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Reference Guide

Cost Accounting - Reference Guides

4 pages697 viewsFall 2015

Department
Accounting
Course Code
ACTG 2010
Professor
all
Chapter
Permachart

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TYPES OF ACCOUNTING
w w w . p e r m a c h a r t s . c o m
MANAGEMENT ACCOUNTING
• Provides information for internal users (for
example, managers)
• Information is related to individual parts or
segments of the organization rather than
the whole
• Information can be forecasted, quantitative
or qualitative, monetary or non-monetary,
and is timely for the purpose of making
decisions
COSTS
CLASSIFICATION
FINANCIAL ACCOUNTING
• Provides information for external users (for
example, shareholders, vendors)
• Information is related to the whole
organization, giving a total overview
• Information must comply with Generally
Accepted Accounting Principles (GAAP)
• Information is usually historical, verifiable,
quantifiable, and monetary
COST ACCOUNTING
• Provides information to determine the cost
of products or services
• Integrates with financial accounting to
provide inventory valuation and cost of
goods sold
• Integrates with management accounting to
provide managers with cost information to
make decisions about products, plan, and
control operations
Direct Directly related or traceable to the production of
costs a good or service (for example, the cost of steel for
cars, the labor cost of manufacturing workers)
Indirect Indirectly related or not directly traceable to the
costs production of a good or service (for example,
utilities of a manufacturing facility, depreciation of
equipment)
Fixed Incurred regardless of whether goods or
costs services are produced (for example, property taxes,
office rent)
Variable Vary with production (for example, labor hours
costs of production workers)
TERMS
Cost The collection of cost data in an organized
accumulation manner
Cost The process of assigning and allocating costs
assignment to a cost object
Cost drivers Factors that cause change in the level of
costs incurred (that is, production and
possible cost drivers are number of units
produced and number of setups)
Cost objects Used to measure the costs associated with
these cost objects (that is, product, service,
or program)
MANUFACTURING COSTS
Prime costs All direct manufacturing costs; consist of
direct materials costs and direct
manufacturing labor costs
Direct materials The costs of materials used to produce the
costs products; they can be directly traced to a
specific product (include taxes and duties)
Direct The costs of labor which contributed to the
manufacturing product; they can be directly traced to a
labor costs specific product (include wages and benefits)
Conversion The costs associated in transforming direct
costs materials into finished products; consist of
direct manufacturing labor costs and
manufacturing overhead costs
Manufacturing Indirect costs which cannot be traced to
overhead costs specific cost objects; include rent, power,
insurance, and supplies
COSTING SYSTEMS
JOB COSTING
• The process by which costs
are assigned to a distinct unit,
batch, or group of products
or services
• The product or service is
usually unique
PROCESS COSTING
• The process by which costs
are obtained by using
averages and assigning
them to mass products
which are identical
• Costs per unit are
calculated as an average of
the total cost
ACTIVITY-BASED COSTING
• The process by which costs
are assigned based on
activities
• An activity is an event, task
or unit of work with a
specified purpose
• The cost of these activities
is used to assign the costs
to other cost objects such
as products, services or
customers
ACTUAL COSTING
• Real (actual) cost may be calculated in two ways
Actual Cost = Actual Direct Cost Rate ¥Actual Quantity
Actual Cost = Actual Indirect Cost Rate ¥Actual Quantity
Normal Cost = Actual Direct Cost Rate ¥Actual Quantity
Normal Cost = Budgeted Indirect Cost Rate ¥Actual Quantity
Standard Cost = Budgeted Direct Cost Rate ¥Actual Quantity
Standard Cost = Budgeted Indirect Cost Rate ¥Actual Quantity
NORMAL COSTING
• May be calculated in two ways
STANDARDS (BUDGETED) COSTING
• May be calculated in two ways
CUSTOMER COSTING
• Based on the customers’ use of company resources
• Shows a direct relationship between the level of attention shown
by the company to the customer and the amount by which the
customer contributes to the company’s profits
Approach to Job Costing
• Identify the job that is
considered the cost object
• Identify the direct costs and
the indirect cost pools
• Select the cost allocation base
to allocate the indirect cost
pools to the job
• Develop the indirect cost per
unit rate to allocate the
indirect costs to the job and
add all costs and assign them
to cost object
• Add all direct and indirect
costs and assign them to the
cost object
Cost Accounting
Cost Accounting
COST ACCOUNTING • 1-55080-811-7 1
l e a r n r e f e r e n c e r e v i e w i n s t a n t l y
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