Higher School of Management Sciences - Annaba

S P E C I A L T Y: M A N A G E M E N T A N D
MANAGEMENT CONTROL.
2nd Master
2023-2024

COST ANALYSIS AND CONTROL

B Y : M E R I E M N A I T AT T I A
MCA
CHAPTER 2: FULL COSTING AND THEIR
MANAGERIAL USE
CONFERENCE 2: THE FULL COST METHOD
INTRODUCTION
 CONFERENCE PLAN

1 -Introduction: definition of “full costing” method

2 –Problems relating to full costing
3-Calculate the cost price the full costing method
INTRODUCTION: “FULL
COSTING” METHOD
DEFINITION
 INTRODUCTION: “FULL COSTING” METHOD DEFINITION

Full costing is a calculation method expected at

determining the cost price of a finished product. They
correspond to the sum of all costs linked to the
manufacture until the sale of a product.
The full cost of a product is a cost that incorporates all
categories of charges: fixed and variable, direct and
indirect. It can be used to set a list price or for a quote.
FULL COST ISSUES
Incorporation of indirect charges

Calculation of cost prices and

analytical results for product

Reconciliation between the

two accounts
Evaluation of the M and P stokes

Allocation of indirect charges to

costs

Valorization of work in progress of

by-products and residual products
Calculate the cost price using the full cost
method
 INTRODUCTION

purchasing costs,
 production costs,
non-production costs,
 costs price.
 PURCHASING COSTS
A)Principles: Purchasing costs or acquisition costs are at the first
stage of the company's activity cycle, whether it is:
• commercial with calculation of the purchase cost of each
merchandise,
• industrial with calculation of the purchase cost of each raw
material and each consumable supply,
• services with calculation of the purchase cost of each supply or
service used.
B) Composition :
 Direct charges. They understand :
• purchase prices net of : raw materials or goods;
• related purchasing costs: transport, packaging, insurance,
• direct labor costs (MOD): remuneration of receivers, purchasing managers,
 Indirect charges. These are the costs of the analysis centers: “supplies”, “store”,
“receipt of deliveries”, etc. whose activity is measured in purchasing Work Units
(quantity purchased: kg, ton, meter, liter , palette, product, etc.).
 Work unit costs are allocated to the cost of each purchasing category based on
the number of work units required.
C) Calculation methods:
Total purchase cost = Purchase price + Direct purchase costs + Indirect
purchase costs
Unit purchasing cost = Total purchasing cost / Quantity purchased
D)Transfers to inventory accounts: Each article purchased has a specific
inventory account.
The calculated purchase cost, for each article purchased, is recorded as an
entry (debit) of the corresponding stock account.
 PRODUCTION COSTS

A) Principle: Production cost calculations concern

industrial companies that transform raw materials
into intermediate products or semi-finished
products or finished products. These are most often
workings or elements used in the manufacture of
products.
. B) Composition.
 Direct charges. They understand :
• the purchasing cost of raw materials consumed or used, evaluated from stock outflows, using the
permanent inventory method at Weighted Average Unit Cost often.
• direct production labor costs: remuneration of workers, technicians, workshop managers, etc.
• costs of any supplies
 Indirect charges. These are the lots distributed in the different analysis centers such as the main
centers: “production workshop”, “association”, “finishing”,” etc., whose activity is measured in
units of production work (number of direct labor hours, number of machine hours, number of
products, etc.).
Labor unit costs will then be allocated to the cost of each product category based on the number
of labor units required
C) Calculation methods:
Total production cost = Purchase cost of raw materials used (WAUC) or
consumed (WAUC) + Direct production labor costs + Imputed indirect
production costs
Unit production cost = Total production cost / Quantity manufactured
d) Transfers to inventory accounts: The production cost assessed for each
item manufactured is reported as an entry (debit) of a stock account specific
to each product manufactured.
 NON-PRODUCTION COSTS
A) Distribution costs: They include:
B) • direct labor costs: remuneration of sellers, representatives, delivery people, salespeople,
etc.
C) • distribution costs: advertising expenses, packaging costs, transport costs,
D) • indirect costs of the “distribution” analysis center allocated to the goods or products
sold.B) Other non-production expenses. They understand :• indirect costs of the
“administration” center,
• indirect costs of the “financial management” center,
• other incorporable charges, even if applicable: insurance, intermediary commissions,
brokerage fees, After-Sales Service expenses, etc.
 COST PRICE
A cost price includes, depending on the nature of the activity:
• All charges incurred for the sale of goods in a commercial
business
• All expenses incurred for the manufacture and sale of products
in an industrial company
• All expenses incurred for agricultural activities),
• All expenses necessary for the production of services in a service
provider company
 Commercial the industrial company the service provider
Enterprise company.

The cost price

The cost price includes: The cost price
includes: • the production cost of includes:
• the purchase cost of the finished products • personnel costs,
goods sold (purchase most often sold at
• the costs of
costs + IS –FS), WAUC,
• distribution costs, • the cost of supplies,
• other charges. distribution, • advertising
• non-production costs. expenses,
 SALES (OR TURNOVER OR REVENUE).

Depending on the activity of the company, these are:

sales of goods in a commercial enterprise:
Turnover (excluding tax) = Unit sales price x Quantity of goods sold
sales of finished products (or production sold) in an industrial company:
Turnover (excluding tax) = Unit sales price x Quantity sold of finished products
provision of services for a service provider company:
Turnover (excluding tax) = Price of a service x Number of services performed
 ANALYTICAL RESULTS.

These are the overall or unit results achieved on the sale of each category of
goods, each category of finished products, each service provision.
Management result = Turnover (CA) - Cost of quantities sold or
services provided (CR)
This result can be:
• null: CA = CR
• positive: profit: CA > CR
• negative: loss: CA < CR