resources in the firm. The focus is on how cost accounting and control helps managers make better decisions to increase performance and profits. Figures that you will be working with nomatter what businessyour in.
EMLV JTW 2

Cost Control to Improve Profit
• Objectives
Understand costs, how they evolve and their impact on the economic performance. Show how cost control enables managers to make knowledgeable decisions and judgments in their pursuit of maximum profit. Be able to produce reliable figures and information that will contribute to decision making.
EMLV JTW 3

Cost Control toImprove Profit
• Method: Instruction on the various themes will be followed by review questions and problems in class. Exercices may be given to do for the following class as well as a chapter or document to be read.
EMLV JTW 4

Cost Control to Improve Profit
• BIBLIOGRAPHY :
Cost Accounting, A managerial emphasis.
C. Horngren, S. Datar, G. Foster, M. Rajan, C. Ittner. 13th edition, PearsonInternational Edition

Management and Cost accounting, Colin Drury,
Editions Thomson

Introduction to Management Accounting
Werner, K.H. Jones, Publisher: Prentice Hall

M.L.

EMLV JTW

5

Cost Control to Improve Profit
• Assessements Mid-term test : 40 % (30 Nov. 2009)
there will not be a second chance to repeat the mid-term test ! mid-

Final examination : 60 % (writtenexamination)
Type of questions:
» theory and » calculations
EMLV JTW 6

Cost Control to Improve Profit
• Contents
Introduction Cost terms and purposes Cost-volume-profit Analysis Break-even point Job costing / process costing Absorption costing Mid-term test – 30 nov 2009 Pricing decisions Cost management Inventory management Decision making and relevant information
EMLV JTW 7

Cost Control toImprove Profit

Introduction

EMLV JTW

8

Cost Control to Improve Profit

Introduction Performance
Profit Economic growth Gain market shares and reputation Sustainable development Ecological respect Quality of employees, qualifications, motivation Fairness to clients, suppliers, Social responsibility – employees
EMLV JTW 9

Cost Control to Improve Profit

Introduction
• COST •CONTROL • PROFIT
EMLV JTW

10

Cost Control to Improve Profit

PROFIT

EMLV JTW

11

Cost Control to Improve Profit

Introduction
• PROFIT Measure of Performance
What happens to profit ? What financial document shows the amount of Profit or loss at the end of the year ? Other words for PROFIT ? How is it calculated ?
EMLV JTW 12

Cost Control to Improve Profit
Introduction• PROFIT :

How is it calculated ?
Sales – Cost or Revenue – expenses or
(Unit Selling price x number of goods) – cost

€
Visualise : Profit

Sales

COST

Loss
EMLV JTW

Volume

13

Cost Control to Improve Profit
• PROFIT

EMLV JTW

14

Cost Control to Improve Profit
• PROFIT

Income statement
(multiple step presentation)

Sales (C.A.) – Cost of goods = Grossprofit (or gross margin) – Operating expenses = Operating profit (or operating margin) – Interest & Tax = Net profit (or Net Income, Net earnings)
EMLV JTW 15

Cost Control to Improve Profit

Introduction
• COST

+ expenses + expenses + expenses = COST

EMLV JTW

16

Cost Control to Improve Profit

Introduction
• COST
A company records expenses and investments Expenses –figures in the …. Investment – figures in the …. Tangible assets
EMLV JTW 17

The Balance sheet
ASSETS N I – CURRENT ASSETS Il – FIXED ASSETS: N-1 I – CURRENT LIABILITIES II – LONG TERM LIABILITIES III – STOCKHOLDERS’ EQUITY TOTAL TOTAL LIABILITIES & Stockholder’s Equity N N-1

Investments

Income Statement (single step)
Caldera Corporation (thousands of dollars)

REVENUES (Produits) Net…