COST ACCOUNTING AND
CONTROL
MARIEL SUN F. JURILLA
Subject Instructor
COLEGIO DE STA.ANA DE VICTORIAS, INC.
CLASSROOM RULES
F2F or Online
CHECKING OF ATTENDANCE
WILL BE STRICTLY OBSERVED.
COLEGIO DE STA.ANA DE VICTORIAS, INC.
COURSE OUTLINE
Chapter 1: Introduction to Cost Accounting
Chapter 2: Costs – Concepts and Classification
Chapter 3: Cost Accounting Cycle
Chapter 4: Job Order Costing
Chapter 5: Just In Time and Backflush
Accounting
Chapter 6: Accounting for Materials
Chapter 7: Accounting for Labor
COLEGIO DE STA.ANA DE VICTORIAS, INC.
COURSE OUTLINE
Chapter 8: Accounting for Factory Overhead
Chapter 9: Process Accounting
Chapter 10: Average and FIFO Costing
Chapter 11: Joint Products and By-Products
Chapter 12: Standard Costing
Chapter 13: Cost-Volume-Profit (CVP)
Analysis
COLEGIO DE STA.ANA DE VICTORIAS, INC.
CHAPTER 1: INTRODUCTION TO
COST ACCOUNTING
Learning Objectives:
• Distinguish between financial, managerial
and cost accounting
• Distinguish between merchandising and
manufacturing operations
• Identify the uses of cost accounting data
• Distinguish between job order costing and
process costing
COLEGIO DE STA.ANA DE VICTORIAS, INC.
INTRODUCTION TO COST
ACCOUNTING
Primary objective of accounting:
To provide financial information about an
economic entity to different types of users.
Users of accounting:
• Internal
• External
COLEGIO DE STA.ANA DE VICTORIAS, INC.
INTRODUCTION TO COST
ACCOUNTING
Cost Accounting is:
• 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.
COLEGIO DE STA.ANA DE VICTORIAS, INC.
INTRODUCTION TO COST
ACCOUNTING
Cost Accounting is:
• Measures, records, and reports information
about costs.
All types of business entities – manufacturing,
merchandising, and service businesses – require
information systems which provide the necessary
financial data.
COLEGIO DE STA.ANA DE VICTORIAS, INC.
Financial
Accounting
Managerial
Accounting
Cost Accounting
COMPARISON OF FINANCIAL,
User of financial
External users
Internal users
• Information in
informationMANAGERIAL, AND COST cost accounting is
needed an used
Users of
Stockholders,
Management
by both financial
ACCOUNTING
information
partners,
sole
and managerial
accounting.
proprietor, SEC,
BIR
Reports prepared
Focus on the
enterprise as a
whole
Data
Historical
transactions
Data and
information
Historical,
quantitative,
monetary and
verifiable
Individual or
divisional concerns
Current or
forecasted,
quantitative or
qualitative,
monetary or nonmonetary,
futuristic, and some
are not recorded in
the accounting
books
•
Cost accounting
provides product
cost information
to external parties
for credit and
investment
decisions.
•
Cost accounting
provides products
costs information
to internal parties
for planning and
controlling.
MERCHANDISING AND
MANUFACTURING OPERATIONS
MERCHANDISING
Buys products that are ready for sale.
MANUFACTURING
Buys raw materials which are converted
into a finished products that are ready for sale.
COLEGIO DE STA.ANA DE VICTORIAS, INC.
Computation of cost of goods sold:
Merchandising
Beginning MI
XX
Add: Total purchases
XX
Cost of goods available for sale XX
Less: Ending MI
(XX)
Cost of goods sold
XX
Manufacturing
Beginning Raw Materials
Add: Purchases
Less: Ending Raw Materials
Raw Materials Used
Add: Direct Labor
Factory Overhead
Total manufacturing cost
Add: Beginning WIP
Less: Ending WIP
Cost of goods manufactured
Add: Beginning FG
Less: Ending FG
Cost of goods sold
XX
XX
(XX)
XX
XX
XX
XX
XX
(XX)
XX
XX
(XX)
XX
Cost of goods sold for merchandising company:
Cost of goods sold for manufacturing company:
USES OF COST ACCOUNTING DATA
• Determining product costs
• Planning and control
COLEGIO DE STA.ANA DE VICTORIAS, INC.
DETERMINING PRODUCT COSTS
Cost
accounting
procedures
help
management in gathering data needed to
determine product costs and generate
meaningful financial statements and other
reports.
COLEGIO DE STA.ANA DE VICTORIAS, INC.
DETERMINING PRODUCT COSTS
Unit cost information is useful in making
variety of important marketing decisions such
as:
1. Determining the selling price of a
product.
2. Meeting competition.
3. Bidding on contracts.
4. Analyzing profitability.
COLEGIO DE STA.ANA DE VICTORIAS, INC.
PLANNING AND CONTROL
PLANNING – is the process of establishing
objectives or goals for the firm and
determining the means by which the firm will
attain them.
Planning can be divided
components:
1. Strategic planning
2. Tactical planning
3. Operations planning
into
three
COLEGIO DE STA.ANA DE VICTORIAS, INC.
PLANNING AND CONTROL
Strategic planning – focus on setting long
range goals and objectives to determine the
overall direction of the company.
Tactical planning – focus with plans for a
short range and emphasizes plans to achieve
strategic goals.
Operations planning – relates to day to day
implementation of tactical plans.
COLEGIO DE STA.ANA DE VICTORIAS, INC.
PLANNING AND CONTROL
CONTROL – is the process of monitoring the
company’s operations and determining
whether the objectives identified in the
planning process are being accomplished.
COLEGIO DE STA.ANA DE VICTORIAS, INC.
PRODUCT-COSTING SYSTEMS
• JOB ORDER COSTING
• PROCESS COSTING
COLEGIO DE STA.ANA DE VICTORIAS, INC.
JOB ORDER COSTING
JOB ORDER COSTING
• A system for allocating costs to groups of
unique product.
• Applicable to the production of customer
specified products such as the manufacture
of special machines.
• Each job become a cost center for which
costs are accumulated.
• A subsidiary record is keep to all
unfinished and finished jobs.
COLEGIO DE STA.ANA DE VICTORIAS, INC.
JOB ORDER COSTING
Primary Characteristics of a job order cost
system:
1. Collects all manufacturing costs and assigns
them to a specific job or batches of products.
2. Measures costs for each completed job, rather
than for set time period.
3. Uses Work in Process Inventory control
account supported by a subsidiary ledger of
job order cost cards or sheets for each job in
process at any point of time.
COLEGIO DE STA.ANA DE VICTORIAS, INC.
PROCESS COSTING
PROCESS COSTING
• A system applicable to a continuous
process of production of same or similar
goods.
• Each processing department becomes a
cost center.
COLEGIO DE STA.ANA DE VICTORIAS, INC.
PROCESS COSTING
Main Characteristics of a process cost system:
1. Manufacturing costs are grouped by
department or work center.
2. Emphasizes a weekly or monthly time period.
3. Uses several Work in Process Inventory
account – one for each department or work
center in the manufacturing process.
COLEGIO DE STA.ANA DE VICTORIAS, INC.
PROCESS COSTING
JOB ORDER COSTING
HYBRID COSTING
1. Homogenous units pass
through a series of similar
processes.
1. Unique jobs are worked on
during a time period.
2. Costs are accumulated by
processing department.
2. Costs are accumulated by
individual job.
3. Unit costs are computed by
dividing the individual
departments’ costs by the
equivalent production.
3. Unit costs are determined by
dividing the total cost sheet
by the number of units on the
job.
4. The cost of production
4. The job cost sheet provides
report provides the detail for
the details for the work in
the Work in Progress
process account.
account for each
department.
HYBRID COSTING
HYBRID COSTING
Incorporates the ideas of both job order and
process costing.
Job Order
Costing
Hybrid Order
Costing
Process
Costing
COLEGIO DE STA.ANA DE VICTORIAS, INC.
HYBRID COSTING
OPERATION COSTING
Is a hybrid costing system often used in
repetitive manufacturing where finished
products have common, as well as
distinguishing characteristics.
COLEGIO DE STA.ANA DE VICTORIAS, INC.
HYBRID COTING
End of Chapter 1.
Thank you!