Constanţa IACOB

MANAGEMENT COSTS

in national and international context

CRAIOVA
2012
 PREFACE

Careful scrutiny of the issues shows that there is a certain perception

of the business, to act and react, make decisions and use different systems to
existing models, especially American and Japanese are often difficult to
describe the formalized, but there. On the other hand, observed differences
between European countries. Specific management tools are identical but
apply equally in practice. In this context, our mission is to contribute
fundamental scientific creation and development of national culture in the
European context, to expand and diversify the educational offer to make a
relationship with its economic environment.
Economic competition, today became increasingly fierce economic
environment requires efficiency and performance. On the other hand,
fulminant evolution of technology requires continuous upgrading of skills
and new forms of organizing and conducting the activity. In this dynamic
context, management accounting becomes vital because transforms
organizations and exert influence on the social, economic and physical.
Business decisions on new products, the pricing policy in its recruitment and
salary are dependent accounting information and the behavior of managers is
influenced by the accounting (Ch.Horngren et &, 2005) because they have an
impact on their possibilities for action managers at the same time producers
and recipients of such information.
Recent research in management accounting reveals a significant
evolution of its fundamental concepts. They focus on key issues of managed
activities directly related decisions. Analysis and calculaşia cost as a primary
objective of management accounting is done in a broader context, compared
with the traditional way, meaning that there is a more specific activities close
to those elements relating to organization strategy. Thus, information on costs
of acquiring an important role in developing better strategies to give
organizations a sustainable competitive advantage (M.Porter, 1986).
Taking Porter's idea, a number of authors, including M.Gervais
(1995), P.Lorino (2001), L.Dubrulle (2002), Ch.Hohmann (2004), argue that
the new approach to the management accounting integrate the production and
organization strategy.
 Likewise voice and H.Bouquin (2006) which concerned the limits of
traditional management contabiliăţii also notes the importance of identifying
and evaluating the financial consequences of policy options. Like followers
costurior strategic management, organization and analyzes the author lies in a
broader context that includes relations with its partners, particularly with
suppliers and customers, an idea embraced by N.Roztocki (2001) referring to
the integration concept EVA the ABC method. In this context appears as a
novelty, need not yet existing computing costs, which does not consider
management accounting classical (traditional), and modeling cost-value
couples (C.Iacob, 2006).
Environmental issues and economic change adaptation needs of
companies led management accounting shift. However, observing the
techniques and practices used by traditional management contabiliatea
applied in new conditions of production, have not yielded the expected
results, it is increasingly obvious need to improve management accounting
system in which the management costs represent more than measuring and
reporting actual costs and determine a direct involvement in making
decisions about costs. The argument is that it actually costs just not
happening, but they are the result of decisions.
For the purposes of the foregoing, A. Burland and C. Simon (2001),
argues loss of relevance of traditional costing systems by making a gap
between the current model of control and management of a company and
model that was based method of analysis centers, but also how composition
differences between actual cost and its restored image to management
accounting.
In other news, Note that rigorous determination of production costs,
to the extent that they fall in the selling price required by the market, allows
for expansion or reduction strategy, as appropriate, to manufacture the
product referred to. In other words, the market determines the price and
determine the cost of profitability (K.V.Mahidhar, 2002).
Therefore, the market economy requires a new vision of the costs,
meaning that starting point to it is based on market price and it is considered
whether the decision on adjustment costs for product manufacturing situation.
Such operations require more accuracy and economy affecting the cost of
consumption, which, by the information they provide is crucial to base
decisions to be adopted for scheduling and strict control of operations
incurred in obtaining and use of production.
We ask ourselves if we can copy and apply a management model as it
was conceived? The answer to this question is YES and NO. Accounting
information systems and formal joint management are similar in different
countries, but their associated management practice visible differences from
country to country.
 This distinction leads us to the idea that major differences occur
between countries and between Europe and the United States occur in the
informal systems. Formal information systems, the instruments are very close,
in retaliation, management practices differ in terms of informal systems, the
actors around accounting and management tools and other in different
cultural contexts.
I found this presentation useful to understand how to deal with the
contents of this paper, a new vision, in accordance with new international
trends and requirements of national accounting regulations with European
Directives and to respond accounting management. Furthermore, we mention
that the work we find many aspects of traditional management accounting
because you can not understand the new look if you do not know the basis on
which it was built, what has changed, it replaced. On the other hand, in
practice companies in Romania, most of these classical methods of
calculation applied on the skeleton which was implemented standard cost
method.

In the context described above, the author of this work, in his

scientific pursuits and almost resorted to a significant number of reference
works recently published in foreign literature without neglecting the positive
experience of the Romanian school of accounting and legislation .
Although this work is likely developments and new approaches, we
express our deep gratitude publisher that gave us the endorsement for
publication.

Author
 Chapter I

FUNDAMENTALS OF
COST MANAGEMENT

1.1. Management accounting across borders

I scriso book in 1996 1 was accompanied by Jacques Necker's

aphorism (1732-1804) who said that "the first rule of economy is keeping
accounts and the first step that leads to ruin is neglect." Today I would add
great poet Johann W. Goethe aphorism, motto in all writings became
Romanian accounting and said: "Accounting is one of the most sublime
creations of the human spirit that every good manager should use it in his
household."
Without going into deep history, we emphasize that flows from
practical work requirements, accounting appeared at a certain stage of
development of human society as a necessity of knowing the amount of
manpower and materialized consumption and production and measurement
results exchange.
Depending on what was intended to be accounting, economic and
social conditions of the time, international cultures have developed two
accounts, namely:

Anglo-Saxon culture, based on accounting monism according to
which accounting system is integrated in a single accounting and
information is for both the internal and external users;

European continental culture dualism based on accounting that the
accounting system is defined in two parts: general and financial
accounting, basic accounting of all construction and its purpose is to
record, classified and grouped, the information concerning the
movements of values generated by the business and, on the other hand,
management accounting, which is based on financial accounting and
whose object is the pursuit of "management company" through a
representative indicator, namely "production cost" accounting remains

1
Iacob, C., Ionescu, I. – Contabilitate de gestiune, Editura AIUS, Craiova, 1996, pag.5
 "secret" (J.Richard, 1996)2, and for managers because nenormalizată
aims to follow the formation of the economic performance of the
organization.
About the beginnings and evolution of management accounting has
written extensively, both nationally as well, especially internationally.
Management Accounting Concepts3 according to the study published by IFA
(International Federation of Accountants), management accounting has
undergone four phases of evolution as follows:

at the beginning, before 1950 the management accounting aimed
mainly determine the costs and control budgets. Called cost
accounting, it was seen as a purely technical one obiectv have to say,
determining production costs. This leads T.Johnson and R.Kaplan
(1987)4 assert that "virtually all management accounting tools have
appeared until 1925";

1965-1985 period represents the second phase characterized by the
production focus of planning and control information necessary for
management and managerial accounting is called. At this stage it is
creating the classic organizational control, adequate use of routines, in
a stable environment;

1985-1995 period characterized by focusing the resources used in
business waste reduction through process analysis and cost
management;

the current phase that begins after 1995 and the attention shifted to the
generation or creation of value through effective use of resources by
using analysis techniques to inducers of customer value to
shareholder and organizational innovation. This phase of development
is identified with value-based management.
Currently, there is a worldwide trend of gradual opening of
managerial accounting by observing the changes taking place in the
organization, customers and suppliers to reveal sources better economic
performance in order to transform the traditional organizations "enterprises'
development. This view causes the Ray Proctor (2002) 5 to distinguish
between "management accounting" and managerial accounting "which
states:" Accounting is future-oriented management. It is mainly concerned
with providing information to help their managers to plan, evaluate and

2
Jacques Richard - Compatibilités et practiques comptables, Dalloz, 1996
3
The study can be found at : http://www.mia.org.my/handbook/guide/IMAP/imap_1.htm
4
Johnson, T. and Kaplan, R.- “Rise and Fall of Management Accounting”, Management
Accounting, IMA, 1987, January, 22-30.
5
Proctor, Ray. - Managerial Accounting for Business Decisions . UK: Pearson Education,
2002, p.XVII
control activities. Is essentially a service function, a means to an end than an
end in itself. Management accounting also fits this definition, but the term
"management" emphasizes the service role. This may seem obvious, but
much of the twentieth century, management accounting was used rather to
serve the needs of financial accounting, than to assist managers in their
tasks ... Managerial Accounting refers to improving future performance of
organizations ".
Careful scrutiny of management accounting, we observe that it is
interesting to feature a mix of two concepts: on the one hand, books dealing
with the technical side of quantification, processing and reporting, on the
other hand, providing management perspective on specific issues of
management control. Can anyone tell where it ends and begins managemntul
accounting? Definitely not, especially since in my view, management
accounting can be seen as "a system 6 which calculates and analyzes the
internal flows in enterprise value. It must be adapted to work, the functional
structure of the company and environmental requirements of decision makers
to economic and technological developments. "
If we consider that all annual financial statements are cosntruite the
same model, we see that they do not fully meet aspirations IAS / IFRS in
measuring the performance of the organization. Each company is based on an
economic model which is proper, or that characterize the industry address a
given customer for products and services, based on their processes with
regard to the resources identified.
Therefore, the management accounting is expected to model a
simplified representation to highlight the relationship between variables, the
causes and effects model to help explain and analyze financial performance.
Finally, managers are responsible objectives to be achieved (cost, time,
quality, market share, etc..) And various levers available to the action.
Managers who want to identify relationships between action levers and their
impact on the results it seeks to achieve. Management accounting, as
accounting picture of the functioning of enterprises and organizations,
describe how resources are used, what effect their use, provides an economic
model that helps managers.
• referring to the mission of management accounting, since 1923, a
famous American economist, J.M.Clark7, found ten functions, namely:
determining the normal price of goods sold by the enterprise;
• fixing of price reductions;

6
Iacob, C., Ionescu, I., Goagără, D – Contabilitate de gestiune conformă cu practica
internaţională, Editura Universitaria, Craiova, 2007, pg. 14
7
Clark, J.M. - Studies in the Economics of Overhead Costs Chicago, University of Chicago
Press, 1923, p.236
 • determining the products that create profitable and deficit;
• inventory control;
• definition of inventories;
• testing the effectiveness of different processes;
• testing the effectiveness of different departments;
• leak detection, waste and theft;
• separation of sub-activity cost of production cost;
• ensure consistency with the financial accounts.
In essence, management accounting must highlight how the company
allocates and uses its resources. In other words, be required to consider costs
as a cost is a consumption of resources, to understand and optimize the result.
If regroup the ten functions listed by Clark, we estimate that this analysis is
necessary to:

pricing. But, as noted, the market often leave little freedom in this
regard and the only concern of producers is to be able to obtain the
cost of products and services sold under its selling price: the priority
is to understand how costs are formed and the influence on them than
to know what are the repercussions on the client;

stock assessment that influence the calculation result sheet.
Evaluation is a consequence of the existence of consumption period
and, in return, the new value produced, sold or not, comprising stocks
of products, especially since some are used for private purposes (eg
production of property) . However, the general rule (see IAS 2) is that
stocks are valued at their cost to be identified;

performance measurement products, processes and entities to inform
those who endorse the company. This is established as a major goal of
today's management accounting;

support for internal control in the classical sense of tracking
resources and compliance with instructions given, as resources are
subject to fraud and waste.
These four objectives are about those that Taylor, referring to "the
accounting information available for comparative and wanted" to emphasize
in 1895 8 , namely: determining the monthly full cost of finished products
under eceuţie; evaluation performance through their account balance and the
results of a representation enabling "treasurer of whether a branch activity
should be congratulated or prosecuted" pricing by developing income
statement income to enable the department to promote trade most profitable
orders and give to the poor, to protect the assets of any diversion of substance
and allow auditors to quickly identify any culpability.

8 e
cited by Bouquin, H. - Comptabilit é de gestion, 5 édition, Paris, Ed.economica, 2008,
p.10
 This approach is also found later in Rimailho (1928)9, a founder of
the French tradition of cost calculation, which states: "Knowledge of costs is
for us, first, the amount of technical learning. It will serve not only pricing,
but we want it to allow us to judge the plant market, value of production
processes, technical progress made, technical or administrative savings made
in management "10
Although the concept of management accounting evolved ideas of
pioneers set of management accounting, as shown, remain relevant today. We
find an analogy of ideas to J.Dearden (1963), R.S.Kaplan and D.P.Norton
(2001), Ch.Horngren and & (2005), H.Bouquin (2006) to name just a few of
the innovators of management accounting.
Fundamental concerns of today's managers converge to the
association of two poles: the knowledge to act, to take action information.
For this, however, as stress and F.E.Emery (1969) 11 , decisions about
outcomes, processes and entities must be based on three main criteria to meet:
 the information is of value to a manager if it helps reduce uncertainty
in future;
 additional information has value if it is considered likely to affect
decision;
 the information is of value if it contributes appreciably changing the
consequences of decisions.
Today, more than ever, knowledge necessary for measuring product
costs remain competitive, price fixing, even if there is a certain freedom, for
piloting performance to managers that can affect the cost through improved
processes that result in a perspective long term to ensure relevance and
business strategy decisions.
To meet the constant preoccupation of today's managers, management
accounting must use two key concepts: understanding and influencing future
behavior. To understand the future, management accounting is now built in
such a way that can identify links between the aims and resources that are
employed for this purpose it is necessary to know the cost, on the other hand,
accumulated knowledge allow actions targeting those involved in achieving
objectives.
After H.Bouquin (2006)12 "Management accounting is an accounting
information system aimed at supporting managers and influencing behavior
for modeling relationships between resources allocated and consumed and
purposes which are".
9
Rimailho, E. - Établissement des prix de revient, Paris, CGPF-CGOST, 1928, p.22.
10
Henri Bouquin – Comptabilité de gestion, 4 e édition, Paris, Ed.economica, 2006, p.8
11
Emery, F.E. – Organizational Planning and Control System : Theory and Technology,
New York, Macmillan, 1969
12
Henri Bouquin – Comptabilité de gestion, 4 e édition, Paris, Ed.economica, 2006, p.12
 In the context definition can define the following six objectives of
management accounting:
• to calculate the relevant costs of various functions, activities or
processes undertaken by the enterprise in the context of
organizational structure to better control them;
• methods of evaluation to determine certain elements of the company
balance sheet (stocks, production assets);
• to explain the causes of costs, results of products, works and services
to compare their corresponding selling prices;
• to study the behavior of costs in relation to the level of business
activity;
• to determine the current revenue and expenditure forecast;
elements to interpret the differences between predicted and observed.
Synthesizing aspects mentioned, we can own the following definition
of management accounting: Management accounting is a system which
calculates and analyzes the internal flows in enterprise value. It must be
adapted to work, the functional structure of the company and environmental
requirements of decision makers to economic and technological
developments.
Therefore, management accounting is a fundamental management
tool for measuring, assessing and improving enterprise performance.
In Romania, research in this area shows that, in general, we define the
four phases of evolution of management accounting that overlapped
conceptually and temporally over existing international stages, but emphasize
that due to economic and political context, some phases are less perceptible
though, from the theoretical, have been translated and published a number of
methods applied by Western countries, but were less implemented in practice
companies.
Careful scrutiny of the issues shows that there is a certain perception
of the business, to act and react, make decisions and use different systems to
those of Western countries, which often are difficult to describe the
formalized but there. On the other hand, note that the specific management
tools are identical but apply equally in practice.
The conclusion we draw is that accounting information systems and
formal joint management are similar in different countries, but their
associated management practice visible differences from country to country.
This can be seen from Table 1 comparing the two accounting systems,
namely the Anglo-Saxon and Continental-European system.
To understand the issues presented, it is worth stressing that 13

13
Iacob, C – Influenţa factorilor socio-culturali asupra practicilor contabilităţii de gestiune,
Simpozion ştiinţific, Bucureşti, 2005
C.Bernard made a distinction between formal and informal structure and
H.Simon came and completed idea in that the difference between formal and
informal communication should not be confused with oral written
antagonism .
Table 1. Comparison of European accounting system and the Anglo-Saxon
Feature Continental Anglo-Saxon
comparison European countries countries
Legal system writing customary
Main sponsor banking System stock exchange
Relationship connected to the tax accounting for tax
with tax accounting disconnected
The state's the state plays an accounting
role in normalizing important role in accounting profession plays an
normalization important role in
normalizing
Source: M.Ţaicu, PhD thesis, 2012, coordinator C.Iacob

To understand the issues presented, it is worth stressing 14 that

C.Bernard made a distinction between formal and informal structure and
H.Simon idea came and filled in that gap between formal and informal
communication should not be confused with oral written antagonism .
This distinction leads us to the idea that major differences occur
between countries and between Europe and the United States occur in the
informal systems. Formal information systems, the instruments are very close,
in retaliation, management practices differ in terms of informal systems, the
actors around accounting and management tools and other in different
cultural contexts.
Differences arising between culture and management practices
designed to keep the two elements on the one hand, the manner of
representation, thinking of individuals determined by their belonging to a
culture, and on the other hand, the social rules of the game, the the team that
prevails in a given context. These two elements provide a crucial link
between a country's culture and what happens in an economic organism and
civil society of the country concerned.
Living, being educated and growing up in a cultural context, people
learn the patterns of representation of reality that surrounds them and learn to
obey rules (rarely written) collective social game, requiring behavior that
society and business. These modes of representation and the rules are cultural,
but they require comportamantul, decisions and action of an economic body.
In the context set ourselves the question: can globalization of

14
Iacob, C – Influenţa factorilor socio-culturali asupra practicilor contabilităţii de gestiune,
Simpozion ştiinţific, Bucureşti, 2005
accounting? The answer is YES and NO! We speak of a convergence of an
approximation of accounting theory and practice, especially in accounting
and management control, but not a harmonization of global perfect alignment.
In contrast to what is written and what the management wants the rest of the
world, national culture should be considered. A manager is interested to
study the specifics of management as they are because he is german, spanish,
french, etc., and there is no american or brazilian or korean ...
In conclusion, globalization of accounting and management control
will be possible only when the cultural differences between European and
non European countries will disappear. This approach takes you to build
cross-cultural studies to develop synthetic studies. We are just starting and
the road is still long.

1.2. Organization and management of management accounting in

Romania

1.2.1. General

In Romania, organization and leadership of management accounting

is required under the provisions of article 1. (1) of the Accounting Law
no.82/1991, republished and made taking into account several factors, such
as the specific activity of entity (production, trade, services, etc..), its size and
organizational structure, type and organization of production, manufacturing
technology, production process character etc.
The goal set by the legislature, is that, through management
accounting, to obtain for its own information to ensure efficient management
of assets of the entity. On the other hand, management accounting
information provided on the cost of finished goods (stocks, property) and
production in progress used financial accounting for evaluation and inclusion
of these items in the balance sheet.
By the Order Minister of Finance Public were approved nr.1826/2003
Details for measures on the organization and conduct of management
accounting, under which management accounting must ensure in particular:

record collection and distribution operations expenses by purpose, ie
the activities, departments, phases of manufacturing, cost centers,
profit centers, as appropriate, and

calculation of cost of acquisition, production, processing incoming
goods, obtained, work done, services rendered, production running,
the running property etc.
The accounting regulations is mandatory organization of management
accounting and the company is allowed only up to the organization that is
determined by its specific activity. Given the nature of activities, most
laborious form of organization of management accounting is met in the
production activity where any structure is interested in managing costs and
determining costs at certain levels.
Given the legislative requirements, we consider useful to present
some aspects concerning the organization of management accounting.
In our opinion, management accounting organization requires a set of
activities performed by an enterprise to achieve an efficient information
system for calculating the cost, efficiency analysis activity, development,
monitoring and control of expenditure budgets, subject to management at all
levels of organizational structures.
In this respect, it raises several issues, including:
a) Specify the bodies entrusted with the management accounting
works. This problem in our country, the complexity of activity and company
size, can be achieved by two approaches.
• The first way takes the concept of disparate activities that costing and
analysis of the decision and are subject to distinct compartments within the
company. Thus, calculating the cost of works can be executed either in a
separate department, called "post-calculation" subordinate economic Director
or the accounting department, while budgeting the kinds of activities are
carried out in the appropriate compartments enterprise functions under the
supervision and coordination of the office-development plan. Degree of
centralization or decentralization of work is the size and complexity of
enterprise activity.
• A second way integrated into the design, which involves concentrating
the work in the same compartment as functional, usually known as "prices,
costs, economic analysis", which is under the management.
Each of the options has advantages and disadvantages presented in the
following sense: the first variant specialization possibility of a mutual control
on methodology and data certainty, but the disadvantage is the lack of shared
vision on the overall work of management accounting, the second variant
remove the disadvantage of the first, but it creates an increased volume of
work and a dependence of this compartment to other functional departments
in the company in the collection of information. However, the second variant
correctly expresses the essence of the role and importance of management
accounting on the board.
b) Choosing the most appropriate organization of the expenditure,
cost calculation and budget development is a problem depends on several
factors, such as the different nature of the production aspect of seasonality,
specific technological process of manufacturing nomenclature, duration
production cycle, the trend of factors, trends manifested internationally, cost
and purpose of running a business.
Choosing a method raises issues of specifying categories of carrying
costs, the calculation unit, establishing centers of analysis, forecasting
techniques, tracking and control system specification documents and their
criteria for establishing and circuit etc.
The specifications on measures related to management accounting
management, approved by Order Minister of Finance Public nr.1826/2003,
cost calculation can be performed by one of the following methods (nn. our
notation):
• methods based on the principle of full cost (standard cost method, the
method controls, phase method, the comprehensive, THM method,
method GP);
• methods based on the principle of partial cost (direct costing method,
the method of direct costs);
• other methods adopted by the legal person according to the
organization of production, specific activities, processes, and features
according to their needs (cost method activities, target cost method,
UV method).
Choosing a costing method which essentially outlines a type of cost,
depends on a number of restrictions, as seen in Figure 1.
nature of the activity (for example, hierarchy costs in an
industrial enterprise is more complex than a commercial
enterprise. There are specific costs for each activity)
management mode (for example, a decentralized
management generally involves keeping a forecasting and
RESTRICTIONS

budget management)
contract (for example, adaptation of management
accounting contracts with partners in order to monitor
their effects)
regulatory (for example, requirements imposed on the
undertaking of certain administrative bodies for the
purpose of controlling its costs - specific aspect of public
procurement)
other restrictions (for example, cost management
accounting treatment should follow the same analytical
information to enable the comparison period)
Source : B. et F. Grandguillot, Comptabilité de gestion, 8e édition, Gualino éditeur, 2006
Fig.1. Restrictions on election costs

Consequently, given the restrictions made, each company is free to

choose one or the other calculation methods set and in their individuality,
have advantages and disadvantages, as seen in Table 2.
What you need to consider the system used is that the information
provided, within convenient to be relevant, accurate and have a reasonable
cost. In other news, be understood that the methods are not applicable, they
shall be filled, so that current international trend is to combine them.
Table 2. Comparative picture of calculation methods
Method Advantages Inconvenience
- knowledge of various phases - cumbersome and often
of development costs and complex
product distribution - not a distinction between
full costs - determining the selling price variable and fixed celtuieli
and release outcomet - ignore the behavior of costs
in relation to changes in
activity levels
- simplifies the calculation of - under-assessed stocks
cost - difficulty in separating the
- calculate risk indicators variable and fixed costs
variable (break-even ......) occur under semi-variable
costs - determining the products with costs
strong margins - exclusion of products
- makes a forecasting specific fixed costs is an
management obstacle in formulating
management decisions
- determining for each product - under-assessed stocks
of its contribution to
vocational outcome through
direct common expenses
costs - eliminates the difficulty of
allocating indirect costs
- analysis of transverse - expensive method
processes - complex calculation system
- calculating the cost centers
cost identified activities
activities - evaluating the work
proportional to the product use
- more appropriate treatment of
indirect costs
- calculate cost from conception - complex procedure
Target to the price of sale imposed by - method poorly adapted
cost the market and expected margins product with long life cycle
- Target cost calculation report
product components
- allows a thorough analysis of - ignores the impact of technical
the activity; developments on the level of
- yield curves can be drawn on costs;
 Method Advantages Inconvenience
UVA customers, geographies, - not based on real
products, etc.. homogenisation of products;
- not based on a correlation
with the degree of achievement
indirect costs of production
capacity.

Source : B. et F. Grandguillot, Comptabilité de gestion, 8e édition, Gualino éditeur, 2006

and completing the author

c) specification of works periods of management accounting. For

this purpose it is necessary to specify the bodies will be informed, at times
when information is needed, form and structure, costing periods, when and
what time is set, analyze and report deviations from predetermined levels,
purpose that can produce graphics table form, linear or graphical network.
d) specification of the works necessary means, especially matters
affecting the costing and is important for determining the primary circuit and
record documents and final statements, since the processing differs
depending on the computerization of the unit.
It is known that the management accounting operating with large
number of data (numbers), financial or otherwise, that are not subject to any
regulations. Most companies use management tools, more or less complex to
achieve a data processing system adapted to the needs of management
accounting, you must choose between several solutions, as seen from the
table. 3
Table 3. Automatic data processing solutions
type of The main features
instrument
Financial
adapted to small businesses
accounting
code is assigned to each management account to be
software with revealed and assigned to the calculation results
analytical data
integration

adapted SMEs

total autonomy to structure information based on
Tabular spreadsheets

a high possibility of calculation, either from data drawn
from other programs or from previous calculations
Specific program
adapted SMEs

standard program or software designed for business

allows interface with other programs
 type of The main features
instrument

treatment functions automatically supply management,
production, stocks ...

adapted to large enterprises

treats all management functions (ordering, invoicing,
Integrated fixed assets, production and inventory management,
management accounting ...) with a single central database
program
unique writing involves multiple processing information
arising
Source : B. et F. Grandguillot, Comptabilité de gestion, 8e édition, Gualino éditeur, 2006

1.2.2. Presentation of management accounting

Given the structure of OMPF nr.3055/200915 PCG approved, notice

that we have several options for organizing the management accounting,
namely: either using specific accounts or developing financial accounting
accounts, either with its own operational and technical evidence .
a) specific accounts using dissociated organization requires on the
one hand, the existence of financial accounting, and on the other hand, the
existence of management accounting by accounts of class IX "Management
accounts", in a simplified form given by current PCG and, as stated, are not
mandatory but allow:
• acquisition of financial accounting Built expenditure, for which
purpose it is necessary to develop a "junction table" to ensure control
of the operations recorded. This picture is even more necessary as in
some accounts appear recorded expenses are unincorporated, that is
not included in cost. An array of junctions, which involves an initial
reclassification of expenses, has content shown in Figure 2;
• cut the panel junction built expenditure (associated production) and
regrouping and rerouting their direct costs (the bearers of costs) and
indirect (on the job costs and expenses by nature in them);
• recording, monitoring and control of production made during the
reporting period, valued at registration, which can be: the standard
cost or wholesale price of the company;
• recording, monitoring and control of production in progress at the end
of the reporting period, valued at its actual cost;
• recording, monitoring and control of deviations between actual costs
and prices of manufactured products related record;

15
OMFP nr.3055/2009 de aprobare a Reglementărilor contabile conforme cu directivele
europene, publicat în M.Of. nr.766 din 10.11.2009
 Expenses related to production activities expenses overheads total
account Direct Indirect Expanditure Expandi Unprodu- Gaps in Total other of expenses
expenditure expenditure of ancillary -ture of ctive manage expenditu activities directors 6th grade
of production of activities sales expenditur -ment re
production e
601
602
603
604
605
607
611
612
.......
641
645
654
658
681
Total

Fig.2. Scheme "Panel Junction"

 • transferring the accounts of the actual cost of production obtained
and its related price differences (Figure no. 3)

Fig.3. Transfer scheme costs and prod

Accounts of class IX is characterized by the fact that it works only

between them and therefore the end, why not have sold that are not in balance,
and from a functional perspective can develop analytical categories of costs .
Using accounting accounts and their analytical symbols shall be such
as storage and retrieval system information obtained to be flexible and allow
a wide range of options. List management accounts can be adapted to the
purposes, namely: emphasizing cost flow, determining inventory costs,
determining the venturi and results in the activity that generates, make
predictions, etc..
Content ninth grade, as indicated in the PCG is now systematized in
three groups as follows:
• Group 90 "Internal Settlement"
• Group 92 "calculation accounts"
• Group 93 "production cost"
Group 90 "Internal Settlement"
Includes accounts that provide coverage on the one hand,
independence of management accounting in relation to financial accounts, on
the other hand, the interdependence between the two sides of the
circumscribed accounting system operating cycle.
Within this group are the following accounts:
♦ Account 901 "Internal Settlement expenditure" bifunctional account
with which you keep track of internal settlements on core business and
ancillary costs, common costs of the department, general administration
expenses and selling expenses and determine the difference between prices
registration (pre-or high) and actual cost of finished products from production
semi for sale, work performed and goods production services forming unit.
Be credited to the accounts of the flow of group 92 and is fed at the end of
the actual cost of the products obtained 931 credit accounts "production cost
obtained", as well as period expenses were not allocated to cost of production,
the credit account 902 "internal Settlement obtained on production". At the
end, 901 may account credit balance reflecting the size of production in
progress and can be maintained in this form, or be closed by the debit of
account 933 "Cost of production in progress". By proceeding to closing
balance at beginning of next month, the credit balance in an article resumes
reverse the closure
♦ Account 902 "Internal Settlement obtained on production" is a
bifunctional account with which you keep track of production achieved
during the month, the price of registration and also liaises production cost.
Account 902 is developing analytical two groups of costs: the cost of
products (and within it, the kinds of products) and period costs. Account
operation is different in relation to its analytical structure, as follows:
Analytics "product cost" is credited to the obtaining of the extent of
production at standard cost, debit account 931 "Cost of production obtained"
is debited at the end of the actual cost of production calculation by credit
account 921 "Expenses core business "and the loan account 903" internal
Settlement of differences in price ", with any differences in red or black
depending on their significance.
Analytics "period costs" is debited at the end of the credit accounts:
921 "core business expenses" analytically unproductive expenses and gaps in
management, 922 "costs of ancillary activities" and 923 "indirect costs of
production" with unallocated expenses because distribution costs reasonable
expenses, 924 "general administrative expenses" and 925 "selling expenses"
with the expenses recorded in these accounts and not included in cost of
production. Be credited at the end of the flow account 901 "Internal
Settlement of expenses" in order to separate expenses of the production cost
can not allocate it. This analytical balance has no end.
♦ Account 903 "Internal Settlement price differences" account is an
active role to keep track of price calculated at the end, between the actual cost
of production and the price obtained registration (pre-or high) of them.
Established differences can be favorable and recorded the amounts listed in
red when the actual cost is less than the price of registration or unfavorable
and record the amounts shown in black, the reverse situation. Works only at
the end, when credited to differences in price, in correspondence with 902
debit "Settlements on production-internal" (analytical cost products) and is
fed with the same differences in correspondence with the credit account 933
"Cost of production obtained" , for which the account does not have balance.
Groups 92 "calculation accounts"
With these accounts to keep track of expenses collected in relation to
how to identify them on the work done at this level, ie: expenditure on
implementing the finished products, semi-execution of works or services,
costs generated by ancillary activities dealing with the core business service
(delivery of electricity, water, steam, packaging, tools, making maintenance
and repair, maintenance and operation expenses of the departments of
production equipment and interest expense, administrative and household
within these sections) the costs of administration and management unit,
storage and distribution costs of production of goods manufactured.
Within this group are included the following accounts:
 Account 921 "core business expenses"
 Account 922 "costs of ancillary activities"
 Account 923 "indirect costs of production"
 Account 924 "General administrative expenses"
 Account 925 "selling expenses"
All those accounts according to accounting of assets and therefore
have a common note in terms of operation. However, given the economic
content they present, there are features in each account, as follows:
♦ Account 921 "core business expenses" is an account of calculation
that develops three analytical: the cost of products (and in it the kinds of
products), unproductive expenses, deficiencies in management.
Analytics "product cost" is debited with the expenses incurred during
the cost of production, taken from financial accounting, the credit account
901 "Internal Settlement of expenditure". At the end credit account is debited
by 923 'Indirect costs of production "to spread rational spending on cost. It
credtitează, from inventory and production in progress to establish the actual
cost thereof, the flow account 933 "Cost of production being excuţie" and
debit account 931 "Cost of production obtained" with the actual cost of
finished products. At the end analytics has not sold. If the company opted to
close the account 933 at the end, the beginning of November analytics
"product cost" loan account is debited by 933 "Cost of production in
progress" due to destocării unfinished production.
Analytics "unproductive expenditures" and "shortcomings in
management" during the month shall be debited with such charges, taken
from financial accounting, the credit account 901 "Internal Settlement
expenditure" and is credited at the end of the debit account 902 "Internal
Settlement the yields from "analytical" period costs "and therefore does not
have balance.
♦ Account 922 "costs of ancillary activities" is an account of the
collection, distribution and calculating the cost of related benefits, so that
places can develop analytical cost generators, auxiliary sections respectively.
During the month shall be charged with costs taken from financial
accounting and delineated at this level, the account creditându 901 "Internal
Settlement of expenditure". At the end takes place in a rational calculation of
costs and settlement auxiliary production departments according to their
destination, during which 922 will credit your account, providing analytical
section, and will charge the following account: 922 "costs of ancillary
activities" analytical department receiving , 923 "indirect production costs",
924 "general administrative expenses" and 925 "selling expenses" with the
actual cost of production settled on sites receiving those benefits and debit
account 902 "internal Settlement on yields from" analytical "period costs"
with the cost of production expenses not allocated by the Department as not
related auxiliary work. In late has not sold.
♦ Account 923 "indirect costs of production" is an account for
collection and distribution of indirect costs generated by the sections of the
enterprise and may develop analytic each production department, depending
on the organization of the company.
During the month is debited with the expenses taken from financial
accounting and delineated in the basic sections, the loan account 901
"Internal Settlement of expenditure". At the end credit account is debited by
922 "costs of ancillary activities" with the actual cost for services provided
by them. At the end it shall rational distribution of expenses based on
products produced, in relation to the progress of the work. Therefore, account
923 shall be credit by debit account 921 "core business expenses" analytical
"cost product ". Unallocated expenses cost (and cost takes the form of sub-
activity) is transferred to the spending period by crediting account 923 and
debiting 902 "Internal Settlement on yields from" analytical "costs of period ".
Not have balance at the end.
♦ 924 accounts "general administrative expenses" and 925 "sales
costs" are incurred acheltuielilor collection accounts of the administrative
sector, retail sector respectively. During the month shall be charged with
costs taken from designated financial accounting of expenditures on such
places, the loan account 901 "Internal Settlement expenditure" and is credited
at the end of the debit account 902 "Internal Settlement on yields from"
analytical "period costs "because these charges are not included in cost of
production. It has outstanding at period end.
Group 93 "production cost"
This group was created to compensate for lack of inventory accounts
for production records obtained and production progress statistic.Din play a
role in this group are:
♦ Account 931 "Cost of production obtained" active account for the
evidence obtained as finite (or semi-finished products for sale, work
performed and services provided to third parties ...). Be debited in the loan
account of the 902 "Internal Settlement on yields from" analytical "product
cost" price of entry (default or wholesale) for finished products obtained and
are credited at the end of the actual cost debit account 901 "internal
settlement of expenditure ". differences expenses, favorable or unfavorable,
shall be forwarded to the account 903" internal settlement price differences
"and therefore do not have balance.
♦ Account 933 "Cost of production in progress" is to keep track of the
actual cost of production in progress. Be debited at the end of the loan
account 921 calculation "core business expenses" analytical "product cost".
The account can remain in balance at the end or you can close the account
flow 901 "Internal Settlement of expenditure". At the beginning of next, if he
was to account 933, destocarea production occurs running a reverse record
closure and simultaneously proceed to its credit debit account 921 "core
business expenses" analytical "product cost". If no account was closed in
early reinstatement occurs only following production value being debited to
account 921 executive, analytical "cost product".
Summarizing the above, the present cycle of specific Romanian
accounting records:
During the month
• Acquisition % = 901
costs of financial 921 "Internal Settlement
accounting "Core business expenses" expenditure"
analytical
- Cost of products
- Unproductive expenses
- Gaps in management
922
"Costs of ancillary
activities"
923
"Indirect costs of
production"
924
"General administrative
expenses"
925
"Selling expenses"

• Record-held 931 902

products obtained "Cost of production = "Internal Settlement
from standard obtained" obtained on
price production"
analytical
Cost of products
• Rational % = 922
distribution of 923 "Costs of ancillary
expenditure "Indirect costs of activities"
auxiliary production" analytical section
sections 902 providing
"Internal Settlement
obtained on production"
analytical period cost
922
"Costs of ancillary
activities"
analytical department
receiving
924
"Generala dministrative
expenses"
925
"Selling expenses"
• rational % = 923
distribution of 921 "Indirect costs of
indirect "Core business expenses" production"
manufacturing analytical Cost of
costs products
902
"Internal Settlement
obtained on production"
analytical period cost
• Evaluation of 933 = 921
the cost effective "Cost of production in "Core business
production and progress" expenses"
recording in analytical Cost of
progress products
• Settlement of 902 = 921
actual costs "Internal Settlement "Core business
associated with obtained on production" expenses"
the production analytical Cost of analytical Cost of
obtained products products

• Reflecting the 902 = 903

differences in "Internal Settlement "Internal Settlement
price obtained on production" price differences"
analytical Cost of
products
• Clearance 903 = 931
account 903 "Internal Settlement "Cost of production
price differences" obtained"
• Închiderea 902 = %
conturilor care nu "Internal Settlement 921
sunt alocate cos- obtained on production" "Core business
rilor de producţie analytical period cost expenses", analitic :
- unproductive
expenditures
- gaps in management
924
"General administrative
expenses"
925
"Selling expenses"
• Spending 901 902
account coverage "Internal Settlement = "Internal Settlement
period 901 expenditure" obtained on
production"
analytical period cost
• Optional: 901 = 933
closing cost of "Internal Settlement "Cost of production in
production in expenditure" progress"
progress
At the beginning of next
• resumption of
production in
progress
a. the variant in 921 = 933
933 account was "Core business expenses" "Cost of production in
not closed analytical Cost of progress"
products

b. the variant in 933 = 901

933 account was "Cost of production in "Internal Settlement
closed progress" expenditure"

and
921 = 933
"Core business expenses" "Cost of production in
analytical Cost of progress"
products

b) Organizing dissociated without using accounts requires that on

the one hand, financial accounting, and on the other hand, the existence of
management accounting statements made by the collection, distribution and
costing per unit of product or service work, which leads to the appearance of
extracontabilităţi.
As with previous rises first question about account linking and cutting
expenses the production costs for reclassification and regrouping carriers
expenditure costs (direct costs) and job expenses (indirect costs).
Direct costs entered in the "post-calculation sheet" open each product
group of products, manufacturing or executive orders, production phases,
depending on the specific technological process, as they are made
consumption. A model for post-calculation differs from one company to
another, depending on the complexity of production. If the nomenclature of
raw materials and direct materials and technological operations is reduced,
they can enroll directly in post-calculation sheet. Otherwise, be prepared
summary of consumption, based on consumer bills, the old records, bills, etc.
workmanship., And post-calculation sheet will get only total consumption by
categories of direct costs.
By its nature, post-calculation sheet contains all structural elements of
production cost (direct costs and indirect costs) and the settlement of
production so as to be able to determine price differences on each carrier of
costs.
Synopsis, a post-calculation sheet can present the content displayed in
Fig.4. To complete the post-calculation sheet with indirect costs, first to
establish a "state of collection and distribution costs", a situation that may
develop in each production department, main and auxiliary (post-calculation
under a decentralized organization) or the company (under a centralized post-
calculation). Whichever you choose, the content will be included indirect
costs taken from financial accounting and cost localized places, by their
nature, followed by allocating specific calculations (as will be presented in a
separate paragraph) to bring them on cost carriers.
c. Integrated organization involves the establishment of analytical
accounts in the accounts synthetic grade I or II on financial and accounting
expenses aimed at delineation, ever since their registration, the bearers of
costs and expenses generating sites and the ways expenditure in nature.
This organization does not exclude specific implementation of management
accounting work with computing situations, as was mentioned above, on the
other hand, is absolutely necessary to use electronic computer, given
workload.

1.3. The concept of costs and their role in decision making

Cost is an economic category and is universally accepted origin latin

verb "finding of", which means to establish, to fix something, the verb to
loose notion of "cost" to express "how much was spent or paid" for work or
object. Then, from this notion it was the notion of cost, whose content is
linked to consumption values to rise and to be reflected, must be based on
monetary value. Given the source of information (financial accounting) that,
viewed from this angle, the costs are synonymous with expenses.
Basically, the similarity between costs and production costs is
because as the great teacher said D.Rusu (1980)16, depending on the subject
of consumaţiunii generator, consumption values can be:
 productive, characterized by being made in production and have a
necsar help create new products, works or services;
 neutral, due to organizational and management failures recorded
during the activity;
 accidental, caused by preventing and combating the adverse effects of
natural disasters or accidents;
 special character arising from special activities, other than those
involving the production process.
In this context, only consumaţiunile with regard to productivity help
create new values, while all other meals as required and OMPF nr.1826/2003
are treated as expenses in the period.
Consumption of values is performed to obtain a product, a work or
provide a service to make a run calculations to be possible their summation
and the result is a synthetic indicator known as the "production cost".
From a practical perspective, consumption values, in most businesses,
not carried out to obtain a single unit of product or service works, but for a
specified quantity, depending on the specific technological process and the
organization of the production process. In this context, the unit cost of
product is an indicator determined by a mathematical calculation, the ratio of
expression value of consumption values (costs) they carry out an enterprise
with obtaining and selling its output for a certain period and quantity of
goods, works or services.
Economic theory defines cost as "part of the sales price of an
economic good which offsets the costs incurred by economic units for the
production and sale of that good"17, and traditional management accounting
states that it is the expression value of consumption of manpower and
materialized performed to obtain a product, a work or service at a time, which
takes the form of consumption and production costs borne by entrepreneurs
sales.

16
Rusu, D. – Bazele contabilităţii, Ediţia a doua revizuită şi completată, EDP, Bucureşti,
1980, p.153
17
M.Băbeanu şi colab.- Economie politică, vol.I, Reprografia Universităţii din Craiova, 1993.
 SHEET POST-CALCULATION

Release date Quantity released Order number Standard unit Total standard Date of Cost
cost cost execution effective
single
Document Matt. Matt. Salaries Social Total Manufac- Produc- Administ Selling Com- Production
first recover direct spen- direct turing tion or rative expenses plete settlement
and able ding costs overheads manu- expenses cost
auxiliary (-) facturing
. cost.
No Date Q Value

Total
Unfinished
production
Cost
effective
Settlement
±
Differences

Fig.nr. 4. A model for post-calculation

 There is no interest or clarification of IAS 2 "Inventories" and
maintained by IFRS 1 which, referring to the stock assessment states: "The
cost of inventories comprises all costs of acquisition and processing and other
costs incurred in bringing the inventories the form and where are now. "
Going on line IAS 2, OMPF 1826/2003 18 states: "The cost of
production or processing of inventory and production cost of assets includes
direct costs related to production, namely: direct materials, energy
consumption for technological purposes, direct labor and other direct
production costs and indirect costs of production quota allocated as rationally
related to their manufacture. "
Although we face many definitions of costs, there is a common note
as manager is required to achieve its objectives through other people.
Information they need is, by nature, less normalized, it depends on the
objectives to be followed and the manner in working with his team.
Therefore, a cost is a construction, it only makes sense in a given scenario.
If cost is a construction, which is found immediately to investigate not
meet the significant data management using solid media, often to predict the
future. In other words, if cost is a construction cost concept "real" is a bit
ambiguous and relative, yet it remains credible causal links that show the
object calculation.
Cost is specifically designated for all items of expenditure which can
be assigned and their aggregation, such as for example, a product, work,
service, project, task, etc..
Considering the reference of international accounting and provisions
OMPF 1826/2003 is necessary to determine the three categories of operating
costs of business activity:
• the supply phase, acquisition costs;
• the production phase, production costs;
• the phase distribution, distribution costs.
The acquisition cost comprises the purchase price of the stock
materials or goods, which can add import duties and any other expenses
necessary to bring stocks to its final form and be available to conduct
business. Usefulness of such cost is obvious: on the one hand, he became part
of the cost of production, consumption within made, on the other hand is a
tool for analysis and decision can be determined as a margin on the cost of
acquisition (Figure No. 5);

18
OMFP 1826/2003 pentru aprobarea Precizărilor privind unele măsuri referitoare la
organizarea şi conducerea contabilităţii de gestiune, publicat în Monitorul Oficial, Partea I
nr. 23 din 12 ianuarie 2004
 Cost Margin
Result margin the
Outside productio acquisi-
production n tion cost
Price costs
of Full cost Other
of production
sale
produc- costs
tion Cost
of Cost of
product acquisition
Fig.5. Scheme costs of operating cycle stages

Production or manufacturing cost is the expression value of what it

costs the manufacturer to obtain a product of a work or service, cost consists
of the purchase price of stocks consumed and other added costs of
undertaking in production (definition of this cost was made explicit at the
beginning of this paragraph). As seen from Figure 5, the difference between
selling price and production cost is the cost of production margin.
The cost of distribution is not an actual cost, it represents all sales
expenses. Definition may be so designed, as previous cost by reference to
costs incurred for sales made production.
Full cost is the effort by the manufacturer for obtaining and selling a
product or service work and consists of cost of production, general
administration expenses and distribution costs.
Each type of cost, as set out above, is characterized by three elements,
independent of each other, which may be submitted outlined as seen in
Figure 6.
If we consider the role of decision-making costs, costs in relation to
their content can be defined as follows:
• full costs - traditional full costs (without adjustments or additions);
full economic cost (with adjustments and additions to better economic
analysis);
• partial costs: variable costs (taking into account only the costs that
vary in relation to production or sale and excluding fixed costs) direct
costs (taking into account the fixed costs variable and its products,
calculated directly).
The three successive stages - supply, production, sales - consuming
resources that would have accumulated (property, stocks) and funded in
advance. It is unlikely that a company have the patience to wait for customers
to collect and pay suppliers and employees. This funding its own cost, is
called cost of capital.
 Costing must adapt enterprise organization and its
activities:
- Economic cost functions (purchasing, production,
distribution)
Field - Means operating cost (shop, factory ...)
application - Cost operating activities (all activities, products
families ...)
- Cost responsibilities (direction, head of department,
head of workshop ...)

Regrouping all costs relating to each

Costs product or item of cost calculation, they
complete allow calculation of a result on the product
selling price by comparing the full cost

Content It involves only part of the expenses

Costs selected (variable costs, direct costs and
partial specific costs) and determining costs
margins

• identified costs (actual or historical)

determined after the production
Time - • pre-calculated costs (standard or forecast)
calculation determined before the start of production
Source : B. et F. Grandguillot, Comptabilité de gestion, 8e édition, Gualino éditeur, 2006
Fig. 6. Cost characteristics

On the one hand, capital borrowed must be paid in interest, on the

other hand, capital contribution of shareholders is a resource whose cost is
not bear interest but is not accounted as an expense. In essence, shareholders
expected to pay their investment and risk posed hoping to "create value", ie
the benefit due.
Therefore, it is sufficient that the selling price to cover operating costs
and to obtain a margin to allow remuneration on capital employed which
allowed completion.
We conclude that, using information about the costs activităţiii makes
decisions about the structure and volume of business to increase profit
(keeping the manufacturing of products, giving others the manufacture or
introduction into manufacturing new products). Information on the structure
and evolution costs have an important role in the decision-making in order to
increase efficiency of work and also important for controlling internal
activities of the company.
 Social management interventions universe favors certain types of
costs, whose determination is useful in decision making, it's about
opportunity costs, external costs and marginal costs and who will do the
following highlights:

to discuss the opportunity costs have on the main purpose of cost
accounting, particularly interested in the cost of what was actually
done, measuring the costs involved of the actions while in office,
earning gaps are of fundamental importance . A worker, for example,
costs that far exceed his salary, and if he misses his job, is the
beginning of a chain of control loss costs, which are normally higher
operating cost position. On this basis, is defined and calculated
opportunity costs, which expresses the absence of possible outcomes.
There is additional spending, but the deprivation likely to achieve
results. The difficulty of measuring something that might happen,
than anything that took place, no accounting of these costs hidden
reality requires caution in their estimation;

external costs extends to social spending and businesses are
transferred wider community around them. Therefore, they will be
neglected in most calculations is limited to the unit. It is always
recommended that these costs can be eliminated since their transfer to
the community is only apparent and temporary;

marginal cost analyzes effects supplement (cost or profit)
consecutive to further social action. For example, to enhance the
employment costs incurred by a company can quantify the costs
determined by employing 1 to 10 additional employees. Such
reasoning is more convenient to assessing the cost of certain social
disruptions such as absenteeism. Using the marginal cost to determine
the social costs have a double advantage:
 it is appropriate to take account of changes in behavior that affects
a group. Many studies aimed at social analysis group reactions to
a particular action taken. Measuring change is greatly facilitated
by an instrument for assessing variations. If an action is measured
incidence of training in a workshop production will supplement
the costs compare very well trained with the opportunity to
supplement made products;
 provides the advantage of isolating the observed phenomenon and
removal costs of structure . Thus, when measuring the cost of
accidents, calculating the additional cost caused by an increase in
accidents eliminate difficult calculations to establish a medical-
social structures.
Accounting analysis should be adapted social phenomenon, which
makes the object move from cost accounting economic action (production,
investment), the economic analysis. The identification problem arises after
which the logic of social action in accounting analysis. Traditional
accounting, costing two references are logical:
• a logical space: the costs and results are calculated in relation to a
service workshop, a department, a plant or a division budget;
• a logic of production: the intended product during its manufacturing
process.
These logics are increasingly likely to translate reality rarely
dispersed units, organized in the network and the performance is basically not
technical but human. Originality problems we faced the company, requires
the adoption of new approaches to determine costs and social benefits.
Paying attention to the social function of the company lies in the fact
that it generates a series of hidden costs, unexplained by traditional
management accounting systems.
The concept of hidden costs and M. H.Savall belongs Zardet (1991)19
and refers to the cost that does not appear explicitly in the enterprise
information systems. The opposite of these costs are costs which are visible
three fundamental characteristics:

have specific names, standardized and recognized;

measured by precise rules and known;

subject to regular monitoring is to check their progress against a fixed
target.
Consequently, in his opinion H.Savall and M.Zardet, any cost element
that lacks one of the three properties is by definition a "hidden cost" and
generally refers to the cost of measures taken to eliminate disturbances . They
are related or additional human activity, or increased material consumption.
Thus, the company uses more material resources to correct malfunctions, and
its staff have to carry out further that they would be held in the normal
operation of the enterprise.
Since conditions may generate hidden costs in six areas of the
enterprise organizational (time management, working conditions, work
organization, implementation strategies, integrated training and
communication, coordination, monitoring objectives), hidden costs can be
grouped into two categories:
 the first category consists of hidden costs that are included in the costs
visible. They are cost effective and meet the real losses of the
enterprise;
 the second category consists of hidden costs are not included in the
costs visible. These are called are the potential costs and lack of

19
Savall, H., Zardet, M. - Maitriser les couts et les performances caches, Ed. Economica,
Paris, 1991
 production resulting from failure. They are virtual costs,
corresponding to subtasks.
Hidden cost-performance method, called socio-economic approach,
trying to reconcile economic and social dimension of the company, seeking
more effective management. Know all costs of the business enterprise is
useful to decision makers but not only measure and manage performance. In
the current economic conditions required a rigorous control of all categories
of resources at its disposal.
Identification of identifying hidden additional costs and loss of
benefits. Action on the causes that generate hidden costs have limited effects.
For example you can take action to reduce excessive absenteeism but its
phenomena can not be completely eliminated. There will always absenteeism
"natural".
Identify hidden costs should be the starting point for generating the
causes and solutions to eliminate or dimnuare their effect. According to H.
Savall (1997)20 concept of cost-performance allows the company to discover
hidden high domestic resources was scope to increase its economic
performance, not to decrease social performance without additional external
funding sources.
Although we agree with Professor H.Savall believe that detect
hidden costs involve additional costs (including personnel involved in the
analysis and improvement of information system) that some businesses,
especially small ones, they can not allows. Most companies in the Romanian
industry are SMEs with limited financial and human resources and
possibilities of application of the method cost-performance hidden within
these companies are questionable.
Hidden costs of enterprise applying this method of intervention can be
greatly reduced but not eliminated entirely. This company is able to eliminate
most of the malfunctions in his but can not act on the external causes
generating hidden costs such as public service strikes or slow functioning of
the justice system.
Therefore, it can be concluded that information provided to users of
management accounting should allow policy makers to act on costs to their
dominion.
Mastering costs is the main way of obtaining economic performance.
One of the competitive strategies of firms that have applied have proved very
good strategy is cost. This strategy, called "japanese strategy" is to achieve
supremacy in the market by charging lower prices due to lower costs.

20
Savall, H. - Les couts caches et l`analyse socio-economique des organisations,
Encyclopedie de gestion, Economica, Paris, 1997, p.708
 1.4. Perpetual inventory costs in support of stock

According the Regulations harmonized with European directives,

stocks are held for assets sold in the ordinary course of business, are being
produced for sale in the ordinary course of business, are in the form of raw
materials and other consumables to be used in production or services.
If we consider the three stages of the cycle of exploitation, in a
general manner can make the following schematic of stocks (fig.7):

STOCKS

Phase Production Phase

supply phase distribution

- goods - semiproducts - finished products

- raw materials -production in - residuals
- consumables progress - packaging
- packaging - finished products - goods

Fig.7. Stock structure in stages of operation

Classification of stocks according to phases operating cycle is relative,

it depends on the business: for example, a waste product for a company can
become raw material for another.
Regardless grouped as the size of the stock value is repeated in the
financial accounting balance sheet as an asset and therefore the question of
their evaluation.
When referring to the general issue of stocks, how to measure their
progress is dependent they are, namely:

Input Output

Supply Produce Consumption distribution

At acquisition The cost of CMP; FIFO;

cost production LIFO ;
Replacement cost;
Standard cost
Fig.8. Stock assessment stages
 As shown, the interests of management accounting is found in the
input stage of the stocks which requires the cost of purchasing and production,
but also in the output stage because consumption generates costs and
generate income distributions.
How to determine cost (stock assessment) in the input stage is
connected to the calculation of cost of production will be presented in the
following chapter. . In general, methods for assessing the stage leaving the
management of financial accounting are known reason, in what follows, we
present a comparative table of the advantages and disadvantages of each
method (Table 4), given the influence they have on costs to assist decision
makers in the choice of accounting options.
Table 4. Comparison of assessment methods
Method Features Advantages Inconvenience

- entries are evaluated - reduces the - evaluation period

quantitatively and average cost price end delay output
CMP at value fluctuations costing
period end - outputs are not only - value stocks is
quantitatively during altered when the
- CMP is calculated final variation of
at period end prices
- withdrawals and
stocks are valued at
the period end CMP

- entries are evaluated - reduce the - stock value is

quantitatively and average cost price altered if the final
CMP after value movements variation of prices
each entry - outputs are measured
quantity and value
(quantity x CMP)
- CMP is calculated
after each entry to a
new price

- each batch is - stock is valued at - outputs are

identified by reference the latest measured with a
to quantity and price lag from changes in
- may require a call out the prices, costs are
FIFO to several groups underestimated
entered
- stocks are made up of
lots that were not
 Method Features Advantages Inconvenience

consumed

- idem FIFO method - outputs are valued - stock is valued at

at latest prices the old prices, it is
LIFO undervalued
(in Romania is
not
recommended)

- outputs are carried at - outputs are valued - is a method of

Replacement cost of replacement at current prices the increasing
cost - at period end, it is possible inflationary period
necessary to correct prices
the theoretical cost
(scripting) to restore
the real cost

- this method is used in - stock movement - standard costs

forecasting can be evaluated need to be revised
management without waiting for constantly to keep
Standard - default costs are actual costing their nature and
cost compared with actual objective time
costs
- the differences are
analyzed
Sursa : B. et F. Grandguillot, Comptabilité de gestion, 8e édition, Gualino éditeur, 2006

A special feature is the methods mentioned above the production in

progress, issues to be presented in a separate paragraph.
Whatever method of evaluation of outputs, in terms of inventory
management, taken together, is necessary to verify the following relations:
Initial stock + Inputs - Outputs = final stock
Initial stock + Inputs = Outputs + Stock final
Initial Stock - Stock end = Outputs - Inputs

In terms of accounting, during the management, we are faced with

determining the theoretical stock (scripting), therefore, systematically, one
should compare it with actual stock reflection set in inventory and inventory
differences to correct any inventory theory. If these differences are the result
of unjustified gaps in management, cost differences affect the period in which
inventory was conducted.
 1.5. Practical applications, solved and proposed

1. Have the following information on a company:

Information 01.01. 31.12
Stock of raw materials 328 366
Stock production in progress 362 354
Stock of finished goods 146 150

Were used during the production of raw materials worth 1.732 um,
and cost of goods sold was 6.000 um
Determine: the cost of purchased raw materials, production costs and
period costs of finished products obtained.
Solution :
a. calculation of cost of raw materials purchased
Starting from the equilibrium relationship inventory (initial balance +
input = output + final balance), the cost of purchased raw materials (inputs in
stock) is determined as follows:
The cost of raw materials purchased (I) = cost of raw materials
consumed (E) + The final stock of raw materials - The initial stock of raw
materials = 1.732 + 366-328 = 1.770 um
b. calculation of the cost of finished products obtained
The same equilibrium relationship used for finished products, means
the cost of finished products obtained (I) as follows:
The cost of finished products obtained (I) = cost of finished products
sold (E) + The final stock of finished products - The initial stock of finished
goods = 6.000 + 150-146 = 6.004 um
c.Calculation period production costs (cost of manufactured
products)
The cost of finished products 6.004
+ The final unfinished production 354
- The original unfinished production 362
= Cost of manufactured products (finished 5.996
and unfinished)

2. ALFA Company produces umbrellas, assembling purchased blade

support. May saw 10,000 bought 10 pieces and 11,000 lei to 20 lei piece of
media, and has assembled 9,500 umbrellas, assembly cost is 15 Euro / piece.
He sold over 8,500 shades of the price of 60 lei / piece seller commission is 5
lei / piece.
Determine the cost of production and the full cost (return) of an
umbrella.
 Solution:
a. calculation of cost of production of umbrellas:
Cost of raw materials consumed: 285.000
 tissue (9.500 buc x 10 lei/piece)
 supports (9.500 buc x 20 lei / piece)
+ Cost of assembly (9.500 buc x 15 lei / piece) 142.000
= Cost of production of umbrellas assembled 427.000
Unit cost (427.000 : 9.500 piece) 45
b. umbrellas full cost calculation:
Cost of production of umbrellas sold 382.000
(8.500 buc x 45 lei / piece)
+ Cost of distribution 42.500
(8.500 buc x 5 lei / piece)
= Cost of completely 425.000

3. BETA company produces chocolate. It buys raw materials of 6.000

mu Initial stock of raw material is 1.000 mu, and the final stock is 2.000 um
Wages and depreciation of production is of 16.000 mu, and the distribution
are 4.000 um This is an initial stock of 3.000 um finished and a final stock of
5.000 u.m.
Calculate the production cost and full cost.

4. One company made the following costs: raw materials 10.000 lei,
14.000 lei direct labor wages, salaries for staff of 12.000 lei distribution,
distribution of company vehicles depreciation 15.000 lei, 18.000 lei
productive machinery depreciation, amortization 10.000 lei vehicle managers,
rent 4.000 lei (of which 60% production), high production capacity utilization
85%.
Determine the amount of expenses that will affect the income of
society.

5. Record the following charges in April of year N:

a) expenditure verification fee telephone, telex, 45.000 lei, 75.000 lei
travel expenses, salaries of staff management and maintenance department
ROL 1.000.000, 4.000.000 lei energy costs, depreciation on buildings
1.200.000 lei.
b) consumption of diesel and related drivers pay their own
transportation depot, diesel consumption 1.000.000 lei; wages 2.000.000 lei.
(c) consumption of raw materials 11 million lei, 2.000.000 lei direct
materials, direct wages 10.000.000 lei.
 (d) obtain the default price production worth 40.000.000 lei.
Solution:
Management accounting

1.a) - phone verification fee costs / telex

924 = 901 45.000

- travel expenses recorded by the entity

924 = 901 75.000

- wage expenditure , CAS, unemployment, health, accident fund, management

of staff (24,1% = 18% + 0,5% + 5,2% + 0,4%)
924 = 901 1.241.000

- energy costs in the enterprise

924 = 901 4.000.000

- depreciation expense for buildings

924 = 901 1.200.000

b)- diesel consumption

922 = 901 1.000.000

- driver wages, CAS, unemployment, health, accident fund

922 = 901 2.482.000

c)- raw materials

921 = 901 11.000.000

- direct materials
921 = 901 2.000.000

- direct salaries, CAS, unemployment, health, accident fund

921 = 901 12.410.000

2) - production at the predetermined price

931 = 902 40.000.000

- close accounts
902 = % 35.453.000
921 25.410.000
922 3.482.000
924 6.651.000

D 902 ___ C
Expenditures Production at the
36.935.000 predetermined price
40.000.000
S.C.Favorable differences 3.065.000

901 = 931 35.453.000

902 = 903 4.547.000
903 = 931 4.547.000

D 931 C
Price default Cost
40.000.000 35.453.000
S.D. – Favorable differences = 4.547.000
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