Cost Accounting

and Control
Reviewer
Chapter 1:Introduction to Cost Accounting
Cost Accounting - is an expanded phase of general or financial accounting
which informs management promptly with the cost of rendering a particular
service, buying and selling a product, and producing a product.
— it is the field of accounting that measures, records, and reports information
about costs.
Conparison of Financial Accounting and Managerial Accounting
Financial Accounting Managerial Accounting
reporting to external reporting to internal
parties, including investors parties
and creditors addresses imdividual or
focus on the enterprise as a divisional
whole futuristic data
historical transaction data does not follow GAAP
follow GAAP
 A merchandising company normally
buys a product that is ready for resale
when it is receive.

Merchandising
Beginning merchandise inventory xxx
Plus: Total Purchases xxx
Costs of Goods available for sale xxx
vs. Less: Ending merchandise inventory
Cost of goods sold
xxx
xxx
Manufacturing A manufacturing company the

Operations creation of new products by the

machinery either from raw materials
or other components.

three inventory accounts:

- Materials Inventory
- Work in Process Inventory
- Finished Goods Inventory
Unit cost information:
1. Determining the selling price of a product
2. Meeting competition
3. Bidding on contracts
4. Analyzing profitability

PLANNING and CONTROLLING

most important functions of cost accounting
PLANNING - establishing objectives or
goals.
three components:
1. Strategic planning - long range goals
2. Tactical planning - short term goals
3. Operations planning - day to day implementation

CONTROLLING - objectives identified in the

planning process are being accomplished
Two basic product-costing systems

1. Job order costing - making one of a kind or special order

products.
2. Process costing - production of the same or similar goods.

Process cost system - is product Operation costing - often used in

costing system used by companies repetitive manufacturing where
that make a large nimber of similar finished products have common, as
products or maintain a continuous well as distinguishing characteristics.
production flow.
Chapter 2 - Costs Concepts and Classifications
Cost
— associated with all types of business.
— vakue sacrificed for goods and services that
are expected to bring a current or future benefit
to the organization
Manufacturing costs/product costs Non - Manufacturing
Direct materials - transformed into finished costs/product costs
product, can be traced and part of the product.
Direct labor - working directly on the product. Marketing or selling expenses - all
Factory overhead - cannot be classified as costs necessary to secure customer
direct materials or direct labor costs. orders.
Administrative or general expenses
- cannot logically be included unde
DM + DL = prime costs either production or marketin.
DL + FO = conversion costs
Cost classified as to variability.
Fixed cost - cost which remain constant.
classified into two:
1. Committed fixed cost - long term
commitments.
2. Managed fixed costs - incurred on a short
term basis.
Variable costs - cost which vary directly
Mixed costs - costs vary with the level of
production.
Semivariable cost - cost usually represents
a minimum fee for making a particular item
or service availabl.
Step cost - cost changes abruptly at various
activity levels.
(1) HIGH LOW METHOD
Direct departmental charges - that are
Variable cost per unit = (Highest activity cost - Lowest Activity cost )
————————————————————
immediately charged to the particular
(Highest acting units - Lowest Activity units) manufacturing department.
Indirec departmental charges - originally charged
to some other manufacturing department
(2) METHOD OF LEAST SQUARE Standard cost - is a budget for this production of
one unit of product or service.
3 methods: Opportunity cost - one alternative is chosen over
Formula 1 = Y=a+bx another.
Formula 2 = €Y=na+b€x Differential cost - present under alternative but is
Formula 3 = €XY=€xa+b€x absent in while or in part under another
alternative.
Common cost - facilities or services employed in two Relevant cost - cist that changes across the
or more accounting periods. alternatives.
Joint cost - incurred in the manufacturer or two or Out of pocket cost - cost that requires the
more products at the same time. payment of money.
Capital expenditure - to benefit more than one accou Sunk cost - they are nor differential cost.
ting periods and is recorded as an asset. Controllable cost - has power to authorize the
cost
Revenue expenditure - to benefit current period only
and is recorded as an expense.
 CHAPTER 3: Cost Accounting Cycle
Cost of Goods Sold
Manufacturing Inventory Accounts
manufacturing companies use Direct materials uses
perpetual inventory approach Direct labor
3 accounts: Factory Overhead
Materials Inventory Total Manufacturing costa
Work in process Inventory Add: Work in process,beg
Finished Goods Inventory Cost of goods put into
Materials Inventory - is made up of the process
balance of materials Less: Work in process,end
Work in process Inventory - all Cost of goods manufactured
manufacturing cost ls incurred and Add: Finished goods, beg
assigned to products being produced. Total goods available for sale
Finished Goods Inventory - made up of the Less: Finished goods, end
cost or products completed but unsold as Cost of goods sold - normal
of the date.
Chapter 4: Cost - Volume = Profit Analysis
Cost-volume-profit analysis
Estimates how channges in costs (variable and fixed) sales volume and
price affect a companys profit
Cash Flow Statement | As of January 1, 2025
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