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L/601/0950 Name : Do Duy Phuoc (Ben 2)

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L/601/0950 Name : Do Duy Phuoc (Ben 2)

TABLE OF CONTENTS
)*+ ,N#"-D.!#,-N ********************************************************************************************************/
)*) #y%es of cost******************************************************************************************************************/
**********************************************************************************************************************************************0
)*2 !osting method**************************************************************************************************************9
)*1 !osts using a%%ro%riate techni2ues******************************************************************************))
)*/ 32*) !ollect4 analyse and %resent data based on the information using a%%ro%riate
techni2ues**************************************************************************************************************************)/
,n the figure belo !ost of goods sold (!-$5) 6 variable costs 3 fixed costs****************)/
********************************************************************************************************************************************)7
2*2 Performance indicators to identify %otential im%rovement****************************************21
2*1 ,m%rovements to reduce costs4 enhance value and 2uality******************************************20
"898"8N!85******************************************************************************************************************1)
List of Figures & Tables
9igure ) : :inimum salary in ;iet Nam by <one (vietnam(briefing4 2+)+)************************7
**********************************************************************************************************************************************0
9igure 2 : 9ixed cost (google)**********************************************************************************************0
9igure 1 : 5te% cost (google)************************************************************************************************0
9igure / : ;ariable cost (google)*****************************************************************************************=
9igure 7 : 5emi(variable cost (google)*********************************************************************************=
9igure > : ,nterde%endence of the de%artments (case study)**********************************************))
9igure 0 : !osts using a%%ro%riate techni2ues*******************************************************************)2
9igure = : Budget figures 2++9 (case study)**********************************************************************)1
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

9igure 9 : 5elling %rice in 2+)+(case study)**********************************************************************)/
9igure )+ : %rofit 2++>(2++=(case study)***************************************************************************)/
9igure )) : 5ales 2++>(2++=(case study)***************************************************************************)7
9igure )2 : 5ales vs !-$5 2++>(2++=(case study)***********************************************************)>
9igure )1 : 5ales vs gross %rofit 2++>(2++=(case study)***************************************************)0
9igure )/ : 5ales vs administrative and selling ex%enses 2++>(2++=(case study) ************)0
*******************************************************************************************************************************************)=
********************************************************************************************************************************************)=
9igure )7 : 5ales vs %rofit 2++>(2++=(case study)*************************************************************)=
9igure )> : "outine cost for 2++=(case study)*******************************************************************2+
9igure )0 : Wee?ly variable costs(case study)******************************************************************2)
9igure )= : Wee?ly fixed costs(case study)***********************************************************************22
9igure )9 : Wee?ly admin4 selling @ other ex%enses(case study)*************************************21
9igure 2+ : !ost %er unit(case study)*********************************************************************************2/
9igure 2) : $ross %rofit and net %rofit for 2++>(2++=(case study)************************************2>
9igure 22 : "-, 2++>(2++=(case study)*****************************************************************************20
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

1.0 INTRODUCTION
;ang com%any is the com%any that customi<ed t(shirts* #he business is o%erations
in Da Nang city since Aanuary 2++>* ,n this re%ort that sho ty%es of cost4 costing
method4 costs using a%%ro%riate techni2ues4 ?ey %erformance indicatorB collect4 analyse
and %resent data based on the information using a%%ro%riate techni2ues4 im%rovements to
reduce costs4 enhance value and 2uality*
1.1 Types of cost
!ost accounting that the %rocess to analyse4 establishing stoc? valuations4 %rofits
and balance sheet items4 %lanning4 control and decision ma?ing* !ost centre is the %art of
the organisation that inside the com%any and that Cust including the de%artment in the
com%any* !ost unit is the organisation that related to the %roducts in the com%any and its
concentrate only in %roducts* #he total cost of a cost unit is made u% of the materials4
labour and other ex%enses* !ost element can be classified as direct costs or indirect costs
(management accounting and financial re%orting4 2+)+)*
1.1.1 Direct cost :
Direct cost is the cost that traced to the %roduct4 service4 or de%artment that being
costed* Direct costs are usually under the control and res%onsibility from the de%artment
manager (businessdictionary)* #hat including direct materials4 direct labour and direct
ex%ense and total direct cost is often referred to as %rime cost*
Direct materials costs that the cost of the materials that have been used in
ma?ing and selling a %roduct* 9or exam%le : in the case study4 ;ang com%any must
%re%are to %ay to the su%%lier for cloth material4 seing machine4 %rinter4 thread for
ma?ing #(shirts*
Direct epe!ses are ex%enses that incurred on %roduct other than direct material
cost and direct age as a direct conse2uence of ma?ing %roduct4 %roviding service or
running de%artment in business (management accounting and financial re%orting4 2+)+)*
9or exam%le : !ost for design4 draing or layout hen they ma?ing shirts 4 hire of
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

e2ui%ment that hel% for %articular Cob for exam%le they can hire electric seing or %rinter
to hel% for ma?ing their shirts*
Fi"#re 1 : $i!im#m salary i! %iet Nam &y 'o!e ()iet!am*&riefi!"+ ,-1-.
Direct la&o#r costs are the costs that used to ma?e a %roduct or service4 usually
itDs time ta?en for a Cob or time that ta?en to ma?e a %roduct and direct age are age
%aid for labour ex%end on or? on the %roduct itself* :oreover4 ;ang com%any should
%ay age to their 27 em%loyees follo ;iet Nam standard for salary* ,n figure ) that
sho the minimum salary in <one ) from )*1/ million and <one 2 is )*)9 million that they
ill need to calculate %ro%erly by folloing the salary standard to attractive their
em%loyees and that ill ma?e them stay longer ith vang com%any and they can save
money and time because they donDt need to training for ne em%loyees*
1.1., /!0irect cost :
,ndirect cost or overhead cost that including indirect material costs4 indirect ages
costs4 indirect ex%enses4 admin overheads4 5@D overheads*
/!0irect materials hich related to %roduct but canDt be traced in the finished
%roduct* #hat the materials that not use li?e direct material but itDs also hel% to finish the
%roduct* 9or exam%le : 5ome indirect materials that in ;ang com%any they are seing
machine4 chemical for clean cloth or machine4 scissors4 glove for %rotect labour hen
they or? or some tools that hel% to decide %roducts*
/!0irect 1a"es that the cost for age but itDs not related to the %roduction that
age also for %erson not Coin to the ma?ing %roduct* 9or exam%le : ;ang com%any they
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

also need to %ay the salary for manager4 su%ervisor and they hel% o%erate and loo?ing for
the business but they not or? on the %roduct line* #he security and cleaner for ;ang
com%any also not or?ing on %roduct activity so that ;ang com%any also have indirect
ages for them*
/!0irect epe!ses that not charged directly to %roduction (management
accounting and financial re%orting4 2+)+)* ;ang com%any also %ay insurance for their
em%loyees4 manufacturing and they also %ay rent for old building that they rent for the
office and factory*
A0mi! o)er2ea0s that the ex%enses that related to administration and general
o%erations of the com%any (smallbusiness4 2+)/)* 9or exam%le : ;ang com%any ill %ay
for office salary that is concluding salaries of secretaries4 accountants and also they must
%ay rent4 rates4 insurance4 lighting4 cleaning4 tele%hone4 %ortal4 ban? charges4 legal
charges*
S3D o)er2ea0s that including mar?eting materials4 advertising4 %ac?aging4
salaries and commission of sales staff4 rent4 rate4 insurance4 cost of delivery %roducts in
;ang com%any* #hey also change the 2uality and the %ac?aging that the %roducts are
individual ra%%ed in recycled bron %a%er bags
1.1.4 Fie0 cost+ step cost+ )aria&le cost a!0 semi*)aria&le cost :
Fie0 cost are the cost that inde%endent ith the 2uality of good or service that
%roduced and itDs not affected by increases or decrease in the volume of out%ut
(management accounting and financial re%orting4 2+)+)* ,n the long term the cost in the
fixed cost ill not change and also itDs referred as a overhead cost* 9or ;ang com%any4
fixed cost is the renting for the old building for the office and factory because they must
have the contract and in the contract maybe they ill sho the %rice for the rent and that
ill not change in after they finish contract*
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

Fi"#re , : Fie0 cost ("oo"le.
Step costs is the fixed cost hen the com%any %ay but this cost have been
increase because of the increasing of the volume of %roduction or something it can be
decrease because of the volume of %roduction decrease* 5te% cost can ha%%en because of
the ex%ands of the com%any* 9or exam%le : 9or ;ang com%any if they receive more t(
shirts from customers that they ill ma?e more t(shirts and they should have more
em%loyees that ill ma?e them increase the cost or they need to rent for factory because
of the increase of the em%loyees*
Fi"#re 4 : Step cost ("oo"le.
%aria&le cost that including materials4 labour4 distribution cost4 energy usage4 etc
( businessdictionary)* ;ariable cost ill increase hen the level of %roduction increase
and they ill decrease hen itDs decrease* 9or exam%le : sales commission ill increase
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

hen seller they have sale more unit of t(shirts for vang com%any* When they need to
ma?e more t(shirts they also %ay more for the variable cost for the material that they get4
electricity bills and ages for em%loyees for more hours or?ing*
Fi"#re 5 : %aria&le cost ("oo"le.
Semi*)aria&le cost are the costs that contain fixed cost and variable cost
com%onents* 9or exam%le: ;ang com%any also need to %ay salary (fixed cost) and
commission (variable cost) for sales%erson and itDs a semi(variable cost*
Fi"#re 6 : Semi*)aria&le cost ("oo"le.
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

1., Costi!" met2o0
1.,.1 7o& costi!"
Aob costing is a s%ecial re2uirement from customers and the order is
com%aratively short duration* ,n this ?ind of costing the customers ill have more %oer
and business must follo the re2uirement from customers and they must do it best* Aob
costing also related to material4 labour and overhead that used for the s%ecial level of Cob*
Aob costing is a tool that hel% customers have hat they ant4 hat the 2uality or
2uantity that they ant* :oreover4 ;ang com%any is concentrate on ma?ing t(shirts for
com%any4 family and grou% events that hy they need to do ell Cob costing hen
someone order t(shirt and they need to follo that customer ant to hen they customi<e
their on t(shirt* 9or exam%le: hen grou% of student they ant to ma?e 7+ t(shirts for
their class and they give idea and they ant all t(shirts must be the same4 Cob costing ill
hel% vang com%any to do that they ill follo the standard4 re2uirement to do all 7+ t(
shirts same ith each other*
1.,., Bat2 costi!"
,n bath costing that also including variable cost and fixed cost4 itDs alays that the
units that customers ant to %roduce in their re2uirement* ,tDs different ith Cob costing
because it have more re2uirement of units that customers ant to do* ,n Cob costing they
only do ) re2uirement for ) unit but in bath costing they have more than ) re2uirement
and more units* #hey Cust only calculated the cost %er unit hen the bath is com%leted* ,n
vang com%any they have lots of order from a grou% and also in the grou% they have lots
of %eo%le ith different si<e of t(shirts* When they order si<e E54 54 :4 F4 EF that vang
com%any ith follo and do their re2uirement ith different re2uirement and itDs a bath
costing*
1.,.4 Co!tract costi!"
!ontract costing is a method that same ith Cob costing but the order is long
duration and in Cob costing itDs Cust short duration ordering* !ustomer and su%%lier in this
ty%e of costing they ma?ing formal contract to or? underta?en to customer
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

re2uirement* ,n this contract it also have some overhead cost for material4 labour4 etc
because itDs ta?e long time for ma?ing %roducts and both %arty must agree in the contract
and they must sho everything clearly in contract ith the agreement beteen %arties*
:oreover4 vang com%any ill need to a%%ly contract costing for their business4 they need
to find some %arty ith long term contract that can hel% them have more %rofit if they
become %arty together* ;ang com%any can ma?e %roducts and give it to them every year
that have in contract and itDll hel% them not losing customers and to do that they need to
follo all re2uirement in the contract beteen them ith high standard of 2uality*
1.,.5 8rocess costi!"
Process costing is a continuous %roduction run hich cost is charged before unit
%roduced during the %eriod* ,n this ?ind of costing that ill hel% %roduction activity ?ee%
all or?ing they ill ?ee% to or? 2/&0 and they cannot sto% that because it ill ma?e
damage for %roduction and loss for business* 9or exam%le : that ?ind of costing ill need
for vang com%any because hen they have lots of order they need to do 2/&0 %roductivity
and they need to have more em%loyees to divide or?ing hour that the em%loyees cannot
fell tired and they can or? ell to ma?e good %roducts*
1.,.6 Ser)ice costi!"
5ervice costing is the accounting cost that is related to service and function* #his
?ind of method is more concentrate on service not in %roduction and that also hel% them
to im%rove about internal and it also hel% for the benefit of the business* #his method ill
sho %er unit of cost for o%eration or service by grou%ed under fixed cost and variable
cost* :oreover4 vang com%any should a%%ly service costing by %rovide canteen4 security4
maintenance de%artment* !anteen ill %rovide food4 ater and it is also the %lace for hel%
their em%loyees relax after or?ing4 itDll save more time if they have canteen inside and
em%loyees ill not ta?e lots of time to go outside to eat* 5ecurity is an im%ortant
de%artment that they can ?ee% safety for business or loo? after for the stoc? that no one
canDt ta?e it*
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

1.4 Costs #si!" appropriate tec2!i9#es
Tas: 1
Producing Department Service Departments
S 8 ; < =
G>+4+++ G9+4+++ G2+4+++ G2+4+++ G)+4+++
5ervice %rovided
De%artments E H I
Producing J 5 ( 1+K /+K
Producing J P 7+K /+K 1+K
5ervice J E ( 2+K (
5ervice J H 2+K ( (
5ervice J I 1+K )+K (
:ar?eting ( ( 2+K
$eneral -ffice ( ( )+K
)++K )++K )++K
Fi"#re > : Interdependence of the departments (case study)
9rom figure > that the service de%artment can be calculated by the formula :
E 6 2+4+++ 3 2+KH ( or 2+4+++ 3 +*2H)
H 6 2+4+++ 3 2+KE ( or 2+4+++ 3 +*2E)
I 6 )+4+++ 3 1+KE 3 )+KH ( or )+4+++ 3 +*1E 3 +*)H)
"e%lace H 6 2+4+++ 3 2+KE into E 6 2+4+++ 3 2+KH that ill have formula:
E 6 2+4+++ 3 +*2(2+4+++ 3 +*2E)
6L E 6 2+4+++ 3 +*+/E 3 /4+++
6L +*9>E 6 2/4+++
6L ; ? ,6+---
Next re%lace ; ? ,6+--- into H 6 2+4+++ 3 2+KE ill have formula :
H 6 2+4+++ 3 +*2 x 274+++
6L < 6 2+4+++ 3 74+++ 6 ,6+---
#hen re%lace ; ? ,6+--- and < ? ,6+--- into I 6 2+4+++ 3 1+KE 3 )+KH ill have
formula :
I 6 )+4+++ 3 +*1 x 274+++ 3 +*) x 274+++
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

6L = 6 )+4+++ 3 047++ 3 247++ 6 ,-+---
9inally the result for service de%artment have sho that E6 274+++ 4 H 6 274+++
and I 6 2+4++ that e ill %ut that result into figure >*
Fi"#re @ : Costs using appropriate techniques
( )2 (
5ervice %rovided
De%artments E H I Production
de%artment
#otal
Producing J
5
( ( 1+K G
047++
/+K G
=4+++
G
>+4+++
G
0747++
Producing J
P
7+K G
)247++
/+K G
)+4+++
1+K G
>4+++
G
9+4+++
G
))=47++
5ervice J E ( ( 2+K G
74+++
( ( G
74+++
5ervice J H 2+K G
74+++
( ( ( ( G
74+++
5ervice J I 1+K G
047++
)+K G
247++
( ( G
)+4+++
:ar?eting ( ( ( ( 2+K G
/4+++
G
/4+++
$eneral
-ffice
( ( ( ( )+K G
24+++
G
24+++
)++K G
274+++
)++K G
274+++
)++K G
2+4+++
A
,,-+---
L/601/0950 Name : Do Duy Phuoc (Ben 2)

Tas: ,
Fi"#re B : Budget figures 2009 (case study)
Factory o)er2ea0 rate6 factory overhead & direct ages 6 >+4+++ & )++4+++ 6 >-C
A0mi!istratio! o)er2ea0 rate 6 administrative overhead 3 selling and distribution
overhead & ( direct materials 3 direct ages 3 factory overhead) 6 9=4+++ & 2=+4+++ 6
46C
,n case study that in 2+)+ :
Direct materials G>+4+++
Direct ages G/+4+++
Factory o)er2ea0 6 factory overhead rate x direct ages 6 >+K x /+4+++ 6 ,5+---
#otal 6 direct materials 3 direct ages 3 factory overhead 6 >+4+++ 3 /+4+++ 3 2/4+++ 6
1,5+---
Total a0mi!istratio! o)er2ea0 6 (administration overhead rate x total factory
overhead ) 3 total factory overhead 6 (17K x )2/4+++) 3 )2/4+++ 6 1>@+5--
,n the case study have mention that 2+K of %rofit so the %rofit 6 2+K x )2/4+++ 6 2/4=++
#otal 6 2/4=++ 3 )>04/++ 6 1D,+,--
Selli!" price for ,-1- 6 )>04/++ 3 ( 2+K x )>04/++) 6 ,--+BB-
Direct materials G >+4+++
( )1 (
A
Direct $aterials )2+4+++
Direct Wa"es )++4+++
Factory O)er2ea0 >+4+++
A0mi!istrati)e o)er2ea0 7>4+++
Selli!" a!0 0istri&#tio! o)er2ea0 /24+++
L/601/0950 Name : Do Duy Phuoc (Ben 2)

Direct ages G /+4+++
#otal factory cost G )2/4+++
#otal administration cost G )>04/++
Selli!" price A ,--+BB-
Fi"#re D : Selli!" price i! ,-1-(case study)
1.5 E,.1 Collect+ a!alyse a!0 prese!t 0ata &ase0 o! t2e i!formatio!
#si!" appropriate tec2!i9#es
,n the figure belo !ost of goods sold (!-$5) 6 variable costs 3 fixed costs
2006 Percentage 2007 Percentage 2008
Percentag
e
Sales $150,000 100%
$285,00
0 100% $400,000 100%
Variable
factory costs $70,000 47% $95,000 33% $120,000 30%
i!e" factory
costs $20,000 13% $25,000 9% $30,000 8%
#$%S $90,000 60%
$120,00
0 42% $150,000 38%
%ross &rofit $60,000 40%
$165,00
0 58% $250,000 63%
'"(inistrati)e
an" selling
e!&enses $25,000 17% $70,000 25% $130,000 33%
Profit $35,000 23% $95,000 33% $120,000 30%
Fi"#re 1- : profit ,-->*,--B(case study)
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

Fi"#re 11 : Sales ,-->*,--B(case study)
,n figure )) that the sales have increasing from G)7+4+++ in 2++> to G/++4+++ in
2++=* ,n the gra%h that sho vang have good signal and they had good im%rovement for
%roducts and service that hy they have more customers and sales* ;ang com%any ill
have more investment because their sale increase faster year by year that the investment
ill attractive on it because they ant to have more %rofit*
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

Fi"#re 1, : Sales )s COFS ,-->*,--B(case study)
5ales that increasing that also ma?e !-$5 increasing from G9+4+++ in 2++> to
G)7+4+++ in 2++= that because more sale they also need to design for the cost of goods
sold to ma?e more %rofit for their com%any* 9or vang com%any they must concentrate on
cost of sales that to reduce stoc? %rices and com%any sales should groth faster than cost
of sales*
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

Fi"#re 14 : Sales )s "ross profit ,-->*,--B(case study)
5ales and gross %rofit have fast increasing from 2++> to 2++=* #he formula for
gross %rofit is e2ual to sales ( !-$5 and that sho the %rofit that they get from sales if
sales is increase that also gross %rofit ill increasing*
Fi"#re 15 : Sales )s a0mi!istrati)e a!0 selli!" epe!ses ,-->*,--B(case study)
Mdministrative and selling ex%enses that increase sloly from )0K in 2++>4 27K
in 2++0 to 11K in 2++=* ;ang com%any need to reduce administrative and selling
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

ex%enses by reduce cost for advertising4 mar?eting4 ex%enses that not too necessary that
to have more sales and %rofit*
Fi"#re 16 : Sales )s profit ,-->*,--B(case study)
5ales and net %rofit also increasing but the %ercentage of increasing for net %rofit
is increase in 2++> and 2++0 from 21K to 11K but decrease in 2++0 and 2++= from 11K
to 1+K* #he government increased tax and interest rate in 2++= that made vang com%any
had loer net %rofit that hy vang com%any should reduce cost of ex%enses4 labours 4
materials*
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

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L/601/0950 Name : Do Duy Phuoc (Ben 2)

Fi"#re 1> : Ro#ti!e cost for ,--B(case study)
( 2+ (
Particulars 2++= (G) (K) Daily ex%enses Wee?ly 8x%enses
5ales G /++4+++ )++K G )4+97*=9 G 04>0)*21
;ariable %roduction cost G ()2+4+++) 1+K G (12=*00) G (241+)*10)
:aterial cost G (>+4+++) 7+K G ()>/*1=) G ()4)7+*>=)
Direct material (cloth) G (/24+++) 0+K
$
*115+07,
$
*805+48,
,ndirect material cost G ()=4+++) 1+K
$
*49+32,
$
*345+21,
Fabour cost G (/=4+++) /+K G ()1)*7)) G (92+*77)
Direct labour cost G (2=4=++) >+K
$
*78+90,
$
*552+33,
,ndirect labour cost (5u%ervisors) G ()942++) /+K
$
*52+60,
$
*368+22,
Phone bill G (24/++) 2K G (>*7=) G (/>*+1)
,nternet bill G (24/++) 2K G (>*7=) G (/>*+1)
8lectrictity bill G (24/++) 2K G (>*7=) G (/>*+1)
Water bill G (24/++) 2K G (>*7=) G (/>*+1)
Delivery cost G (24/++) 2K G (>*7=) G (/>*+1)
9ixed %rod cost G (1+4+++) =K G (=2*)9) G (707*1/)
:aintenance cost of tools4 Cigs4 fixtures G (>4+++) 2+K G ()>*//) G ())7*+0)
9ixed "esearch and Develo%ment G (/47++) )7K G ()2*11) G (=>*1+)
"ental of buisiness %remises (7++G %er 52 ft) G ()040++) 79K G (/=*/9)
$
*339+45,
"ent insurance G ()4=++) >K G (/*91) G (1/*72)
#otal !-$5 G ()7+4+++) 1=K G (/)+*9>) G (24=0>*0))
$ross %rofit G 27+4+++ >1K G >=/*91 G /409/*72
Mdmin4 5elling @ -ther 8x%enses G ()1+4+++) 11K G (17>*)>) G (24/91*)7)
Mdvertising G ()14+++) ))K G (17*>2) G (2/9*12)
Fegal charges @ Mudit fees G (>47++) 7K G ()0*=)) G ()2/*>>)
9reight and ,nsurance charges G ()+4/++) 9K G (2=*/9) G ()99*/7)
Fighting4 cleaning @ heating of $eneral
-ffice
G (04=++) 0K G (2)*10) G ()/9*79)
5ales commission G (194+++) 1+K G ()+>*=7) G (0/0*97)
5ales %romotion G (2>4+++) 2+K G (0)*21) G (/9=*>1)
De%reciation ex%enses G ()14+++) )+K G (17*>2) G (2/9*12)
Printing and stationeries G ())40++) 9K G (12*+7) G (22/*1=)
Net %rofit G )2+4+++ 1+K G 12=*00 G 241+)*10
L/601/0950 Name : Do Duy Phuoc (Ben 2)

Fi"#re 1@ : Wee:ly )aria&le costs(case study)
,n figure )0 that vang com%any s%ent 7+K that G)4)7+ on material cost and G92+
that /+K for labour cost that they s%ent too much for direct costs* ;ang com%any have to
reduce material and labour cost by find good su%%liers ith chea% %rice of materials and
hire enough em%loyees to or? ith the salary normal or they can cut don some
em%loyees if it is not necessary* #hey must ?ee% %roductivity or?ing 2/&0 ith %erfect
number of em%loyees that they canDt aste time and cost for ma?ing %roducts that they
can have more %rofit*
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

Fi"#re 1B : Wee:ly fie0 costs(case study)
,n figure )=4 vang com%any s%ent G1+4+++ for 2++= fixed cost and G707 for
ee?ly ex%enses* #he most ex%ense that they need to %ay is rental that nearly G/++ %er
ee? and they also s%ent G))7 for maintenance of tools4 Cigs and fixtures* ;ang com%any
should reduce cost of rental by find some contract ith %arties that they have good
relationshi% that can ma?e it chea%er* #hey also need to reduce maintenance of tools4 Cigs
and fixtures B reduce research and develo%ment cost is also im%ortant and to do that they
need to have good %lan and %rocess that they must ?no ho to have good research and
that can save money and time* :oreover4 they need to hire good manager ith lots of
?noledge and ex%eriences that to hel% them give good research and good idea to
develo%ment for their business and that ill give them lots of %rofit ithout s%end lots of
costs for lots of %eo%le to do develo%ment instead of one*
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

Fi"#re 1D : Wee:ly a0mi!+ selli!" 3 ot2er epe!ses(case study)
;ang com%any s%ent G)1+4+++ in 2++= and G24/91 on ee?ly ex%enses for
admin4 selling and other ex%enses* ;ang com%any need to sale more t(shirts to family4
com%any and grou% event that hy they %ay lots for 1+K sale commission4 2+K sale
%romotion and ))K for advertising* #hey do that to have good relationshi% ith
holesaler4 detailer that they can stay longer ith vang com%any and they ill have more
motivation because vang com%any give them have commission that they can earn more
%rofit* When vang com%any is groing enough they also need to reduce costs for
advertising that they Cust advertise some that necessary to their business to save more
cost* ;ang com%any also find ays to reduce legal charges @ audit fee B freight and
insurance charges B lighting4 cleaning and heating of general officeB de%reciation
ex%ensesB %rinting and stationeries to have more %rofit*
,., 8erforma!ce i!0icators to i0e!tify pote!tial impro)eme!t
Ney %erformance indicators (NP,) that is a tool to hel% the organisation define and
measure that to they are achieve the organisation goals* NP, also can hel% to analysis of
variances and that hel% to monitoring resources4 controlling and %lanning for the future
( 21 (
L/601/0950 Name : Do Duy Phuoc (Ben 2)

(management accounting and financial re%orting4 2+)+)* Performance indicators are
establish to measure efficiency4 effectiveness and %roductivity* 8fficiency is all about the
2uality4 %erformance of the %roductivity that sho they are doing ell effectiveness is
that business is meeting their target and obCectives* :oreover4 vang com%any should have
good management that manager can effect to their em%loyees to or? ell ith %erfect
2uality and that ill hel% them achieve their goals by having good efficiency and
effectiveness* Performance indicators measure for the cost centres4 revenue centres4 %rofit
centres and investment centres*
,.,.1Cost ce!tres
8ro0#cti)ity is that related to the dividing beteen out%ut over in%ut in the
business activity* Productivity can so units %roduced %er em%loyee4 hour4 material
(management accounting and financial re%orting4 2+)+)* Productivity can bring good
income to the business that ill hel% them have more revenue and %rofit4 also
%roductivity can hel% business im%rove and ex%and* 'igh level of activity that they have
high level of %rofit* 9or exam%le: vang com%any needs to have good analysis4 %rocess
that to hel% them to have best activity*
Cost per #!it is that a cost that they calculated to ?no for each unit by dividing
%roduction costs and units %roduced* 9or exam%le : ,n vang com%any to calculate cost %er
unit they must follo formula that cost %er unit 6 %roduction costs ( variable cost 3 fixed
cost) & units %roduced*
2006 2007 2008
Pro"-ction costs
$ 90,000 $ 120,000 $ 150,000
.nits &ro"-ce" 900 1150 1400
Cost per unit $ 100 $ 104 $ 107
Fi"#re ,- : Cost per #!it(case study)
,.,.,Re)e!#e ce!tres
"evenue centres are generating revenue4 against %rice and volume targets* 9or
exam%le : de%artment4 section4 grou% are determined individual organisation by revenue
( 2/ (
L/601/0950 Name : Do Duy Phuoc (Ben 2)

centres 4 they ill collect income or %rofit from services or sale of goods* Performance
indicators for revenue centres that including customer reCects4 deliveries late: deliveries
on schedule4 flexibility measures4 number of %eo%le served and s%eed of service*
C#stomer reGect that hen customers not satisfy about the %roducts and the
business should %rovide some em%loyees to chec? the %roducts careful before go to the
mar?et* :oreover4 business need to ma?e the %ercentage of customer reCect is really lo
that can sho ho %erfect of their %roducts and ho customers satisfy* 9or exam%le:
hen vang com%any %roduce )+4+++ t(shirts and )++ t(shirts is from customers return
that sho they have +*+)K of customer reCect and itDs a good signal for their business
because the %roduct that they %roduce is %erfect*
Deli)eries late that can hel% for customers and su%%liers* Deliveries late also
sho that the time that customers ant to delivery and itDs sho ho the %rofessional of
the business that ill hel% them have more benefit by having customerDs satisfaction*
:oreover4 they can create relationshi% ith su%%lier to have chea%er cost and faster time
of delivery materials by a%%ly this ratio* 9urthermore4 vang com%any should a%%ly this
ratio to have good agreement ith customers and su%%liers to bring more benefit to their
business*
N#m&er of people ser)e0 and s%eed of service is very im%ortant for the business
that usually at the sho% that can sho the s%eed of service and ho good they are at the
%oint of sale* :oreover4 this ratio ill hel% vang com%any concentrate on the 2uality of t(
shirts and 2uantity that they ill serve to the customers4 also they need to ma?e sure the
s%eed of service is fast that can ma?e customer satisfy*
C#stomer satisfactio! 9#estio!!aires that also same ith survey that customers
can create some 2uestion by using softare* !ustomer satisfaction 2uestionnaires can
sho that customers can ha%%y4 satisfy or not* 9or vang com%any they need to a%%ly this
ratio that they can ?no clearly about customerDs satisfaction that can hel% them to
im%rove ho to ma?e %roducts or service better*
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L/601/0950 Name : Do Duy Phuoc (Ben 2)

,.,.48rofit ce!tres
Profit centres are generating about %rofit or loss they ill calculate it se%arate
ith other centre and that ill sho gross %rofit and net %rofit by dividing for sales* #he
%rofit centre manager can see that com%any is going on the right ay or not and that ill
hel% them ?no ho to im%rove their business*
$ross %rofit margin 6 (gross %rofit & sales) x )++K
Net %rofit margin 6 (net %rofit & sales) x)++K
,n the figure belo that sho sale4 gross %rofit margin and net %rofit margin in
2++>4 2++0 and 2++=* #he gross %rofit ratio is increase from /+K in 2++> to >1K in 2++=
this is a good signal for vang com%any that sho they have more %rofit and their business
is going better and better* 9or net %rofit margin itDs increase from 21K in 2++> to 11K in
2++0 and itDs decrease to 11K in 2++=* #he decrease in 2++= maybe because of the high
interest rate4 tax4 !-$5* ,n 2++=4 gross %rofit is high but hen the government increase
tax and interest rate that also effect directly to net %rofit* :oreover4 !ost of goods sold
that including labour4 material4 ex%ense that vang com%any should reduce some labour4
material and ex%ense costs that to hel% to increase net %rofit* Profit centre ill hel% them
ho to manage and im%rove the business to have more revenue4 %rofit*
2006 2007 2008
Sales $ 150,000 $ 285,000
$
400,000
%ross &rofit $ 60,000 $ 165,000
$
250,000
/et &rofit $ 35,000 $ 95,000
$
120,000
%ross &rofit (argin 40% 58% 63%
/et &rofit (argin 23% 33% 30%
Fi"#re ,1 : Fross profit a!0 !et profit for ,-->*,--B(case study)
,.,.5/!)estme!t ce!tres
,nvestment centres are the de%artment that hel% com%any to control and %lan for
ca%ital that sho here and ho they investment money to get revenue and %rofit for
( 2> (
L/601/0950 Name : Do Duy Phuoc (Ben 2)

com%any* "eturn on investment ("-,) is also very im%ortant for investment centre that
can sho that they have %rofit and they ill ?no that they ill get bac? the investment
in ho many days* "-, is usually calculated by (%rofit & ca%ital em%loyed) x )++K and
the %rofit in this formula is usually that before tax and interest (management accounting
and financial re%orting4 2+)+)* "-, that can hel% vang com%any to ?no exactly ho
they ill s%end to get %rofit and ho to ex%and their com%any* 9or exam%le: in the figure
belo that sho vang com%any can get bac? "-, that increase from >K in 2++> to )=K
in 2++= that can sho vang com%any have im%rove their com%any and they have good
signal for return on investment each year*
2006 2007 2008
Profit $ 60,000 $ 165,000 $ 250,000
#a&ital e(&loye" $ 1,000,000 $ 1,200,000 $ 1,400,000
0$1 6% 14% 18%
Fi"#re ,, : RO/ ,-->*,--B(case study)
,.4 /mpro)eme!ts to re0#ce costs+ e!2a!ce )al#e a!0 9#ality
Cost is an im%ortant thing for business that ill sho that they can have %rofit or
not* ,n cost that including cost %lus %ricing4 mar?et %ricing and target costing* 9ull cost
%lus %ricing that add all the costs that including %rofit4 admin and selling distribution4
overhead costs4 etc* 8very %roducts must have the %roduct life cycle that the %roducts
should introduction to the customers first for them to ?no hat is this ne %roduct4
secondly they go to the groth stage by increasing the %roductivity 4 mar?eting4 go to
bigger mar?et and investment4 in this stage they also need to create ne %roducts for
%re%are for the recovery* #hirdly4 maturity stage is the stage that the %roducts is going
don that they need to do some recovery or change %roduct label4 2uality to bring
%roducts bac? to groth or the %roducts ill go to the last stage itDs saturation and decline
that the %roducts ill no longer stay4 they ill get loss in this stage and they ill go to
other %roducts that can ma?e business have %rofit* #arget costing is that usually
( 20 (
L/601/0950 Name : Do Duy Phuoc (Ben 2)

determined by su%%ly and demand and that really im%ortant for business that they need to
find out the target for their %roducts to bring %rofit to their business*
;ang com%any should have good pro0#ct life cycle for their %roducts4 they need
introduce their %roducts and their com%any first through mar?eting on the internet4
maga<ine4 nes%a%er and direct selling* #hey need to ma?e t(shirts that suitable for the
grou% of %eo%le4 they can ma?e the 2uality of %roducts de%end on the customers for
exam%le t(shirts for business ill be different ith t(shirts for grou% of students about the
2uality4 style and %rice* #hey also need to have good business image that can attractive
their customers* :oreover4 they need to have good %rocess to %lan for reduce materials
cost4 labours cost and ex%enses cost* ;ang com%any should reduce number of aste that
they can reduce cost for materials4 hire more em%loyees and change their or? that they
can or? = hours %er day and that ill hel% %roductivity or?ing 2/&0 that ill ma?e
them save more costs for labour* :oreover4 vang com%any should have good relationshi%
ith su%%liers that can hel% them %urchase materials ith lo %rice*
H#ality is the degree of excellent of a thing4 ho ell for the %roducts and ho
the %roducts %erform are really im%ortant for 2uality* 9or exam%le : micro%hone can
transfer voice fast and loud to customers that it fitness the %ur%ose of the customers and
that ill ma?e customers satisfy about 2uality of the %roducts*
%al#e is a that hen the 2uality is fitness to the customerDs %ur%ose and it can
bring %rofit to the business* ,n value that including cost value4 exchange value4 use value
and esteem value*
;ang com%any also should a%%ly si si"ma that they must achieve 99*999>>K of
out%ut is no defects* 9or exam%le : hen vang com%any ma?e one million t(shirts that
only 14/ t(shirts are defect that can hel% vang com%any can reduce materials4 labours and
ex%enses cost* ;ang com%any ant to a%%ly > sigma they also need to %lan ho to ma?e
%roduct better by using some tools and manager should chec? the 2uality of %roducts to
ma?e sure that no defect*
;ang com%any also need to a%%ly total 9#ality ma!a"eme!t ( TH$.* #O: that
hel% business to analyse4 im%rove 2uality of %roducts and customers service* ,n #O: that
( 2= (
L/601/0950 Name : Do Duy Phuoc (Ben 2)

including 7 %rinci%les that get it right4 first time B continuous im%rovement B 2uality
assurance %rocedures B em%loyees and 2uality B 2uality control and ins%ection*
$et it right4 first time that vang com%any need to have everything right4 correct in
the first time and to do that they need to have good %rocess4 %lan4 ?noledge4 understand
customers need* #his %rinci%les of #O: ill hel% vang com%any save more costs and
time*
5econd %rinci%le is continuous im%rovement that hen vang com%any have
mista?e they need to ?no clearly about that mista?e and they need to do it better next
time* Because4 nothing is %erfect and everything should have mista?e but they need ?no
ho to im%rove to not doing that mista?e again and again*
Ouality assurance %rocedures that cover or? of sales4 reaction of external
customers4 effort of external su%%liers and administration and distribution de%artments
(management accounting and financial re%orting4 2+)+)* ,n this %rinci%le the 2uality of
the %roducts is usually de%end on the 2uality of the materials from su%%liers that hy
vang com%any should find out best su%%liers and get best materials ith chea%er %rice*
;ang com%any should hire good manager for chec?ing %roducts before sell it to
customers* #hey also need to do survey and after it they need to im%rove through the
survey4 reduce the number of customers com%laints by giving best %roducts ith no
mista?e to them4 discount for some of the %roducts that have little bit error*
8m%loyees and 2uality is the next %rinci%le for #O:* ;ang com%any should give
freedom to their em%loyees to decide ho to do and that can hel% them more create4 relax
that can hel% them for doing good 2uality of %roducts* :oreover4 vang com%any should
ma?e them res%onsible for hat they are doing if the 2uality of %roducts not good the
em%loyees that ma?ing that %roducts ill res%onsible for that and they ill not do this
mista?e again*
Ouality control and ins%ection is the last %rinci%le of #O:* #he 2uality of
%roducts and service must be %erfect 4 it must be control to give best %erformance to the
customers by using some techni2ue* ;ang com%any also need to a%%ly 1or: i! process (
W/8. that can hel% them divide the Cob for each de%artments to ma?e the %roducts better*
9or ex%am%le : #hey have different section for ma?ing t(shirt by a%%ly W,P that they
( 29 (
L/601/0950 Name : Do Duy Phuoc (Ben 2)

ill divide ho ill do design of the t(shirt4 ho ill ma?ing collar4 sleeve and body for
the t(shirt then they Coin all %arts together to ma?e finish %roduct* W,P ill hel% them
save time and money hen ma?ing finish %roducts*
;ang com%any need to follo /!ter!atio!al Or"a!i'atio! for Sta!0ar0i'atio!
( /SO. to get certificate that certificate can sho that they have good 2uality and value
for their %roducts and business* ,5- also ma?e vang com%any more efficient and
effective4 lo tax4 Coin to the international trade that can hel% them have more ex%ort and
chea%er for im%ort* :oreover4 their %roducts can be satisfied by the international standard
that they ill have more customers because they have best 2uality certificate by achieve
,5-*
( 1+ (
L/601/0950 Name : Do Duy Phuoc (Ben 2)

REFERENCES
BPP4 learning media4 2+)+* Finance: Management accounting and financial reporting.
)nd ed* .N
Businessdictionary (no date) direct cost PonlineQ available from
Rhtt%:&&*businessdictionary*com&definition&direct(cost*htmlL
Businessdictionary (no date) variable cost PonlineQ available from
R htt%:&&*businessdictionary*com&definition&variable(cost*htmlL
5mallbusiness (no date) overhead expense PonlineQ available from
R htt%:&&smallbusiness*chron*com&overhead(ex%ense(11)20*htmlL
9ig* )* vietnam briefing* (2++9) minimum wage levels to rise for foreign companies in
200 PonlineQ avaiable from
R htt%:&&*vietnam(briefing*com&nes&minimum(age(levels(rise(foreign(
com%anies(2+)+*html&L P)> november 2++9Q
( 1) (

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