Cost Accounting II - Course Description- Lecture (1)

0:02 Peace be upon you and God's mercy. Our dear students, I hope you are well and in the best of health. I hope this is the beginning of a happy academic year for you, for all our families, and for all of Palestine. With you is Dr. Tariq Abu Al-Ajeen. God willing, we will start today with the first lecture of Cost Accounting 2. We will begin with the course description or the course syllabus. So that you understand What the course overview is, the learning objectives, the chapters we will cover, and how your assessment will be in this course. As we know, this course is approximately at the third level. It is

0:48 a core course, meaning a specialized course. We have created a group for everyone present with us, along with the phone number. Let’s start with the course overview. As we know, Cost Accounting 2 is built upon Cost Accounting 1. After that, I will tell you which chapters we will start with. Just so you are aware, and to justify to you why we have, for example, the first chapter. It will be a chapter you already took in Cost, but it is essential to start with it so we have a strong foundation moving forward. Alright, regarding the course description or the overview. You have

1:41 already taken the introduction. The basics; in Cost Accounting 2, we start taking advanced topics. Things related to the analytical tools that managers can benefit from. Meaning, you as a management accountant, how can you assist the manager or management in making decisions? In decision-making, for instance, or in planning, supervision, and control. The decisions . These are the focal points we will

2:41 address. You, in Cost Accounting...... are mentally connected to the principles of Cost Accounting 1. You will take, as I mentioned, cost classification, the classification of costs. In addition to terminology. Terminology refers to the technical terms related to each field. For example, you have terminology related to taxes, physics, or finance. And we also have terminologies related to cost accounting. You will move from the basics, from concepts, from classifications, and from definitions of cost elements. To advanced topics including flexible budgeting, the flexible budget. Variance analysis, the

3:29 analysis of difference or deviation. Inventory costing and the company's capacity. Cost estimation techniques, all the mechanisms and methods that can be used to estimate costs. Everything related to relevant information that helps in decision-making. And pricing and pricing strategy. Everything you are taking, whether it is parts related to estimation. These are things you will, or the topic of estimation, also

4:15 involves estimating many costs. And capacity costing and inventory costing are based on these methods. The methods , meaning they are techniques. These techniques help managers in making decisions. What are the best methods they can use to do, for example, inventory costing, meaning accurate cost estimation? Or, for example, working on a pricing strategy, or how to determine the appropriate strategy for pricing. So all of this is based on something called quantitative analysis or quantitative techniques. Quantitative analysis, any analysis based on calculations and numbers. We

5:00 call it quantitative. And for your information, it is said that it is quantitative to managerial judgment. As we know, cost accounting is actually built, or rather it is a part of managerial accounting or management accounting. Cost accounting is a part of management accounting. And management accounting is different from financial accounting. Financial accounting is governed by standards like IFRS, International Financial Reporting Standards. Or if you are working in the US, it is governed by GAAP, Generally Accepted Accounting Principles. So, there are standards that you must apply. These standards

5:48 include rules on how to report and how to record the items that you need to account for. As for managerial accounting, which cost accounting is a part of, there are no standards for it. That is why its decisions are always based on judgment. It is not like financial accounting. Okay, let's take the course aims, the goals of the course. The first goal is to explain the foundation of cost classification, cost behavior, and cost object analysis . And this is the chapter we will start with, the first chapter. And as I told you, it is a fundamental chapter. It

6:34 does not mean that just because you have taken it before, why take it again ? No, even if you—let me tell you something—if you are a master's student and you enter a course today, just like the managerial accounting course you have in your master's program, it will start with this foundation chapter. These are the basics. There is no possibility; even if you were entering a PhD program, you would find that the first introductory chapter must remind you of these concepts. These concepts are considered fundamental principles, fundamental concepts, and essential things. So we will go back again. To understanding and explaining cost classifications,

7:20 cost items, cost behavior, and cost objects, the subject of cost. After that, we begin with the chapters. Which contain advanced topics. Okay. Control. We start to define what flexible budgets are. How are they prepared? And the skills related to preparing them. Now, if we talk about variances, whether they are related to volume variance or price variance. What will be their treatment? And how do we

8:05 explain them? And what is most important regarding them? Number 3. As we know, inventory is an important part of any organization. The subject of inventory must also be included. We will focus on the subject of costing, pricing. Determining the cost of inventory, and. And is this cost determined? Do we have one method? No. There are methods. So, what is the best method according to management's decision? According to the situation the management is currently in, or that

8:52 the company is living through. Do these same methods have the same impact? Certainly not. So, for each choice, we will see the extent of its effect on the presentation of operating profit. Okay, then we have. We will take the meaning of cost drivers. Or you have actually already taken them. Which are the causes of costs. Or in some Arabic books, you might find them called cost engines. But here, we call them cost drivers. Now, as I told you, in order

9:37 for you to estimate costs, all of this. Is based on estimations. Estimations require numbers. They require techniques. So we will see what the quantitative techniques are, the methods or quantitative approaches. That we will rely on as management accountants. And we can assist managers with. In making decisions related to estimation. And this certainly depends on your identification of reliable information. Including having a reliable cost driver, a trusted or verified cost inducer. Well, after that , we have...Also, a topic we must take

10:31 information and analysis from. Which will help us in analyzing information. Which will help us in how to choose the best price. Analyze the best price if there is a product mix. What is the best mix? If we have manufacturing, for instance. Is it better to make outsourcing choices or in-sourcing? I mean, today, I am a company like Toyota , for example. Does, for example, Toyota have headlights, or a part, or a filter in the car, an air filter or a fuel filter? Is it better for me to manufacture this component? Or can I get it, for example, from China at a cheaper price? This is what we call

11:16 outsourcing choices. Okay, after that ...To compile. We will gather all these analyses, or all the results of this analysis. Whether it was from cost auditing. Managers like to make a decision. They are concerned with, in the end, making a decision based on information. As a management accountant , your job is to go to the place depending on the decision required. Analyze the budgeting for me. Analyze the costs for me. See for me what the best analysis for prices is. So I can

12:05 make a decision on the best price to launch Apple or iPhone 18, the best price to launch the Mac M5, for example , depending on your product. Now, regarding the learning outcomes, the educational outputs, or what are called intended learning outcomes. You, as a student, are expected to emerge from this course with educational goals. You are expected to be able to define what cost concept means, cost object, the

12:52 cost subject. Classifying costs into direct and indirect, variable and fixed . And how to apply this. You must be able to distinguish between what is meant by...What is called cost tracing, and what is the difference between it and cost allocation. Let's focus. On the concepts, everyone, these concepts are important. It is good for you to know them. Cost tracing, as you took in

13:38 Cost 1, is related to direct costs. Cost allocation is something I cannot trace in an economically feasible way. So in this case, I do allocation; I allocate it, and that's it. This will help me in computing, how to calculate unit cost, or average cost versus total costs. All of this will help me in planning purposes. Clear. You must be able to separate and distinguish

14:24 between inventoriable costs; what are inventoriable costs? One word, please, Doctor, which is product costs. And what is the difference between them and period costs? You've taken it before, but I'll return to it because it is considered one of the essential learning outcomes. You must understand how the cost of goods manufactured is calculated. And how the table you took, we will repeat it and look at it in a detailed and fundamental way. The flexible budget; we have a static budget, and we have a flexible budget for sales. So, How do we calculate the

15:14 variance? We use these budgets for variance. Volume, volume variance. Are there types of these variances? Certainly. There is price variance, and there is...Paper. No. We finished how to calculate standard costs. We are talking. Is there anything else? Yes, I also have Price, price variance. You set a price, for example, of 1200 dollars, but it is Planned, a planned

16:02 price. But you found the actual price was lower than that. Why do you need to see? You calculate the variances, the deviation. You expected, for example, 1000 dollars, for instance, we sold it for 800, so there is a 200 variance. What caused that? So we must perform an analysis. For the variances. Number 6, differentiate. You need to distinguish between the variable costing system and absorption costing system. These are

16:49 systems; these are systems for you to calculate costs. You have systems, and these systems are chosen by management. Why do they choose them? They choose them based on the goals they have planned for. As I told you, cost accounting is entirely built on judgment, entirely on opinions. So there is no standard. So you, as a company, can apply the variable costing system, or absorption, the absorption costing system. And we have the throughput, which is the direct one. We will learn what the difference is between them, how it will affect the subject of how we determine the cost,

17:47 based on information that will be historical data. Surely, when you come in any life, or in any decision you want to estimate, you must look back to historical data. Historical data, you rely on this historical data. And then you apply or predict what will happen, for example, in the future. You find, for example, analysts coming and saying , "At a time like this, stocks in the month of September, for example," they say, "Stocks in September decrease." Well, why? Historically, they decrease in September. Many people who have stocks sell a portion of their stocks. For example, for educational expenses,

18:34 schools, universities, so it happens like that. For example, two days ago I heard an analysis of gold, for example, in Egypt; you find it in this period dropping a little below the global price. Because it's the same idea; they say some people sell gold to also cover obligations related to education and studies. So it is predicting the thing. This means he is talking. He might be talking about something. Meaning it is a possible prediction. Meaning this meeting could be, for example, in July. He tells you, "I expect in September, for example, stocks to drop," or [ another] month. Or in September, for example, gold drops. Because every year for 30. Years, for example, or for 20 years. There has been selling at this time. So when selling occurs, stocks,

19:19 for example, decrease. When there is a sell-off. Whenever there is demand for something, its price increases. Number 8, learn. Objective number 8, a plan. We have five. Main steps for making, I mean, rational decisions. We will see what the process is. Identify relevant costs. And see what cost information or relevant costs are for. Decisions related to capacity. Outsourcing, which I mentioned to you. Should we manufacture externally or manufacture internally? Or should we get it from outside? In addition to segment decisions. Segment decisions, which means. Let's leave that for later. Many

20:09 companies have segments. For instance, take a company, for example. What companies do we have? Any company, Pepsi, for example. It might have a sector. Branches in all countries of the world. Yes. Maybe it has opened, for example, in Europe. So. There might be a segment among the segments existing in the world that is not profitable. In this case, you might make a decision to say, "Hey, get rid of this whole segment, we don't want it ." Because it is considered, I mean, a sector that is losing money for us. When they come to do the consolidated —you will take this later in Advanced —which is consolidated financial statements. They go and create

20:55 consolidated financial statements, including all segments that exist in the whole world. They find that this segment, for example, is incurring a loss, so there is no need for it. So you want to provide them with relevant information to make a decision on whether this segment should stay or not . It goes back to management considerations and future outlook. I mean. Like. Or cost lifecycle. Pricing strategies for any product depend on approaches. These approaches vary. You might take the target costing approach, focus on it, and based on it, build the price you want. Or there is another

21:43 approach, which is cost-plus, which is the cost plus a margin. Or someone says , "I'll save myself the trouble and take the whole lifecycle costing, taking its cycle from the beginning." From research and development up to customer service. And accordingly, I will price it. It differs from the point of view of each management. The last one is integrated cost classification. Everything you have taken will be integrated. Into how we can—I mean, it's integrated cost classifications, variances, costing, pricing. All these analyses, we will integrate them. Integrated into comprehensive managerial recommendations. As a manager, it is

22:28 important for me to give recommendations to make decisions. So, the chapters we have will be: the first chapter related to cost object, cost classification, cost behavior. The next chapter, we will take. Flexible budgets , static budgets. We will take the variances we have. All types of analyses. In the next chapter, we will take variable costing or absorption costing, i.e., variable or full costing . Included in it is also cost or

23:16 capacity analysis. After that, all of this, folks, is planned. The next chapter: cost estimation foundations, the basic rules for cost estimation. And we will also include evaluating costs. The next chapter is Relevant Cost Decision Making. It also includes applied scenarios, how to make decisions in different scenarios. The last thing, the final chapter, is Pricing Decisions and Cost Management. As for the evaluation here, our evaluation follows the college instructions. Which is 40%for the

24:05 midterm and the final is 60%. Regarding the book, dear students, I have uploaded it for you. God willing, I will also upload, as I told you on the group, our PowerPoint presentations. I have updated the PowerPoint slides in a way that I hope is better for you. The size will be smaller, with fewer slides . And more importantly, the information is explained in a better way, presented more clearly and easily. And it's also a more comprehensive idea. The presentation doesn't necessarily have to be PowerPoint. Also, I want to lighten the load for those who follow and keep up. I know that most of you

24:51 rely on PowerPoint. That is why I tried as much as possible to make the PowerPoint comprehensive. But this does not mean you can dispense with the book . On the contrary, the book is your primary reference. And as I told you, you are at the third level, so it is expected. I am currently teaching first-level students; on the contrary, I force them to read from the book and tell them that PowerPoint......is just guidelines. But for you to be ready, you must read from the book. I always tell students that whoever relies on PowerPoint will have light, slide-based information. Unlike the student who relies on the book, who has deep knowledge. Deeper, so this is an important point. Regarding the book, I

25:36 have uploaded a good, new book, the latest edition we have reached, because the previous book......I studied it. I didn't actually study it. I am Cost 2, I studied Cost 1. A whole period of Cost, a book from...We will get a new edition, God willing. Uh. God willing, next lecture, and may it be well for you. We will begin the first chapter, God willing. I reiterate, if any part is not clear, my dear ones. You can easily ask on the group and I will answer you. Yes, regarding the technique, also because some students ask about the evaluation questions. I am the type of professor who, while you read, tells you to focus on the theoretical part. Because theoretically

26:25 , I believe that for a student to be strong in practical aspects, they must have a solid conceptual framework. The stronger you are theoretically, the more your terms and concepts link together, which helps you in analysis and solving practical problems, and even helps you understand the practical framework. That is why I am the type who focuses on the theoretical framework. Okay, Doctor, what about the theoretical framework? Will it be essay questions? No. What we will focus on is for you to concentrate on the information of the theoretical framework that......I will ask you. They are just questions. They will be either True or False or multiple-choice questions. I am, I am the type who writes for you. Meaning, I don't. Exhaust you by making you read and memorize. No, no, like "mention,""

27:11 define,""importance,""what do you think ," and essays and that kind of stuff. No, the information is right in front of you, true or false. So that’s why I don't, I mean I don’t focus on theoretical things, like writing. My questions are either true or false or multiple choice. In addition to the practical aspects. Alright, I think we have covered everything related to the course. Description. Okay, everyone. We will see you in the next lecture, God willing. May God protect and keep you safe. Peace be upon you, and God's mercy and blessings. Ah.