701211 Cost Accounting

Chapter 1

Principle of ผศ.ดร.มนทิพย์ ตัง้ เอกจิต

ผศ.ดร.เอือ้ บุญ เอกะสิงห์
Cost Accounting
ผศ.ดร. จอมใจ แซมเพชร
ภาควิชาการบัญชี คณะบริหารธุรกิจ มหาวิทยาลัยเชียงใหม่
 Cost Accounting
• Cost Accounting is the process of recording, classifying, analyzing,
summarizing, and allocating manufacturing costs to prepare a financial
statements.
• The determination of the costs of products or services and for the
suitably arranged data for purposes of control and guidance of
information to management for decision making.
Objective of Cost Accounting

Manufacturing cost & Cost of Goods Sold 01

Inventory Evaluation 02

Planning & Control 03

Decision Making 04
 Types of Accounting Information

Financial Managerial
Accounting Accounting

Generally Accepted Accounting For Management

Principles: GAAP
 Relationship between cost accounting, financial accounting,
and managerial Accounting

Financial Cost Managerial

Accounting Accounting Accounting

Cost Accounting is a part of Managerial Accounting and Financial Accounting.

Cost Accounting focus on gathering information on costs, But Management Accounting
is focused on Analysis, planning, control and decision making.
 Role of Cost Accountant
• Creating a calculation criteria • Cost Reduction Approach

• Analyzing & Providing cost

• Collecting and information for managers
recording cost

• Calculating cost of goods and services

• Reporting
What is cost? Cost is monetary valuation of effort, material,
resource, time and utilities consumed and opportunity
forgone in production and delivery of good or service
1. Expired cost benefits the current period and
is known as expense. For comparative with
revenue in the Income statement at the same
period.
2. Unexpired cost can gain much in future and It
is classified as an asset in financial
statements.
Assets Expenses
Prepaid expenses Cost of goods sold
Supplies Depreciation
Machine Utility cost
Classification of Costs
For preparing financial statements

For predicting cost

For assigning costs to cost objects

For business unit

planning and control

For decision making

01 For preparing financial statements
Manufacturing costs Nonmanufacturing costs

- Selling expenses
- Administrative expenses
 Manufacturing
- Utilities
- Factory rent
Materials - Depreciation- machinery
Labor

Direct Materials Factory Overhead Direct Labor

Goods
 Prime Cost

Direct Materials Direct Labor Factory Overhead

Conversion Cost

12
 Direct Direct Factory Product
Materials Labor Overhead Cost
 Engine Labor

Utilities &
Wheel Depreciation-
machinery
 For predicting cost

1. Variable Costs change in proportion with activity levels.

2. Fixed Costs do not change with an increase or decrease in activity levels
3. Mixed Costs contain both fixed cost and variable cost components.
3.1 Semivariable Costs vary with activity levels, but not in a direct
proportion.
3.2 Semifixed Costs / Step Costs are unchanged within a relevant range
Variable Costs
Example: Seats for motorcycles at 100 Baht per seat

Number Variable cost

of Cars Per unit Amount
1 100.- 100.-
10 100.- 1,000.-
50 100.- 5,000.-
Variable Costs

Total Cost Unit Cost

Baht Baht
1,000
500
100
100
Unit Unit
1 5 10 1 5 10

Y = bX
Fixed Costs
Example: Factory rental at 100,000 Baht

Rental Cost
Number of
product Per Unit Amount
1 100,000 100,000
10 10,000 100,000
50 2,000 100,000
Fixed Costs
Total Cost Unit Cost

Baht Baht

100,000
100,000

Unit Unit
1 5 10

Y=a
Mixed Costs: Semivariable cost
Example: Land line telephone

Baht

100
Unit

Y = a + bX
Mixed Costs: Semifixed cost
Example: 1 supervisor (salary 30,000 baht) can look after 1,000 tons per month
Baht

90,000
60,000
30,000
Unit
1,000 2,000 3,000

Y = a1 , a2 , … , an
 For assigning costs to cost objects

Cost Object Anything for which costs are accumulated. For example, goods,
product department.
1. Direct Costs: Costs which can be easily and conveniently traced to the cost
object.
2. Indirect Costs / Common Costs: Costs which have no direct relationship
with the cost object and cannot be easily and conveniently traced to the
cost object.
 For business unit planning and control

1. Costs of manufacturing departments

2. Costs of service departments

 For decision making
1. Relevant Costs Costs which are relevant to decision making
1.1 Differential Costs Costs which are different between alternatives.
1.2 Opportunity Costs Potential benefits given up when one alternative is selected.
1.3 Avoidable Costs Costs which can be avoided by selecting one alternative.

2. Irrelevant Costs Costs which are not relevant to decision making

2.1 Sunk Costs
2.2 Indifferential costs Costs which are not different between alternatives