Chap 1

Sunday, 2 October 2022 10:59 am

Cost accounting
- measures, records and reports information about
cost.
- Cost of rendering a particular service, buying and
selling a product and producing a product
- Developed originally for manufacturing business

Internal user
- Managers for planning, controlling and decision
making.
External User
- Government, those who provide funds and those
who have various interest in the operations of the
entity

Merchandising
- Buys a product and ready for a resale
- Formula:
Beginning merchandise Inventory xxx
Plus: Total purchases xxx
- Cost of goods available for sale xxx
Less: Ending Inventory (xxx)
Cost of Goods sold xxx

Manufacturing
- Conversion of raw materials into finish product by
using labor and incurrence of various factory
expenses.
- Three inventory accounts: Materials Inventory,
Work in Process Inventory and Finished Goods
Inventory
- Purchased Materials used = Ending Materials
Inventory Balance
- Factory overhead
○ Indirect materials
○ Indirect labor
○ Utility cost
○ Depreciation of factory machinery
○ Depreciation of factory building
○ Supplies
- Ending Balance of Work in Process Inventory
○ Cost remaining
- Finished Goods Inventory Account
○ Completed goods
- Ending Balance of Finished Goods Inventory

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 - Ending Balance of Finished Goods Inventory
○ Costs attached to unsold items at year end
- Cost of Goods Sold Account
○ Units sold

Marketing Decision
- Determining the selling price
○ Enough to cover the cost, marketing and
administrative expenses, and provide a
profit
- Meeting Competition
- Bidding on contracts
- Analyzing Profitability

PLANNING
- Process of establishing objectives or goal for the
firms and determining the means by which the
firm will attain them
- Provides means of coordinating all of the
operations of firm
- Three Components
○ Strategic Planning
▪ Long range goals and determine the
overall directions of the company
○ Tactical Planning
▪ Shorter range (time period)
▪ Emphasizes plans to achieve strategic
goals
○ Operations Planning
▪ Day to day implementation of tactical
plans
▪ Emphasizes the coordination of the
major factors of production
□ Materials
□ Labor
□ Facilities

CONTROL
- Process of monitoring the company's operations
- Determining whether planning's objectives are
accomplished

TWO BASIC PRODUCT-COSTING SYSTEM

○ Provide product unit cost information for
pricing, cost control, inventory valuation and
income statement preparation
1. Job order costing
a. System for allocating cost to groups of
unique product
b. Each job becomes cost center
c. One of a kind or special- order product
d. Measure cos for each completed job rather
than for set time periods

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 than for set time periods
2. Process Costing
a. System applicable to a continuous process of
production of the same or similar goods
b. Processing department becomes a cost
center
c. Grouped by departments or work center
d. Emphasizes weekly or monthly time period
3. Hybrid Costing System (Operation System)
a. Includes both job-order product costing and
process product costing
b. Large orders
i. Batch

MANUFACTURING

Cost of Materials used xxx

Add: Cost of Labor services xxx
Factory overhead xxx
Work in Process Inventory xxx

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