Cost Accounting : PERTEMUAN V
KEMAMPUAN AKHIR YANG DIHARAPKAN
Mahasiswa mampu menguraikan pengerian
liabilities dan equity, jenis-jenis nya dan menilai liabilities dan equity serta mengerti tentang
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Cost and management
accounting
• Provides management with costs for
products, inventories, operations or functions and compares actual to
predetermined data
• It also provides a variety of data for
Functions of managerial
accounting
• Determining the cost
• Providing relevant information for
better decision-making
• Providing information for planning,
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Planning
• Deals with the estimation of product
Control
• Deals with the maintenance of
product costing record, comparison of actual performance with standards or budgets, anlaysis of variances,
recommendation of corrective
actions, controlling cost to ensure operational efciency and
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Decision-making
• Deals with whether it is more
proftable to make or buy a
Application
• Cost accounting has extended from
manufacturing operations to a
variety of service industries such as hotels, bands, airline, etc
• Cost accounting system should be
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Element of cost
• Cost object • Cost
• Cost unit
Cost object
• It is an activity or item or operation
for which a separate measurement of costs is desired
• E.g. the cost of operating the
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Cost
• It is the amount of expenditure
incurred on a specifc cost object
• Total cost = quantity used * cost per
Cost unit
• It is a quantitative unit of product or
service in which costs are
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Cost centre
• It is a location or function of an
organisation in respect of which costs are ascertained
• E.g. the rent, rates and maintenance
Proft centre
• It is location or function where
managers are accountable for sales revenues and expenses
• E.g. division of a company that is
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Cost classifcation
• Direct cost
Direct cost
• Cost that can be identifed
specifcally with or traced to a given cost object
• The direct costs consist of the
following three elements:
– Direct materials – Direct labour
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Direct materials
• The cost of materials – the cost of
materials used entering into and
becoming the elements of a product or service
Direct labour
• The cost of remuneration for working
time
• E.g. assembly workers’ wages in toy
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Direct expenses
• Other costs which are incurred for a
specifc product or service
Indirect cost (overhead)
• Cost that cannot be identifed
specifcally with or traced to a given cost object
• They are identifed with cost centres
as overheads
– Indirect materials – Indirect labour
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Indirect materials
• Such as stationery, consumable
supplies, spare parts for machine
Indirect labour
• Such as salaries of factory
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Indirect expenses
• Such as rent, rates, depreciation,
Cost accumulation
•Prime cost = direct materials + direct labour + direct expenses
•Production cost = Prime cost + factory overhead OR
= Direct materials + Conversion cost
*Conversion cost is the production cost of converting raw materials into finished product
•Total cost = Prime cost + Overheads (admin, selling,distribution cost)
OR
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Cost coding
• A code is a system of symbols
designed to be applied to a classifed set of items to give a brief, accurate reference, facilitating entry, collation and analysis
• Coding is important in modern
computerised accounting systems for catergories various composite
Reasons
• To reducing error owing to
descriptions
• Enable easy recalling
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Cost behaviour
• Costs can be classifed into variable,
Variable cost
• It increases or decreases in direct
proportion to levels of activity, but the unit variable cost remains
constant
• E.g. cost of food served in a
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Fixed cost
• Total fxed cost remains constant
over a relevant range of activity level but unit fxed cost falls with an
Semi-variable cost
• It processes characteristics of both
fxed and variable cost
• It increases or decreases with
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Step cost
• It remains constant for a range of
activity levels, then, on further
increase in activity, the cost jumps to a new level and remains constant
Cost for stock valuation
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Unexpired cost
• Unexpired costs are the resources
that have been acquired and are
expected to contribute to the future revenue
• They will be recorded as assets in
current period
• They will be charged as expenses
Expired costs
• Expired costs are the expenses
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Product cost
• Product cost are related to the goods
purchased or produced for resale
• If the products are sold, the product cost
will be included in the cost of goods sold and recorded as expenses in current period
• If the products are unsold, the product
costs will be included in the closing stock and recorded as assets in the balance
Period cost
• Period cost related to the operation
of a business
• They are treated as fxed cost and
charged as expenses when they are incurred
• They should not be included in the
Includes cost to purchase goods plus
freight-in
Beginning inventory Plus: Purchases, net Plus: Freight-in
Less: Ending inventory
Net sales revenue $$$$ Cost of goods sold $$$$
Gross proft $$$
Operating expenses $$$
Operating income $$$
Other income (expense) $$
Net income $$$
Any Company Income Statement
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Net sales revenue $128,500
Cost of goods sold:
Beginning inventory $7,400 Plus: Purchases 62,800 Less: Ending inventory (6,000)
Cost of goods sold 64,200
Gross proft 64,300
Selling and administrative expense 45,400
Net income $18,900
Gonzales Brush Company Income Statement
For the year ended December 31, 2011
Cost of goods
sold
Units sold Unit cost of one brush
Use labor, plant, supplies and facilities to
convert raw materials into fnished products
Three kinds of inventory
Direct costs Indirect costs
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Cost object: Anything for which managers want a separate measurement of cost
Includes only indirect costs related to
manufacturing
Examples:
◦ Indirect materials
◦ Indirect labor
Other costs related to the manufacturing
facility and plant assets
◦ Repairs & maintenance
◦ Utilities
◦ Rent & insurance
◦ Property taxes
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Net sales revenue $$$$$$$
Cost of goods sold:
Beginning fnished goods inventory $$$$$$ Plus: Cost of goods manufactured $$$$$ Less: Ending fnished goods inventory ($$$$$)
Cost of goods sold $$$$$$
Gross proft $$$$$$
Selling and administrative expense $$$$$
Operating income $$$$$$
Any Manufacturing Company Income Statement
For the year ended December 31, 2011
Type of company Inventoriable
product costs Period costs (Expenses)
Service company None Salaries, depreciation, utilities, advertising, insurance, property taxes
Merchandising company
Purchases plus freight
in Salaries, depreciation, utilities, advertising, insurance, property taxes and delivery expense
Manufacturing company
Direct materials, Direct labor and manufacturing
Ofce salaries,
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Direct labor &
manufacturi ng overhead
Beginning Work in process inventory $$$ Add: Direct materials used
Beginning direct materials inventory $$$ Plus: Direct materials purchased $$$ Less: Ending direct materials inventory ($$$)
Direct materials used $$$
Direct labor $$$
Manufacturing overhead $$$
Total manufacturing costs incurred during the year $$$ Total manufacturing costs to account for $$$ Less: Ending Work in process inventory $$$
Any Manufacturing Company
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Direct materials
inventory Work in process inventory Finished goods inventory
Beginning
inventory Beginning inventory Beginning inventory + Purchases and
freight-in + Direct materials used + Cost of goods manufactured = Direct materials
available for use + Direct labor = Cost of goods available for sale + Manuf. overhead
- Ending inventory - Ending inventory - Ending inventory
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Beginning Work in process inventory $6,000 Add: Direct materials used 15,000
Direct labor 7,000
Manufacturing overhead 18,000
Total manufacturing costs incurred during the year 40,000 Total manufacturing costs to account for 46,000 Less: Ending Work in process inventory (3,000) Cost of goods manufactured $ 43,000
Max-Fli Golf Company
Schedule of Cost of Goods Manufactured For the year ended December 31, 2010
