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ch.1 No 1-3, CH 2 No 5

Cost accounting aims to capture the total cost of production by calculating variable and fixed costs. It helps management with decision making, planning, budgeting, and performance monitoring. Management accounting differs from financial accounting in its purpose, users, focus, rules, timelines and behavioral implications.

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26 views4 pages

ch.1 No 1-3, CH 2 No 5

Cost accounting aims to capture the total cost of production by calculating variable and fixed costs. It helps management with decision making, planning, budgeting, and performance monitoring. Management accounting differs from financial accounting in its purpose, users, focus, rules, timelines and behavioral implications.

Uploaded by

Grisherra Valeryandra
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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1. Explain definition of cost accounting and the role of cost accounting!

Cost Accounting is a form of managerial accounting that aims to capture a total


cost of production of company by calculating the variable costs ( each steps in
production ) also the fixed costs. It measures, analyzes and reports financial also
nonfinancial information related to the costs of acquiring resources in an organization or
corporation.
Role of cost accounting ( which produce cost information ) that is collected helps
to make management decision , plan, budget and monitor performance such as setting a
standard unit costs and recommend suitable cost-saving opportunities. The role is also
important in understanding where an organization is spending their money or products or
services are most profitable.

2. What is your opinion about costs and benefits information?

Our opinion regarding cost and benefits information is that there is a negation of it
with cost and benefits principles. Where the cost benefit principle is that the cost of providing
information through financial statements should not exceed its usefulness for the reader. The
important point is that some financial information is too expensive to produce. In other
words, financial information is not free to be collected and organized to compile financial
information into financial reports. Cost and Benefits information will help companies
compare the benefits of an action / purchase with costs, of course, the benefits must exceed
the costs (Cost and Benefits Approach). For example of this Principles , an organization has
just acquired another entity, and finds that there is some uncertainty regarding the final
outcome of derivatives to which the acquiree is a party.

An extensive amount of modeling could define the extent of the possible gains and
losses associated with these derivatives, but the cost of the modeling would be $10,000. It is
more cost-beneficial for the business to wait a few months for the derivatives to resolve
themselves. The controller learns that a long-term employee has been engaged in a low level
of petty cash theft for the past ten years. The estimated amount of the loss is a few thousand
dollars, though an extensive review by the firm's auditors could probably pin down a more
precise figure, at the cost of a $10,000 audit. The controller elects to skip the audit, since the
cost-benefit relationship is so poor.

3. How does management accounting differ from financial accounting?

Management Accounting Financial Accounting


Purpose of Information Help managers make Communicate an organization’s
decisions to fulfil an finance position to investors , banks ,
organization’s goals regulators and other outside parties
Primary Users Managers of the organization External users such as investors, bank ,
regulators and suppliers
Focus and emphasis Future – Oriented Past – Oriented
Rules and measurement and Internal measures and reports Financial statement prepared based on
reporting based on cost benefit GAAP and certified by external ,
analyses independent audit
Time span and type of Varies from hourly Annual and quarterly financial reports ,
reports information up to 20 years primarily on the company as a whole
with financial and non
financial reports on
products , departments ,
territories and startegies
Behavioral Implications Designed to influence the Primarily reports economic events but
behaviour of managers and also influences behaviour because
other employees manager’s compensation is often based
on reported financial results
1. Tools Manufacturing Company had the following account balances for the quarter ending
March 31, unless otherwise noted:

Work-in-process inventory (January 1) $ 140,400


Work-in-process inventory (March 31) 171,000

Direct materials used 378,000


Indirect materials used 84,000
Direct manufacturing labour 480,000
Indirect manufacturing labour 186,000

Property taxes on manufacturing plant building 28,800


Salespersons' company vehicle costs 12,000
Depreciation of manufacturing equipment 264,000
Depreciation of office equipment 123,600

Miscellaneous plant overhead 135,000


Plant utilities 92,400
General office expenses 305,400
Marketing distribution costs 30,000

Required:

Prepare a cost of goods manufactured schedule for the quarter.


Direct material Costs $378,000
Direct manufacturing labour $480,000
Overhead Cost :
Indirect Materials used $84,000
Indirect Manufacturing Labour $186,000
Property taxes on manufacturing plant building $28,800

Depreciation of manufacturing equipment $264,000

Plant utilities $92,400

Total Overhead costs $665,200

Total Manufacturing Costs $1,513,200

Cost of Goods Manufactured :

Work-in-process inventory (January 1) $ 140,400

Total Manufacturing Costs $1,513,200

Work-in-process inventory (March 31) $171,000

Cost of Goods Manufactured $1,824,600

4.

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