Cost Accounting Reviewer PDF

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INTRODUCTION TO COST ACCOUNTING

CLASSIFICATION AND CONCEPTS OF COSTS

FINANCIAL ACCOUNTING

I. Cost classified as to relation to a product

- use of accounting information for reporting to external users - reports prepared focused on the enterprise as a whole - based on historical data - precise, verifiable, free from bias, relevance, timeliness - restricted to peso

A. MANUFACTURING COSTS/ PRODUCT COSTS

MANAGERIAL ACCOUNTING - commonly addresses individual or divisional concerns - focuses on the needs of parties within the organization - information may be current or forecasted - relevance, timeliness - economic measure (peso), physical measure (units), relationship measure (ratio)

*Direct Materials- materials which are traceable and can be conveniently measured to the product *Direct Labor- labor time that is physically traceable to the products being manufactures *Factory Overhead- all manufacturing costs that cannot be classified as DM or DL (indirect materials, indirect labor, all other types of manufacturing overhead like depreciation on machinery or factory building) Prime Cost- DM + DL Conversion Cost- DL + FOH

COST ACCOUNTING - intersection between financial accounting and managerial accounting - provides product cost information to external parties and managers PLANNING – process of establishing objectives or goals *STRATEGIC- setting long range goals *TACTICAL- setting short range goals *OPERATIONS – day to day implementation of tactical plans CONTROL – process of monitoring the company’s operations and determining whether the goals are attained

B. NON-MANUFACTURING COSTS/PERIOD COSTS *Marketing/Selling Costs- cost incurred in securing orders from customers and providing customers with the finished products (ex. Sales commission, storage of finished goods, depreciation of selling equipment) *Administrative Costs- executive, organizational and clerical costs that are not related to manufacturing or marketing (ex. CEO’s salary, depreciation on administrative building) II. Cost classified as to variability *Variable Cost- items of cost which may vary directly, in total, in relation to volume of production *Fixed Cost- items of cost which remain constant In total, in relation to the volume of production

*Mixed Cost- items of cost with fixed and variable components (two types: semivariable cost and step cost)

COST ACCOUNTING CYCLE Cost Flow in a Manufacturing Company

HIGH-LOW POINT METHOD VC = HC-LC HA-LA

*always mind the number of units/activity

Beg Pur

Materials 45,000 105,000 95,000

Linear Equation End M = a + bx M is the total cost A is the fixed cost B is the variable cost X is the number of quantity III. Costs related to decision-making *Opportunity Cost- the benefit given up when one alternative is chosen over another *Differential Cost- cost that is present under one alternative but is absent in whole or in part under another alternative (an increase in cost is known as incremental cost and a decrease in cost is known as decremental cost) *Relevant Cost- a future cost that changes across the alternatives *Sunk Cost-costs that have been incurred but are not affected by any current/future action *Standard Cost- predetermined costs for DM, DL and FOH *Out-of-pocket cost- cost that requires the payment of money (or other assets) as a result of their incurrence

Work in Process

Used

Beg

15,000

DM

75,000

DL

100,000

55,000

Finished Goods Beg

25,000

COGM

140,00 0

150,000

FOH 55,000 140,000 End 105,000

COGM

COGS COGS 150,000

Factory Overhead-Applied 55,000 Factory Overhead-Control In-DM

20,000

In-DL

45,000

COGS Statement DM used DL incurred FOH-applied Total Manufacturing Cost WIP, beg TCoGPiP

75,000 100,000 55,000 230,000 15,000 245,000

TCoGM 140,000 FG, beg 25,000 TCoGAfS 65,000 FG, end 15,000 Unadj. TCoGS 150,000 Less: Allow. For O/U 10,000

WIP, end

105,000

Adj. TOCGS

160,000

ACCOUNTING FOR MATERIALS

WEIGHTED AVERAGE METHOD

INVENTORY CONTROL PROCEDURES

Periodic = Inventory, Beg + Total Purchases Total Purchasing Costs

1. Order Cycling – when the inventory level drops to a 60-day supply, an order will be placed for a 30-day supply 2. Min-max method – when the inventory reaches the minimum level, an order is placed to increase the inventory to the maximum level 3. Two-bin method – materials ordered will be placed in the first bin and the second bin will contain the materials to be used between the ordering and delivery 4. Automatic order system – an order is automatically placed when the level of inventory reaches a predetermined order point quantity 5. ABC Plan – materials are grouped depending on the value of item MATERIAL CONTROL 1. Limited Access – only authorized personal should have access to materials storage area 2. Segregation of Duties – duties should be divided to minimize opportunities for misappropriation of inventories 3. Accuracy in Recording – inventory records should permit the determination of inventory quantities on hand upon request

Perpetual = unit price changes when purchase occurs SPOILED UNITS & DEFECTIVE UNITS Spoiled Units 





Economic Order Quantity

√ 2 ( AD ) (OC ) CC

Order Point = Daily Usage x Lead Time FIFO METHOD COSTING = Inventory, End x Latest Purchasing Prices

xxx

All production Spoiled Goods FOH-Control Work in Process

xxx xxx

xxx

xxx

Defective Materials

CONTROLLING THE INVESTMENT IN MATERIALS

EOQ =

Specific job Spoiled Goods Work in process



Specific job Work in process xxx Materials Payroll FOH-Applied

xxx xxx xxx

All production FOH-Control xxx Materials Payroll FOH-Applied

xxx xxx xxx

ACCOUNTING FOR FACTORY OVERHEAD

PROCESS COSTING

Base to be used

FIFO

1. DL hours

=

est FOH est DL hrs.

2. DL cost

=

est FOH est DL cost

x 100

3. Machine hours

=

est FOH est machine hrs

4. DM cost

=

est FOH est DM cost

5. Units of production =

x 100

est FOH est units of production

ACCOUNTING FOR LABOR Labor Overhead 1. Waiting or idle time – cost of non-productive hours of direct labor Work in process – Job 101 FOH Control Accrued Payroll

xx xx xx

2. Overtime premium – represents amount paid, in excess of regular rate, to employees working in excess of 8 hours in a day, or working holidays or their rest day Work in process FOH control Accrued Payroll

xx xx xx

WiP, beg

xx

Started UTA

xx xx

Quantity Schedule

DM

CC

WiP, beg S&C WiP, end UAF

xx xx xx xx

xx xx xx xx

Costs Charged to the Department Cost of WiP, beg Cost incurred during the period TCA

DM xx xx xx

CC xx xx xx

TOTAL xx xx xx

Cost per unit Cost incurred during the period / EUP Cost per EUP

xx xx xx

xx xx xx

xx xx xx

xx xx xx xx xx xx xx

xx xx xx xx xx xx xx

Total Cost of Units in Completed and Transferred Cost of WiP, beg xx Add’l cost incurred to C&T xx Total Cost to C&T units in WiP, beg xx Total Cost of Units S&C xx xx Cost of WiP, end xx TCAF xx

For DL & DM

WEIGHTED WiP, beg Started UTA C&T WiP, end UAF

xx xx xx xx xx xx

ACTUAL (AQ x AP) AQ (AP-SP)

SP (AQ x SQ)

For FOH Variable

Quantity Schedule

DM

CC

C&T WiP, end UAF

xx xx xx

xx xx xx

Costs Charged to the Department Cost of WiP, beg Cost incurred during the period TCA

DM xx xx xx

CC xx xx xx

TOTAL xx xx xx

Cost per unit TCA / EUP Cost per EUP

xx xx xx

xx xx xx

xx xx xx

Cost Accounted For as follows Cost of units C&T Cost of WiP, end TCAF

xx xx xx

xx xx xx

xx xx xx

ACTUAL (AQ x AP)

3 way = (1+3) + 2 + 4 2 way = (1+2+3) + 4

STANDARD (SQ x SP)

(AQ x SP) AQ (AP-SP)

SP (AQ x SQ)

FIXED ACTUAL (AQ x AP)

STANDARD (SQ x SP)

(NCQ x SP) SP (NCQ x SQ)

JOINT PRODUCTS – main BY PRODUCTS – incidental Sales Value @ Split Off Method Units (x) Price (=) Total Sales Value

STANDARD COSTING 4 way = 1 + 2 + 3 + 4

STANDARD (SQ x SP)

(AQ x SP)

Weight Joint Cost Allocation (TSV/Tot TSV) (Weight x Tot JCA)

A

xx

xx

xx

x/x

xx

B

xx

xx

xx

x/x

xx

C

xx

xx

xx

x/x

xx

Sold (%)

Inv, End COGS Sales Gross Margin (JCA x unsold) (JCA x sold) (TSV x sold) (Sales – COGS)

GM % (GM/Sales)

Sold (%)

Inv, End COGS Sales Gross Margin (JCA x unsold) (JCA x sold) (TSV x sold) (Sales – COGS)

GM % (GM/Sales)

A

xx

xx

xx

xx

xx

xx

A

xx

xx

xx

xx

xx

xx

B

xx

xx

xx

xx

xx

xx

B

xx

xx

xx

xx

xx

xx

C

xx

xx

xx

xx

xx

xx

C

xx

xx

xx

xx

xx

xx

NRV Method Cost (-) Further Cost (=) NRV

Weight (NRV/Tot NRV)

Joint Cost Allocation CGAfS (Weight x Tot JCA) (JCA+further cost)

A

xx

xx

xx

x/x

xx

xx

B

xx

xx

xx

x/x

xx

xx

C

xx

xx

xx

x/x

xx

xx

Sold (%)

Inv, End COGS Sales Gross Margin (JCA x unsold) (JCA x sold) (TSV x sold) (Sales – COGS)

GM % (GM/Sales)

A

xx

xx

xx

xx

xx

xx

B

xx

xx

xx

xx

xx

xx

C

xx

xx

xx

xx

xx

xx

PHYSICAL MEASURE Pound P

Weight (P x TotP)

JCA (Weight x Tot JCA)

A

xx

x/x

xx

B

xx

x/x

xx

C

xx

x/x

xx...