Cost Accounting

for Planning and Control

 Cost Accounting
for Planning and Control

Michael P Griffin
Raymond Jordan
 Contents

About This Course xi

How to Take This Course xiii

1 Introduction to Cost Accounting 1

The Role of Cost Accounting Today
The Uses of Cost Data
Cost Estimating and Price Setting
Decision Making
Cost Control
Cost Accumulation Methods
Standard Costs
The Process Cost Method
Job Order Costing
The Elements of Cost That Make Up the Product Selling Price
Cost Objects
Recap
Review Questions

2 Job Order Cost System 13

The Job Order Cost Sheet
Recording the Purchase and Requisition of Direct Materials
Accounting for Direct Labor Costs
Accounting for Manufacturing Overhead
Accounting for Finished Goods and Goods That Are Sold
Disposing of Over- or Under-applied Manufacturing Overhead
Immediate Write-off Method
Proration Method
Recap
Review Questions

v
vi Cost Accounting For Planning And Control

3 Process Costing: Joint and By-product

Costing 27
Comparison Between Job Order and Process Costing
The Basics of Process Costing
Single Process Costing
No Units Lost
Units Lost at Beginning of Period
Units Scrapped at Final Inspection
Multiple Process Costing
No Materials Added During Process 2
Materials Added During Process 2
Joint Products
Relative Market `slue Method
Unit Production Method
Weighted Average: Method
By-products
Recap
Review Questions

4 Indirect Manufacturing Costs 45

Predetermined Factory Overhead Rates
The Activity Base
Volume
Direct Materials Cost
Direct Labor Cost
Direct Labor Hours
Machine Hours
How to Determine the Best Activity Base
Activity-based Costing
Recap
Review Questions

5 Cost Accounting for Service Enterprises 57

Planning and Control
Budgeting and Pricing Alternatives
Single Direct Cost and Single Indirect Cost Pool
Multiple Direct Costs and Single Indirect Cost Pool
Multiple Direct Costs and Multiple Indirect Cost Pools
Cost Accounting for Service Departments
Direct Allocation
Step-down Method.
Recap
Review Questions
vii Cost Accounting For Planning And Control

6 Standard Costs 69
The Basics of Standard Costs
Direct Material as an Element of Cost
Determination of Standard Material Cost
Material Variances
Direct Labor as an Element of Cost
Determination of Direct Labor Cost Standards
Direct Labor Variances
Advantages and Disadvantages of the Component
Standard Cost Method
Factory Overhead Variances
Overhead Spending Variance
Overhead Idle Capacity Variance
Recap
Review Questions

7 Cost Estimating 87
The Cost Accountant and Cost Estimates
Brief History of the Learning Curve
The Doubling Concept
The Basic Formula
What: Is an Exponent?
Using the Learning Curve Formula to Estimate Costs
Estimating Labor Costs with Learning Curves
Assumptions That Underlie the Learning Curve
Applications of the Learning Curve
Factors That Influence Learning
What Learning Rate Can Be Expected?
Estimating Costs Using Quantitative Techniques
The High and Low Points Method
Linear Regression
Recap
Review Questions

8 Cost Reduction and

Manufacturing Loss Control 101
The Cost Accountant and Cost Reduction
Organizing for Cost Reduction
Cost Reduction Defined
The Cost Reduction Budget
Reporting Requirements
The Need for Instructions
Contributory Credit
Measuring Performance
A Sample Cost Reduction Problem
The Cost Accountant and Manufacturing Loss Control
Manufacturing Losses Defined
viii Cost Accounting For Planning And Control

The System
Reporting Requirements
Measuring Results Against the Budget
Recap
Review Questions

9 Cost Control 117

The Cost Accountant and Cost Control
Establishing Standards
Responsibility Reporting
Frequency of Reporting
Types of Reports
Analyzing Variances
Following Up
Controlling Clerical Expense
Recording Employee Work Segments
Reviewing Routines and Implementing Results
Work Sampling
Recap
Review Questions

10 Decision Making 1 133

Cost-volume-profit Analysis
Sensitivity Analysis
Some Examples
Capital Investment
The Mathematics of Compound Interest
The Present Value Concept
The Present Value and Investment Decisions
Decisions Involving Unequal Annual Returns
Recap
Review Questions

11 Decision Making II 149

Traditional Push Manufacturing
Nontraditional Pull System: Just-in-time Inventory System
JIT and Backflush Costing
Direct versus Absorption Costing
Economic Ordering Quantities (EOQ) for Purchased or
Manufactured Parts
The EOQ Range
The Cost of Money Factor
Sensitivity Analysis
Reorder Point, Stockout Risk, and Safety Stock
Make-versus-buy Decisions
The Expense Problem
Other Considerations
A Sample Problem
ix Cost Accounting For Planning And Control

Recap
Review Questions

Bibliography 175
Post-test 177
Case Study 189
Case Study Solution 195
- 199
Selected Readings 207
Index 227