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Introduction to Cost Accounting, Concepts, and Classifications

Users of the Financial Information

A. Internal
1. Owners
2. Management
3. Employees

B. External
1. Potential Investors
2. Potential Creditors
3. Suppliers
4. Customers
5. Government
6. Public

Planning is the process of establishing objectives or goals for the firm and determine how the
firm will attain them. Strategic – long term; Tactical – short term; Operations – day to day.

Controlling is monitoring of company’s operations and determining whether the objectives

identified in the planning phase are accomplished

Financial Accounting vs Cost Accounting vs Management Accounting

Financial Accounting
For external users of FS
Reports prepared focus on
the enterprise as a whole
Historical, quantitative,
monetary, verifiable
Cost Accounting
Provides cost information
both for external and internal
users of FS.
External: for credit and
investment decisions
Internal: for planning and
controlling
Management Accounting
For internal users of FS
Reports prepared are
individual or divisional
Current or forecasted,
quantitative or qualitative,
monetary or non-monetary,
futuristic

Required by SEC and BIR Not required or mandated

Merchandising vs Manufacturing
Merchandising Manufacturing
Buy and sell Buy, process, sell

Merchandise Inventory (Finished Goods) Raw Material, Work-in-process, Finished

Goods Inventories

Beginning Inv. xx Raw Materials, beg xx

*Purchases xx Net Purchases xx
COGAS xxx Raw Materials, end (xx)
Ending Inv. (xx) RM, used (DM) xxx
CGS xxx Direct Labor (DL) xx
Factory Overhead (FOH) xx
TMC xxx
*Net Purchases Work-in-process, beg xx
Gross Purchases xx GPIP xxx
Freight in xx Work-in-process, end (xx)
Returns/Discounts (xx) CGM xxx
Net Purchases xx Finished Goods, beg xx
COGAS xxx
Finished Goods, end (xx)
CGS xxx

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Job Order Costing vs Process Costing

Job Order Costing Process Costing
Unique or customer specific products Same or similar goods

Batch Production Continuous production

Measures cost for each job completed Measures cost for a given period of time per
department

Uses only one WIP Inventory Uses several WIP Inventories

Cost Classifications
Product Costs / Manufacturing Costs / Period Costs/ Non-manufacturing Costs
Inventoriable Costs
Direct Material Operating Expenses (General and
Direct Labor Administrative Expenses, and Selling
Factory Overhead (Indirect material, indirect Expenses)
labor, other manufacturing costs)

Direct Material xx Direct Material xx

Direct Labor xx Direct Labor xx
Prime Cost xxx FOH xx
TMC xxx
Direct Labor xx
FOH xx *PC + CC – DM = TMC
Conversion Cost xxx

Fixed Cost Variable Cost Mixed Cost

Total cost is constant
↑ Volume = ↓ Unit Cost
↓ Volume = ↑ Unit Cost
Committed FC – long term,
results of past decision
Managed FC – short term,
discretionary, programmed,
planned
↑ Volume = ↑ Total Cost
↓ Volume = ↓ Total Cost
Unit cost is constant
Items with fixed and variable
components.
Semivariable Cost – minimal
fixed cost
Step Cost – the fixed cost
component changes at
certain levels

Methods of Separating Mixed Costs

High-Low Point Method Least Square Regression Method
Let: y = a + bx
y = total cost Σy = na + bΣx
a = fixed cost Σxy = Σxa + bΣx^2
b = variable unit cost
Where:
y = a + bx x = activity
b = (Cost of HA – Cost of LA) / (HA – LA) y = cost
xy = product of activity and cost
x^2 = square of activities

Other Cost Classifications

Common costs are employed in two or more periods or services. Joint costs are incurred in
the production of two or more goods at the same time. Both are subject to allocation.

Capital expenditure is an asset, it benefits more than one period, thus subject to
depreciation/amortization. Revenue expenditure benefits only one period, thus expensed
immediately.

Direct costs are conveniently identified and associated to a specific department while Indirect
Costs involved transfer of cost from one department to another.

Standard Cost Involves pre-determined cost based from past experience.

Opportunity Cost Forgone benefit; not recorded in books; only for decision making
Differential Cost Incremental cost or decremental cost, marginal cost or marginal
revenue; results from avoidable and unavoidable costs
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Relevant Cost Future cost that may affect the decision making because it differs
per scenario (cost is not yet incurred)
Sunk Cost Irrelevant cost, may be used for analyzing future courses of actions
(cost is already incurred)
Out-of-pocket Cost Involves immediate cash outflow
Controllable Cost Management has power to authorize the cost
Non-controllable Cost Expenses not within the authority of a specific person (e.g., one’s
salary)

Cost Accounting Cycle

Financial statements are prepared to meet the needs of investors, creditors, and other external
users of financial information. Although these reports are useful to management as well, additional
reports, schedules, and analyses are required for internal use in planning and control. Cost
accounting provides additional information required by management and provides data necessary
for the preparation of external financial statement. Cost accounting procedures are necessary for
the determination of cost of goods sold and the valuation of inventories.

Manufacturing Inventory Accounts

1. Materials Inventory Control Account - made up of the balances of materials and supplies
on hand. These are not usually purchased for resale but for use in manufacturing a
product, thus transferred to the Work-in-Process Inventory (WIP) account.

Merchandise Inventory Cost of Goods Sold

Materials Inventory transferred to Work-in-Process

2. Work-in-Process Inventory – made up of all manufacturing costs of the products being

produced. Includes Direct Materials, Direct Labor, and Overhead Costs

Work-in-Process transferred to Finished Goods

3. Finished Goods Inventory – takes on the characteristics of Merchandise Inventory, except

that salable products were produced rather than purchased.

Finished Goods transferred to Cost of Goods Sold

Cost Flows
Structure Cost Incurrence Expense Category
Manufacturing Firms Direct Materials Cost of Goods Sold
Direct Labor (From MI to WIP to FG to
Factory Overhead CGS)
Selling and Administrative Operating Expense
Merchandising Firms Merchandise Inventory Cost of Goods Sold
Selling and Administrative Operating Expense
Service Firms Direct Materials Cost of Services
Direct Labor
Factory Overhead
Selling and Administrative Operating Expense

Statement of Cost of Goods Manufactured and Sold

Direct Materials used (DM)
Materials Inventory, beg
Add: Net Purchases
Total Materials Available for use
Less: Materials Inventory, end
Direct Labor (DL)
Factory Overhead (FOH)
Total Manufacturing Costs (TMC)
Add: Work-in-Process, beg (WIP)
Cost of Goods Put Into Process (CGP)
Less: Work-in-Process, end
Cost of Goods Manufactured (CGM)
Add: Finished Goods, beg (FG)
Total Goods Available for Sale (TGAS)
Less: Finished Goods, end
Cost of Goods Sold (CGS)
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Pro-forma Journal Entries for Manufacturing Firms

1. Purchase of Raw Materials.
Materials xx
Accounts Payable xx

2. Issuance of Materials to Production

Work-in-Process xx
Factory Overhead Control (Indirect Materials) xx
Materials xx

3. Recording of Total Company Payroll

Payroll xx
Accrued Payroll xx
Accrued Payroll xx
Cash xx

4. Accounting of Labor Costs

Work-in-Process xx
Factory Overhead Control (Indirect Labor) xx
Selling and Admin Expense Control (Period Cost) xx
Payroll xx

5. Accounting of Other Product and Period Costs

Factory Overhead Control (Product Cost) xx
Selling and Admin Expense Control (Period Cost) xx
Various Accounts xx

6. Recording of Pre-determined Overhead

Work-in-Process xx
Factory Overhead Applied xx

7. Transfer of Goods to Finished Goods Inventory

Finished Goods xx
Work-in-Process xx

8. Accounting of Sold Goods

Accounts Receivable xx
Sales xx
Cost of Goods Sold xx
Finished Goods xx

9. Closing of Factory Overhead Control and Applied Accounts

Factory Overhead Applied xx
Underapplied Factory Overhead xx
Factory Overhead Control xx
Overapplied Factory Overhead xx

10. Disposition of Underapplied or Overapplied Factory Overhead

If significant: closed to WIP, FG, and CGS according to their ending balances
Overapplied Factory Overhead xx
Work-in-Process xx
Finished Goods xx
Cost of Goods Sold xx
Underapplied Factory Overhead xx
Work-in-Process xx
Finished Goods xx
Cost of Goods Sold xx

If insignificant:
Overapplied Factory Overhead xx
Cost of Goods Sold xx
Underapplied Factory Overhead xx
Cost of Goods Sold xx

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Job Order Costing

Major Source Documents for Job Order Costing

1. Job order cost sheet
2. Materials stockcard
3. Finished goods stockcard
4. Factory overhead control cost record
5. Materials requisition, time ticket, and clock card

Backflush Accounting and Just-In-Time

Backflush accounting is a shortened version of traditional method of accounting for cost.

Its purpose is to simplify and to reduce the number of events that are measured and
recorded in the accounting system. Inventories are not adjusted during the accounting
period, instead adjustments are made at the end of the period

Just-in-time (JIT) means raw materials are received just in time to go into production,
manufactured parts are completed just in time to be assembled into products, and
products are completed just in time to be shipped to customers. This is characterized by
decisions made by companies to intentionally maintain relatively small inventory levels.

3 Major Characteristics
1. JIT combines the Materials Inventory and IP Inventory to Raw and in Process
account.
2. There is no separate Direct Labor Cost account. Labor and Overhead are charged
to Conversion Cost account, or sometimes directly to Cost of Goods Sold.
3. Overhead is not applied to production until they are completed.

Pro-forma Journal Entries

Traditional JIT
Purchase of Materials Purchase of Materials
Materials xx Materials & In-Process xx
Accounts Payable xx Accounts Payable xx
Issuance to Production none
WIP xx
Materials xx
Accounting for Labor Cost Accounting for Labor Cost
WIP xx Conversion Cost xx
Accrued Payroll xx Various Accounts xx

Accounting for Overhead Accounting for Overhead

FOH Control xx Conversion Cost xx
Various Accounts xx Various Accounts xx
Transfer to Finished Goods none
FG xx
WIP xx
Sale Sale
AR xx AR xx
Sales xx Sales xx

CGS xx CGS xx
FG xx Mat and In-process xx
Conversion Cost xx

Pro-forma Journal Entries (Ultimate Just-in-time)

Materials and In-Process Inventory (not yet completed) xx
Finished Goods Inventory (not yet sold) xx
Cost of Goods Sold (completed and sold) xx
Various Accounts xx

Accounts Receivable xx
Sales xx
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Accounting For Materials

System of Accounting for Materials Issued to Production and Ending Inventory

Periodic Inventory Perpetual Inventory
Purchase of materials is recorded in Purchase of materials is recorded in
Purchase account Materials Inventory account
Beginning inventories are recorded Beginning Inventory is the balance of the
separately under Materials Inventory – Ending Inventory of the previous period
Beginning
Ending Inventory is determined by a physical Cost of materials and ending inventories are
count at yearend directly ascertained after each transaction
Cost of materials is not directly determined,
only computed by deducting the Ending
Inventory from the total available for use

Control Procedures
It is important that companies employ a good system of materials inventory control which keeps
costs at a minimum level and plant production on a smooth and uninterrupted schedule. The
following concepts below must be considered:
1. Inventory result from various items
2. Reduction of Inventory
3. Optimum Inventory Investment
4. Efficient purchasing, management, and investment
5. Forecasts
6. Inventory Control
7. Methods of Inventory

Commonly Used Control Procedures

1. Order Cycling: materials are reviewed on a regular or periodic cycle where essential
materials have a shorter review cycle than less important items
2. Min-max Method: a minimum level represents order point to increase the inventory to the
maximum level. Minimum level is determined to protect the company against stockout.
3. Two-bin Method: used for inexpensive and non-essential items. The first bin contains
materials to be used from the receipt of order to placement of new order. The second bin
contains materials to be used from placement of order to receipt or delivery of order plus
safety stock.
4. Automatic Order System: a purchase order is automatically placed when the level of
inventory reaches a predetermined order point of quantity.
5. ABC Plan: used by companies with large number of materials. It involves grouping of
materials into separate classification and determining the degree of control that each
group requires.

Aspects of Material Control

1. Physical Control or Safeguarding Materials: protection from unauthorized use or theft
a. Limited Access
b. Segregation of Duties: purchasing, receiving, storage, usage, and recording
c. Accuracy in Recording

2. Control of the Investment in Materials: maintaining of proper balance of materials

a. Order Point: point at which an item should be ordered.
✓ Usage: rate at which materials are used
✓ Lead Time: time between when order is placed and received
✓ Safety Stock: minimum level of inventory
Thus, Order Point = (Daily Usage x Lead Time) + Safety Stock
b. Economic Order Quantity (EOQ): purchase order that provides minimum cost
✓ Salaries and wages of employees (ordering cost)
✓ Communication cost (ordering cost)
✓ Materials accounting and record keeping (ordering cost)
✓ Materials storage and handling (carrying cost)
✓ Interest, insurance property taxes (carrying cost)
✓ Loss due to theft, deterioration, or obsolescence (carrying cost)
✓ Record and supplies (carrying cost)
Note: total ordering costs and total carrying cost are vary inversely

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Methods of Computing EOQ

1. Tabular Method: several purchase order quantity alternatives are listed in
separate columns.
2. Formula Method
EOQ = √ 2CN / K
where, C = ordering cost; N = units required annually, K = carrying cost

Total Ordering Cost

= (Annual Demand / EOQ) x C or
= Number of Orders x C

Total Carrying Cost

= (EOQ / 2) x K or
= Average Inventory x K

Business Papers Used to Support Material Transactions

1. Purchase Requisition: a written request to inform the purchasing department of a need
for materials or supplies.
2. Purchase Order: written request to a supplier for specified goods at an agreed upon
price.
3. Receiving Report
4. Materials Requisition Slip: written order to the storekeeper to deliver materials to
supplies to the place designated.

Methods of Costing Materials

1. First-In First-Out (FIFO) Method: based on the assumption that costs should be charged
to manufacturing cost in the order in which incurred.
2. Average Method
✓ Weighted Average Method: used for periodic system
✓ Moving Average Method: used for perpetual system where a new average is
calculated after each new purchase.

Special Problems in Accounting for Materials

1. Discounts: reduction in the list price
✓ Trade Discount: given in terms of percentage; not recorded in books
✓ Quantity Discount: savings for volume purchases; not recorded in books
✓ Cash Discount: motivates prompt payment

When Taken Method When Not Taken Method When Offered Method
Purchases xx Purchases xx (net) Purchases xx (net)
AP xx AP xx (net) Allowance xx
AP xx
(within) (within) (within)
AP xx AP xx AP xx
Discount xx Cash xx Allowance xx
Cash xx Cash xx
(beyond) (beyond) (beyond)
AP xx AP xx AP xx
Cash xx Lost xx Lost xx
Cash xx Allowance xx
Cash xx

2. Freight-In: added to invoice price for direct charging; charged to overhead if otherwise
✓ Relative Peso Value Method: allocation is based on peso value of items
✓ Relative Weight Method: allocation is based on weight of items

3. Spoiled Units: do not meet production standards and either sold for their salvage value
or discarded; no further work is performed.
✓ Charged to specific job: reason of spoilage is the job itself; it increases the unit
cost of remaining perfect finished articles; ignore allowance for spoilage
JE: FG Inventory xx
Spoiled Goods xx (sales value)
WIP Inventory xx

Cost of Spoiled Goods xx (net of allowance)

Less: Sales Value xx
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Increase in Cost xxx

✓ Charged to all jobs: reason of spoilage is considered normal; no increase in unit

cost; include allowance for spoilage in FOH
JE: FG Inventory xx
Spoiled Goods xx (Sales Value)
FOH Control xx (Cost less Sales Value)
WIP Inventory xx
✓ Charge to all job but due to Abnormal Spoilage
JE: FG Inventory xx
Spoiled Goods xx (Sales Value)
Loss xx (Cost less Sales Value)
WIP Inventory xx

4. Defective Units: do not meet production standards and must be processed further to be
sold either as good unit or irregulars.
JE: WIP Inventory xx (specific)
FOH Control xx (all jobs; due to internal failure)
Loss xx (abnormal)
RM xx
Payroll xx
FOH xx

5. Scrap Units: left over from the production that cannot be put back to production but may
be usable for different purpose or be sold to outsiders for a nominal amount.
JE: Scrap Materials xx
WIP xx (specific)
Misc. Income xx (all jobs)
FOH xx (factory supplies)

6. Waste Units: left over that has no further use, no resale value, and may require disposal
cost
JE: WIP xx (specific)
FOH xx (all jobs)
AP xx (cost of disposal)

Quality Costs
1. Preventive
2. Appraisal
3. Failure (Internal and External): results to Spoilage, Defective, Scrap, and Waste Units

Additional Basic Material Transactions

✓ Emergency Purchase of Materials
WIP xx (direct)
FOH xx (indirect)
AP xx

✓ Return of Excess Materials

Materials xx
WIP xx

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Accounting For Labor

Definition of Terms
Wages: gross earnings for an hourly-rate employee
Salaries: gross earnings for employees with flat rate
Gross Earnings: compensation comprised of regular and overtime pay

Labor Classification
1. Direct Labor
2. Indirect Labor
3. Labor Overhead
✓ Waiting Time or Idle Time: cost of non-productive hours
✓ Make-up Pay: payment based on number of units produced (piecework);
minimum wage with additional pay if more quantities were produced
If < min: WIP xx (actual pay)
FOH xx (make-up pay)
Payroll xx (minimum pay)

If > min: WIP xx (actual pay)

Payroll xx (actual pay pay)

✓ Overtime Pay: amount paid in excess of regular rate for employees

working beyond 8 hours in a day
If all jobs: WIP xx (regular hours x regular rate)
WIP xx (overtime hours x regular rate)
FOH xx (overtime hours x premium rate)
Payroll xx

If specific: WIP xx (regular hours x regular rate)

WIP xx (overtime hours x regular rate)
WIP xx (overtime hours x premium rate)
Payroll xx

✓ Shift Premium: extra pay for working during less desirable time (10:00 pm
to 6:00 am); charged to Factory Overhead
✓ Employer’s Payroll Taxes: employer’s share to SSS, Philhealth, and PAG-
Ibig contributions

Accounting System Procedures for Payroll Costs

1. Recording the number of hours used in total and by job.
2. Recording the quantity produced by the workers.
3. Analyzing the hours used by employees to determine how time is to be charged.
4. Allocation of payroll costs to jobs and factory overhead accounts.
5. Preparation of the payroll, including computation and recording of the employees
gross earnings, deductions, and net earnings.

Wage Plans
1. Hourly-rate plan: a definite rate per hour is set for each employee. Does not
provide employee a high level of productivity.
2. Piece-rate plan: earnings are calculated by multiplying the employee’s output by
the rate per piece. Provides incentive for producing more but may sacrifice the
quality.
3. Modified Wage Plan: setting of a minimum hourly wage and an additional
payment per piece in excess of the quota would be added .

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Responsible Departments
1. Time-keeping: Clock cards, Time tickets, Production reports
2. Payroll: Payroll records, Employee’s earning records, Payroll summaries

Payroll Taxes (as of January 01, 2021)

✓ Social Security System
1. 13% of the monthly salary credit (4.5% employee, 8.5% employer)
2. Php 10.00 (<15,000.00); Php 30 (>= 15,000,00)

✓ Philhealth Contribution: 3% of monthly basic salary (1.5% employee, 1.5%

employer)

✓ PAG-Ibig Contribution: 4% of monthly basic salary (2% employee, 2% employer,

but the maximum is 200 i.e., 100 for employee, 100 for employer). If MBS is
1,500.00 and below, employee share is only 1%

Pro-forma Journal Entries

1. To Record Total Payroll
Payroll xx
Withholding Tax Payable xx
SSS Premium Payable xx
Philhealth Contributions Payable xx
Pag-ibig Contributions Payable xx
Voucher’s Payable xx

2. To Record Payment of Net Earnings

Voucher’s Payable xx
Cash xx

3. To Record Distribution of Payroll

Work-in-Process xx
Factory Overhead xx
Operating Expenses xx
Payroll xx

4. To Record Payroll Taxes

Factory Overhead xx
Operating Expenses xx
SSS Premium Payable xx
Philhealth Contributions Payable xx
Pag-ibig Contributions Payable xx

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Accounting For Overhead

Factory overhead refers to the cost pool used to accumulate all indirect manufacturing
costs. Examples of factory overhead include the following: indirect materials, indirect
labor, heat, light, and power for the factory, factory rent, depreciation and maintenance
of factory building and equipment. Overhead costs are divided into three categories:
1. Variable Overhead: costs that vary in direct proportion to the level of production,
within relevant range.
2. Fixed Overhead: costs that remain constant within relevant range regardless of
the varying levels of production.
3. Mixed Overhead: costs that are neither wholly fixed nor wholly variable in nature
but have characteristics of both. These costs are ultimately separated into their
fixed and variable components for purposes of planning and control.

Factors to Consider in the Computation of Overhead Rate

1. Base: the base to be used should be related to functions represented by the
overhead cost being applied
✓ Physical Output / Units of Production: appropriate when a company
manufactures only one product
Pre-determined FOH Rate = Est. FOH / Est. Units of Production

✓ Direct Material Cost: appropriate if direct materials are a very large part of
total cost
Pre-determined FOH Rate = (Est. FOH / Est. DM Cost) x 100

✓ Direct Labor Cost: appropriate if there is a direct relationship between

labor cost and factory overhead
Pre-determined FOH Rate = (Est. FOH / Est. DL Cost) x 100

✓ Direct Labor Hours: appropriate if there is a great disparity in hourly wage

rates
Pre-determined FOH Rate = Est. FOH / Est. DL Hours

✓ Machine Hours: appropriate if there is a direct relationship between

machine hours and factory overhead
✓ Pre-determined FOH Rate = Est. FOH / Est. Machine Hours

2. Activity level
✓ Normal Capacity
✓ Expected Annual Capacity
3. Fixed factory overhead
✓ Absorption Costing (Full Costing): included in CGS
✓ Variable Costing (Direct Costing): excluded in CGS
4. Rate
✓ Plant-wide or blanket rate: one for all producing departments
✓ Departmentalized rates: one rate for each department

Computation of Departmentalized Overhead Rate

1. Divide the company into segments, called departments, cost centers, to which
expenses are charged.
2. Estimate the factory overhead for each department (direct departmental charges
+ indirect departmental charges).
3. Select and estimate the base to be used by each segment.
4. Allocate the service department costs to the producing departments.
5. Compute the factory overhead rate (similar to the computation using blanket rate).

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Types of Departments
1. Service Department: include activities such as maintenance, personnel, employee
services, and the provision of utilities.
2. Producing Department: these are the cost-accumulation centers in which work is
performed directly on the goods being produced.

Prior to the computation of the departmentalized factory overhead rate, service costs
must be allocated to the producing departments first.

Common Costs
✓ Labor-related
✓ Machine-related
✓ Space-related
✓ Service-related

Allocation of Service Department Cost to the Producing Departments

1. Direct Method: ignores any service rendered by one service department to
another, it allocates directly to the producing department.
2. Step Method: also called sequential method, recognizes services rendered by
service departments to other service departments.
3. Algebraic Method: also called reciprocal method, allocated costs by explicitly
including the mutual services rendered among all departments.

Capacity Production
1. Theoretical, Maximum, Ideal Capacity: producing at full speed without interruptions
to yield the highest physical output possible.
2. Practical Capacity: provides allowance for circumstances that might result to
stoppage of production.
3. Expected Actual Capacity: based on a short-range outlook which is feasible only
for firms whose products are seasonal or where the market and style changes
allow price adjustments according to competition and demands.
4. Normal Capacity: takes into consideration the utilization of the plant facilities to
meet commercial demands served over a period long enough to level out the
peaks and valleys which come with seasonal cyclical variations; commonly used.

Actual Overhead FOH Control xx

Various Accounts xx
Applied Overhead WIP xx
FOH Applied xx

FOH Variance Actual LESS Applied

Actual > Applied = Underapplied (unfavorable)
Actual < Applied = Overapplied (favorable)

Causes of Variance
1. Spending Variance: due to expense factors
Actual Factory Overhead (AcFOH)
LESS: Budgeted Allowed based on Actual Hours (BAAH)

2. Idle Capacity Variance: due to difference in volume and activity factors

Budgeted Allowed based on Actual Hours (BAAH)
LESS: Applied Factory Overhead (ApFOH)

AcFOH Spending Variance FOH Variance

BAAH > >
BAAH Idle Cap. Variance
ApFOH > (Volume Variance)

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Accounting for Overhead Variance

1. During the period: not recognized; during interim reports, variance is deferred if
expected to be absorbed.
2. At the end of the period
✓ If immaterial, due to inefficiency: closed to CGS
✓ If material, due to error in computing the OH rate: closed to the ending
balances of CGS, FG, WIP

Methods of Accumulating Overhead

1. Non-controlling account system: account for each kind of overhead expense
according to their nature.
2. Controlling account system (FOH Control): overhead incurred are charged in one
control account and a subsidiary ledger is maintained to show in detail the nature
and account of the expense.

ACCT 106: COST ACCOUNTING AND CONTROL /pba

Reference: Cost Accounting and Control 2019 Edition by Norma, Ellery, and Guillermo De Leon.