U5

• Course content - syllabus


  • Course organisation + Intro
  • Cost terms and cost concepts
  • Cost behaviour
  • Cost accounting system
  • Cost type accounting
  • Cost center accounting
  • Cost unit accounting
  • Direct costing
  • Determining profit for period
• Cost type accounting


  Forms the link between the basic accounting data as recorded in financial accounting and the subsequent cost accounting steps
• Main tasks of cost type accounting

  • Adjusting resource consumption by eliminating neutral expenses and adding imputed costs items to account for resource consumption that is not recorded in financial accounting
  • Structuring and classifying all resource types in order to allow detailed tracking and planning of costs
  • Preparing cost records for treatment in subsequent cost accounting steps by further categorizing cost items
• Cost type accounting


  • Measures primary costs only, which denote the value of all resources that have been procured from the company's outside environment
• Cost categorizations in cost type accounting


  • Resource type
  • Allocation method
• Resource type


  Cost type accounting records all inputs that flow into the company and differentiates them according to their nature
• Allocation method


  Cost type accounting must clearly differentiate between direct and indirect costs
• Chart of accounts


  1. Main cost types do not differ between companies. Generally, the following types of resource consumption will be distinguished: material and labor cost, asset related cost, taxes, etc.

  2. The broad categories are further classified into subcategories at several levels. The resulting tree of cost types is documented in a cost categorization chart and each cost type is individually coded.

  3. The resulting categorization is documented in a cost categorization chart that depicts the vertical cost structure of a company.

  4. Individual differences appear between companies as regards the level of detail in their cost categorization charts and the coding used.
• Average number of cost types used in top German companies

  • Industry: 1,071.4
  • Services: 846.9
  • Banking: 827.6
  • Retail: 638.5
  • Insurance: 345.5
• How to value resource consumption

  • Market price
  • Historical purchase price
  • Expected replacement price
  • Current market price
• How to value resource consumption

  • Settlement price
  • Group-internal transfer price
  • Average price
  • Estimated price
• Criteria for differentiating cost types from each other

  • Quantity measure
  • Value indicator
  • Further cost treatment
• Main cost types


  • Material
  • Labour
  • Asset-related
  • Capital cost
  • Third party cost
  • Taxes, public fees
  • Imputed cost
• Material cost type


  • Raw material: Enter directly into the final product and determine main characteristics of product
  • Auxiliary Material: Enter into the final product, but do not determine its main characteristics
  • Components: Constitute the combination or assembly of several different material items
  • Operating material: Do not enter the final product, but are needed to carry out the manufacturing process
  • Merchandise: Enter the company as final products and are re-sold without any physical modification (except packaging)
• Immediate consumption
• Raw material


  Enter directly into the final product and determine main characteristics of product
• Auxiliary Material


  Enter into the final product, but do not determine its main characteristics
• Components


  Constitute the combination or assembly of several different material items
• Operating material


  Do not enter the final product, but are needed to carry out the manufacturing process
• Merchandise


  Enter the company as final products and are re-sold without any physical modification (except packaging)
• Classification of material cost types

  • Raw material
  • Auxiliary Material
  • Components
  • Operating material
  • Merchandise
• Immediate consumption fiction


  The resource amount is considered to be consumed at the time of purchase. Thus, no inventory levels are recorded, but the entire purchase amount is immediately recorded as material costs.
• Inventory-taking


  Materials purchases are recorded as additions to current stock levels. Consumed amounts then can be determined by the following formula: Consumed amount = beginning inventory + new purchases – ending inventory
• Inverse calculation


  The output of the manufacturing is multiplied by the amounts of inputs required per unit of output.
• Material requisition cards


  A worker withdrawing material from inventory must fill a material requisition card stating the type of material, the quantity, the purpose, etc.
• Approaches to determine consumed resource quantities

  • Immediate consumption fiction
  • Inventory-taking
  • Inverse calculation
  • Material requisition cards
• Specific identification


  One of the approaches to determine consumed resource value when prices fluctuate
• Average method


  One of the approaches to determine consumed resource value when prices fluctuate
• FIFO


  One of the approaches to determine consumed resource value when prices fluctuate
• LIFO


  One of the approaches to determine consumed resource value when prices fluctuate
• Approaches to determine consumed resource value when prices fluctuate


  • Specific identification
  • Average method
  • FIFO
  • LIFO
• Direct labor


  Remuneration for work performed directly at the final product
• Indirect labor


  Remuneration for work performed to maintain factory operations
• Salaries


  Remuneration of white collar staff
• Allowances and benefits


  Monetary payments in addition to wages or salaries
• Social security


  Employer share in social security payments for staff
• Other labor-related costs


  Cost for hiring staff, HR marketing, redundancy payments, etc.
• Classification of labor cost types

  • Direct labor
  • Indirect labor
  • Salaries
  • Allowances and benefits
  • Social security
  • Other labor-related costs
• Gross labor cost


  base wage + allowances = gross wage + employer's social security contribution
• Net labor cost


  gross wage - income tax - employee's social security contribution - church tax (where applicable)