Planned Cost Calculations

Question 1

Cost Planning

Answer 1

Cost accounting system which plans cost by cost type, cost center and cost object in advance based on
reasonable estimates and budgeted figures across the whole company.

Inflexible planned cost calculation: only one level of output / occupation / performance
Flexible planned cost calculation: various levels of output / occupation / performance

Control of economic efficiency, identification of cost deviations, identification of cost drivers and
cost reduction potential

Question 2

Inflexible planned cost calculation

Answer 2

Does not respect cost accounting principle of causation
Applicable for cost centers with no output variations
Fixed cost cannot be identified; further deviation causes (e.g. wastage, additional consumption
due to inefficiencies) cannot be identified

Question 3

Flexible planned cost calculation (full cost approach)

Answer 3

Consequences of inefficiencies and working below planned capacity become obvious

Better cost planning and cost control compared to inflexible planned cost calculation
Cost planning is independent from actual level of output

Flexible planned cost calculation generates useful information for cost and capacity planning and
can provide input figures for the budgeting process

Question 4

Planned Cost

Answer 4

Planned cost calculation represents a standard MA instrument

facilitates the identification of reasons for deviations
facilitates control of efficiency and provides incentives for economic behavior
illustrates the relation between fixed cost, output levels and cost deviations
supports forward-looking thinking and behavior
can provide important information for the budgeting process (base data)

Question 5

Consumption Deviation (When something goes wrong in production)

Answer 5

Responsibility of a cost center managers

Question 6

Output deviation (You worked less then you actually should)

Answer 6

Responsibility of a top management