Cost Flow Case

Illustration Case
Lippy Company’s beginning and ending inventories for the month of November are as follows

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Lippy uses two factory overhead accounts, one for actual O.H (called factory O.H control) and
the other for O.H applied and charges factory overhead to production (DR WIP & CR fac-
tory O.H applied at 70% of direct labor cost (D.L is considered the factory O.H cost driver in
this case
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The company does not formally recognize over/under applied factory overhead until year-end

Assume also sales revenue during November amounted to $750,000 also marketing and selling
expenses $80,000 detailed later, General and Administration Expenses $29,000 detailed later

Assume also interest expense $50,000 and income tax rate is 30%
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 Cost Flow Case

Direct labor are wages paid to machine operators only, but factory supervisor’s salary is
considered indirect labor and included in factory O.H. Also wages paid to all production
service workers like machinery mechanics are considered indirect labor
and included in factory O.H

Direct labor costs are assumed to be variable, unless otherwise stated specifically

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Direct Costs: are costs that can be feasibly and specifically identified with specific cost object.
Accordingly
A) Direct materials used and direct labor both are direct costs because they can be specifically
identified with the production of finished goods

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B) Direct materials used and direct labor costs can be associated with specific product
traceable) hence, D.M. used and D.L. costs are product costs(
C) Prime costs = D.M. used + Direct Labor costs

Factory O.H. includes all indirect costs (both variable components and fixed components) relat-
ed to manufacturing activity and total factory O.H is considered product cost under full absorp-
tion costing approach, while fixed factory O.H is considered period cost under variable costing
approach
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,On the other hand total marketing costs such as salaries of sales personnel, commissions
advertising and total administrative expenses are period costs and are expensed in income
.statement as incurred

Cost of D.M. used = Beg. D.M. 67 Plus Net D.M. purchased (163 + 4 – 2) Minus Ending D.M. 62 = 170

Prime cost = D.M used 170 Plus D.L 200 = 370

Conversion cost (C.C) = D.L 200 Plus Factory O.H applied 140 =340

Total Factory O.H applied to production = $200 × 70% = $140

Over applied O.H = O.H applied 140 – actual O.H incurred 132= $8
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Manufacturing costs during the period =D.M used 170 + D.L 200 + Factory O.H applied 140 = 510

Total manufacturing costs (T.M.C) = BWIP 145 + Manufacturing costs during the period 510 = 655

Cost of goods Manufactured (COGM) = Total manufacturing costs (T.M.C) 655 Minus EWIP 171 = 484

Cost of goods available for sale = beginning F.G 85 + COGM 484 = 569

Cost of goods sold (COGS) = Cost of goods available for sale569 - Ending F.G inventory 78 = 491

Gross profit (gross Margin) = Sales revenue 750 - COGS 491 = 259

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 ‫‪Cost Flow Case‬‬
‫الحظ أتة يبدا الشغل من عند المحاسب المالي ثم جزء من الحسابات تصب في محاسبة التكاليف وأي شركة لها ثالثة‬
‫وظائف في الشركة (وظيفة صناعية ‪ Manufacturing‬و وظيفة ادارية وتسوقية ‪Marketing and selling‬‬
‫و وظيفة ادارية ‪Administrative‬‬
‫وبالتالي محاسب التكاليف ياخذ من المحاسب المالي كل الحسابات التي تتعلق الوظيفة الصناعية ويترك لة كل مايتعلق‬
‫بالوظيفتين االدارية والتسويقية‪ .....‬لية؟؟؟‬
‫الن الوظيفتين االدارية والتسويقية مصروف ‪ Expense‬يخص فترة وليس ‪ cost‬تتعقب منتج ‪,‬يظهر في ‪ I\S‬لحظة‬
‫وقوعة ولذلك اطلق علية ‪ Period cost‬مصروف يخص فترة وبالتالي فهو‬
‫‪non-manufacturing & non inventoriable cost‬‬
‫وبالتالي كل مايتعلق بالوظيفة الصناعية فهو ‪Product & Manufacturing cost‬‬

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‫وبعد ما اخد محاسب التكاليف المعلومات التي تخص الوظيفة الصناعية من المحاسب المالي اصبح معاة‬
‫‪)Product Cost (DM/DL/MOH‬‬
‫ويجي الوقت ان محاسب التكاليف يرد الجميلة للمحاسب المالي ويديلة ‪ )Inventories(RM/WIP/FG‬علشان‬

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‫يصور بيهم الميزانية ومستني كمان ‪ COGS‬علشان يعمل بيها ‪ Matching‬مع ‪ Sales Revenue‬علشان يعمل‬
‫‪Gross Profit‬‬
‫اذا المحاسب المالي مستني من محاسبالتكاليف رقمين كبار‬
‫‪ -1‬رقم في الميزانية (‪)inventory‬‬
‫‪ -2‬رقم في قائمة الدخل (‪)COGS‬‬

‫مالحظات علي التمرين‬

‫(‪ )Beg DM‬خامات اول المدة باقية من شهور او سنين فاتت ودة معناة اننا شغالين بقالنا فترة‬
‫(‪ )INDM‬خامات غير مباشرة من حيث ‪cost benefit‬‬
‫)‪)Beg WIP‬‬ ‫(‪(DM + DL+ MOH (145,000‬‬
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‫(‪ )Transportation in‬تكلفة نقل الخامات ليس مصروف يخص فترة بينما تكلفة تخص الخامة‬
‫(‪ )Actual OH‬جميع التكاليف الصناعية الغير مباشرة‬
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 ‫‪Cost Flow Case‬‬

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‫مع مالحظة ان الذي يحمل علي االنتاج اسمة وطبيعتة ‪CR OH‬‬
‫‪ Applied‬ودة بتعملة معظم الشركات وبالتالي اي شركة عندها حسابين‬
‫‪OH‬‬
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‫‪ Factory OH Control Account‬فعليات‬ ‫‪ -1‬‬

‫‪ OH Applied‬المحمل‬ ‫‪ -2‬‬

‫ودة يسمل نظام ‪ Normal costing system‬بينما الذي يعمل علي‬

‫الفعليات فقط فهو نظام ‪Actual system‬‬

‫‪Amir Wagdy‬‬ ‫     ‪Page 4‬‬

 Cost Flow Case

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Notes
Prime cost = D.M used 170 Plus D.L 200 = 370
Conversion cost (C.C) = D.L 200 Plus Factory O.H applied 140 =340
Total Factory O.H applied to production = $200 × 70% = $140
Over applied O.H = O.H applied 140 – actual O.H incurred 132= $8
Manufacturing costs during the period =D.M used 170 + D.L 200 + Factory O.H applied 140 = 510
Total manufacturing costs (T.M.C) = BWIP 145 + Manufacturing costs during the period 510 = 655
Cost of goods Manufactured (COGM) = Total manufacturing costs (T.M.C) 655 Minus EWIP 171 =
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484
Cost of goods available for sale = beginning F.G 85 + COGM 484 = 569
Cost of goods sold (COGS) = Cost of goods available for sale569 - Ending F.G inventory 78 =491
‫هدية للمحاسب املالي‬

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 ‫‪Cost Flow Case‬‬
‫فواتيرموجودة في دفاتراملحاسب املالي بيتعامل مع االجمالي بينما محاسب التكاليف يتعامل مع مايخص الوظيفة الصناعية فقط‬

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 Cost Flow Case
.The company does not formally recognize over/under applied factory overhead until year-end
Assume also sales revenue during November amounted to $750,000 also marketing and selling
expenses $80,000 detailed later, General and Administration Expenses $29,000 detailed later
Assume also interest expense $50,000 and income tax rate is 30%

‫في دفاتر املحاسب املالي‬

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‫ من املحاسب املالي‬COGS ‫وياخد‬Income statement ‫واالن دور املحاسب املالي في اعداد قائمة الدخل‬
‫ من املحاسب املالي‬COGS ‫وياخد‬Income statement ‫واالن دور املحاسب املالي في اعداد قائمة الدخل‬
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