CBA - Approved Module - Cost Accounting and Control v2021

University of Nueva Caceres
Naga City
COLLEGE OF BUSINESS AND ACCOUNTANCY
COST ACCOUNTING AND CONTROL

STUDY GUIDE TO
Integrated Cost Accounting – Principles

and Applications, 2016
Marlon Oyzon Flores
Noel L. Rosco, CPA

Cerila C. Sanchez
Cost Accounting and Control
By: Noel L. Rosco
Cerila C. Sanchez
Copyright © 2020 by Noel L. Rosco and Cerila C. Sanchez and the University of Nueva
Caceres
No part of this course module/study guide may be reproduced or transmitted in any

form or by any means, electronic or mechanical, including photocopying, recording, or
any information storage and retrieval system, without permission in writing from the
author and the University of Nueva Caceres
Published in the Philippines by the University of Nueva Caceres
Office of the Vice President for Academic Affairs
JH10, JH Bldg., University of Nueva Caceres,
J. Hernandez Ave. Naga City,
Camarines Sur, Philippines
Printed in the Philippines
First printing, 2020
Second printing, July 2021

TABLE OF CONTENTS
MODULE 0 1
MODULE 1 INTRODUCTION TO COST ACCOUNTING 25
MODULE 2 ACCOUNTING AND MANAGEMENT OF MATERIALS, LABOR AND OVERHEAD 33
MODULE 3 JUST-IN-TIME AND ACTIVITY-BASED COSTING 57
MODULE 4 JOB ORDER COSTING 64
MODULE 5 PROCESS COSTING 70
MODULE 6 ACCOUNTING FOR PRODUCTION LOSSES 84
MODULE 7 COST-VOLUME-PROFIT RELATIONSHIP 91
MODULE 8 ACCOUNTING FOR JOINT AND BY-PRODUCTS 98
MODULE 9 STANDARD COSTING 102

University of Nueva Caceres
J. Hernandez Avenue, Naga City
Tel. No. +63-054-472-6100 local 115
UNIVERSITY OF NUEVA CACERES

The University of Nueva Caceres, a private non-sectarian institution, is
Bicol’s first university.
Guided by its motto, “Non-Scholae Sed Vitae” (Not of School but of Life), and
VISION
attuned to the demands of a highly dynamic global environment, the
STATEMENT
University of Nueva Caceres commits itself to quality and excellent education
for all to transform the youth into entrepreneurial, productive, morally
upright, socially responsible professionals for a just, humane and progressive
society.
The University of Nueva Caceres shall be a leading exponent of academic

excellence, research, extension, and innovative technology for sustainable
development.
MISSION
STATEMENT It creates a nurturing academic environment and provides equal
opportunities in the formation of individuals into empowered leaders,
competent professionals and proactive entrepreneurs who are cognizant of
our rich cultural heritage.
1. PURSUE the nurturing and strengthening of social institutions with

empowered leaders, skilled professionals, and proactive
entrepreneurs for the development of the Bicol Region and the
Filipino nation;
2. PRODUCE graduates who entrepreneurial, productive, morally

upright, environmentally conscious, globally responsive and socially
UNIVERSITY
responsible citizens;
OBJECTIVES
3. PROPAGATE the culture of excellence through a continual process of
introspection, integration and improvement of programs, facilities
and services;
4. PROVIDE the University personnel with the means to enhance their

personal well-being and professional skills to effectively carry out
balanced curricular and development programs.
CORE
VALUES

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1. We champion excellence. We consistently strive for excellence in
everything we do.
2. We nurture dreams. We passionately guide and inspire our students to
leverage their potentials and aspire for better lives.
3. We do the right things right. We uphold integrity in everything we do.
We hold ourselves to high standards for accountability and character.
We do things right.
4. We are dynamic and creative. We anticipate the forces of change. We
explore possibilities with intent and purpose.
5. We respect each other and work as a team. We collaboratively
maximize our talents and capabilities. We hold each other in high regard
and passionately realize our shared purpose, priorities and promises.
Ex - Excellence Driven
C - Culturally- Rooted with Multi-Cultural Understanding
Collaborative
GRADUATES Creative and Critical Thinker
ATTRIBUTES Compleat Leader (Compleat means Accomplished, Masterful, Great)
E - Effective Communicator
Ethically and Socially Responsible
L - Life-Long Learner

The UNC College of Business and Accountancy envisions its graduates as
leaders and active agents in nation building by entrepreneurship and by
VISION
honest, dedicated service in government and private entities, contributing to
STATEMENT
the improvement of the quality of life of the Filipino, and responsive to the
demands of the global business environment.
The benefits of quality and excellent business and accountancy education shall
be made accessible to the youth through the provision of rich and diverse
MISSION curricular programs and alternative learning system that will transform
STATEMENT individuals into competent professionals, empowered leaders, and proactive
managers and entrepreneurs possessing the ideals of competence, integrity,
and moral and social responsibility.
PROGRAM EDUCATIONAL OBJECTIVES

Three to five years after graduation, BSA graduates are expected to:
PEO 1 Adapt to the developments in the Accountancy profession through life-long

learning engagements
Pursue graduate or law studies
Maintain updated CPA license
Acquire Accreditation (BOA, SEC, BIR, CDA etc)
Acquire Professional Certification (CISA, CMA, CIA)
PEO 2 Adhere to the Code of Ethics in the practice of the Accountancy profession
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Exercise objectivity, due care and skepticism required of the accountancy
profession.
PEO 3 Contribute to nation-building by assuming leadership responsibilities
Assume supervisory/managerial positions
Lead projects along accounting and its related fields
PROGRAM OUTCOMES
At the time of graduation, the students of the BS Accountancy program should be able to:
General
POa Communicate clearly and effectively with stakeholders both in oral and written
forms.
POb Work effectively and independently in multi-disciplinary and multi-cultural teams

(PQF level 6 descriptor)
POc Promote “Filipino historical and cultural heritage” (based on RA 7722)
POd Act in recognition of personal and professional development
Technical
POe Implement business- related activities by applying the basic functions of

management and basic concepts that underlie in each of the functional areas of
business (marketing, finance, human resource, production/operation)
PO f Resolve business issues and problems, with global perspective and particular
emphasis on matters confronting financial statement preparers and users, using
their knowledge and technical proficiency in the areas of financial accounting, cost
accounting, management accounting, auditing, taxation, business laws, regulatory
framework for business transactions,accounting information systems and other
related areas.
PO g Conduct accounting research, as a tool to critically, analytically and creatively solve

problems and drive results
PO h Employ technology as a business tool in capturing financial and non financial

information, generating reports and making decisions.
PO i Apply knowledge and skills to successfully respond to various types of assessments

(including professional licensure and certifications
PO j Maintain a commitment to good corporate citizenship, social responsibility and

ethical practice in performing function as accountants

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COURSE CODE AND TITLE: AEC 213k COST ACCOUNTING AND CONTROL
COURSE DESCRIPTION
This course is designed to provide you with the knowledge of the cost accounting and control
framework of business. It will expose you to different costing methods and product costing
procedures. It includes accounting procedures for main products and incidental products that
are manufactured simultaneously in a common process. It encompasses costing techniques and
procedures for companies that use standard cost as a benchmark for costing the products. The
students must be able to assemble financial statements prepared under standard costing
procedures. While its emphasis dwells on a manufacturing concern, it also highlights the
elements and features applicable to non- manufacturing concerns. The course aims to help the
students understand the factors and aspects necessary to come up with an effective cost system.
It explores the details of components of manufacturing from one department to the next,
specifically materials, labor, and overhead, and transcends to the understanding the flow of cost
during the work and process stage until the completion of goods. It will aid them in the
production of necessary deliverables and reports pertinent to the cost system. It will enhance
the analyzing and problem-solving skills of students whilst teaching them the requisites of
assessing the role of cost accounting and an indispensable tool for management in planning and
control for decision-making.
COURSE OVERVIEW
This course will start with understanding the cost accounting, cost concepts, cost terms used in
planning control and decision making, and the relationship between cost, financial, and
management accounting. This course will cover the five components of the cost accounting
system such as costing method, costing techniques, cost accumulation, cost flow assumption,
and inventory system. Each component is divided into different costing methods or systems used
by businesses based on its nature and complexity operation. This course also includes a topic on
the Cost-Volume-Profit relationship.
COURSE OUTCOMES
At the end of this course, you should be able to:
1. Explain the basic concepts of cost accounting and its importance to
decision-making;
2. Discuss the control measures appropriate to each element of production cost;
3. Apply the concepts of Just-in-time and Activity-based costing
4. Apply the accounting procedures for job order costing
5. Apply the accounting procedures for process costing;
6. Apply the accounting treatment for production losses in both job order and process
costing
7. Apply the concepts of the Cost-Volume-Profit relationship;
8. Apply the concepts applicable to joint products and by-products;

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9. Apply the concepts of standard costing
PREREQUISITE KNOWLEDGE AND SKILLS

This course is all about accounting and analysis of costs in a manufacturing and services kind of
business. Your knowledge in AEC 111k, Fundamentals of Accounting, AEC 121k Financial
Accounting, and Reporting, and AEC 122k Conceptual Framework and Accounting Standards are
required.
In addition to these, in all of your subjects, you are expected to possess also the following skills:
1. Basic digital literacy skills required for studying such as being able to communicate
through email, FB messenger and video call. These are especially for students with
unstable or zero connectivity at home. If you have stable connectivity, you should know
the basic skills in downloading and uploading content material using Google Suite
(Google docs, Google drive, Google sheets). You will need this as a basic tool when
engaging with your teachers and groupmates. You also need to have basic skills in using
Google Hangouts or Zoom as platforms to be used during real-time or synchronous
sessions with your professor and classmates. To facilitate the use of these tools, it would
be advisable for you to create your own gmail account.
2. Collaboration skills necessary for you to work with your classmates and groupmates for
group activities or projects.
COURSE OUTLINE
This course is divided into 9 modules, arranged based on the relationship of each topic for you to
acquire the required knowledge upon completion of each module before proceeding to the next
module.
Module 1 Introduction to Cost Accounting and Cost Concept
Topics:
1. Introduction to Cost Accounting, Scope, and Objectives of Cost
Accounting
2. Relationship between Cost Accounting, Financial Accounting and
Management Accounting
3. Parts/Components of Accounting System
4. Elements of Cost
5. Classification of Inventories
6. Statement of Cost of Goods Manufactured, Manufacturing Process, and
Statement of Income and Expenses of a Service and Manufacturing
Companies
Module 2 Accounting for Materials, labor and overhead

Topic 1 Accounting for Materials
1. Procedures for Material Control

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2. Materials Control Methods
3. Economic Order Quantity Model
4. Recording of Materials
5. Inventory System/Methods of Costing Materials
6. Methods of Costing Materials
7. Recording of Transactions in Stock Ledger Card
8. Inventory/Stock Discrepancies
9. Inventory/Stock Valuation
Topic 2 Accounting for Labor

1. Labor Control
2. Attendance and Time Recording
3. Measurement of Labor Efficiency and Productivity
4. Labor Turn-over
5. Accounting for Labor Cost and recording of Payroll
Topic 3 Accounting for Manufacturing Overhead

1. Nature of Overheads, Collecting Overhead Costs and Classification of
Overheads
2. Separating Semi-Variable/Mixed Costs into Fixed and Variable and its
Purpose
3. Steps in Accounting for Factory Overhead
4. Predetermined Overhead Rate
5. Application base used in Calculating Predetermined Overhead Rate
6. Alternative Capacity Measures
7. Recording of Actual and Applied Overhead
8. Overhead Variance
9. Departmentalization of Factory Overhead and Classification of
Departments and Its Objectives
10. Allocating Overhead Costs and Methods of Allocating Service
Department Costs to Producing Departments
Module 3 Just-in-time and Backflush Accounting, and Activity-based Costing

Topic 1 Just-in-time and backflush accounting
1. Overview of Just-in-Time System
2. Backflush Accounting
3. Variants in Backflush Accounting
Topic 2 ABC Costing

1. Nature and Characteristics of Activity-Based Costing
2. Advantages and Disadvantages of Activity-Based Costing
3. Calculation of Unit Cost Under Traditional Costing System
4. Calculation of Unit Cost Under ABC System

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5. Comparison of Unit Cost Between ABC System and Traditional Costing
Module 4 Job-Order Costing

1. Job Order Costing System Overview
2. Product Flow in Job Order Costing
3. The flow of Costs in Job Order Cost System
4. Measuring Costs in Job Order Costing
5. Comprehensive Illustration – Job Order Costing (Normal – Costing)
6. Accounting Treatment for Underapplied and Overapplied Overhead
Module 5 Introduction to Process Costing – Five Steps Procedures for

Topic 1 Process Costing
1. Introduction process costing systems - Overview of the Process Costing
2. Nature and Characteristics of Process Costing
3. Product Flow in Process Costing
4. Methods of Process Costing
5. Equivalent Production
6. Cost of Production Report
7. Recording of Manufacturing Costs
8. Application of Cost Elements to Production
9. Comprehensive Illustration – Process Costing
Topic 2 Process Costing- FIFO
1. Overview
2. Illustration of FIFO – Even Application of Costs
3. Illustration of FIFO – Uneven Application of Costs
Topic 3 Process Costing- Weighted Average

1. Overview
2. Comparison of FIFO and Average Method
3. Illustration of Average Method – Even Application of Costs
4. Illustration of Average Method – Uneven Application of Costs
Module 6 Accounting for production losses

Topic 1 Cost of Scrap, Spoilage, Defective Units, and Rework
1. Overview of Spoilage, Defective Units, Rework and Scrap
2. Methods of Accounting for Spoilage
3. 3.Methods of Accounting for Rework
4. Methods of Accounting for Scrap
Topic 2 Accounting for By-Products, Lost Units, Evaporation, and Increase in Unit
1. Overview/Accounting for Lost Units

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2. Accounting for Evaporation Loss
3. Accounting for Increase in Units
Module 7 Cost-Volume-Profit Relationship

4. The Basics of Cost-Volume-Profit (CVP) Analysis
5. Significance of Cost Volume Profit Analysis
6. CVP Analysis for Breakeven Planning
7. CVP Analysis for Revenue and Cost Planning
8. Assumptions and Limitations of CVP Analysis
9. Sensitivity Analysis of CVP Results
Module 8 Accounting for Joint Cost and By-Products

1. Overview of Joint and By-Products
2. Reason for Allocating Joint Costs
3. Methods of Allocating Joint Costs
4. Accounting for By-Products
Module 9 Standard Costing and Variance Analysis

1. Overview of Standard Costing
2. Advantages and Disadvantages of Standard Costing and its Limitations
3. Types of Variances
4. Direct Materials Variance
5. Direct Labor Variance
6. Overhead Variances
7. Comprehensive Illustration – Standard Costing System
LIST OF RESOURCES
1. Required Textbook for the subject – "Integrated Cost Accounting – Principles and
Applications, 2016 by Marlon Oyzon Flores
2. References at the UNC library

Cost control of small and medium sized e – commerce enterprises under trans –
ocean trade mode, 2017, Frias, Solita A
Management and cost accounting control, 2017, Drury, Colin (E-book)

Horngren’s cost accounting: a managerial emphasis, 2017, Datar, Skirant (E-book)
3. Optional Resources- Youtube Channel and other online resources.

4. Mobile Phone is required for communication.

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CLASS SCHEDULE
Refer to the table below for your schedules of activities and assessments. You are highly
encouraged to complete the scheduled tasks to build-up your competencies and comply with
course requirements.
STUDY PERIOD TOPIC LEARNING LEARNING ASSESSMENT

ACTIVITY RESOURCES
Week 1-2 Module 0 Learning Activity Integrated Cost Compilation of

1-1 to 1-6 Accounting – answers for the
Module 1 Principles and assigned exercises
Introduction to Self - Assessments Applications, and problems
Cost Accounting
2016 by
and Cost Let’s Practice
Marlon Oyzon
Concept
Wrap-up session Flores
& Consultation
Week 3 Module 2 Self - Assessments Integrated Cost Compilation of

Accounting for 2-1.1 to 2.1-8 Accounting – answers for the
Production Principles and assigned exercises
Elements Let’s Practice Applications, and problems
2016 by
Wrap-up session
Topic 1 Marlon Oyzon
& Consultation
Accounting for Flores
Materials
Week 4 Topic 2 Learning Activities Integrated Cost Compilation of

Accounting for 2.2-1 to 2.2-6 Accounting – answers for the
Labor Principles and assigned exercises
Self - Assessments Applications, and problems
2016 by
Let’s Practice
Marlon Oyzon
& Consultation
Week 5 Topic 3 Learning Activities Integrated Cost Compilation of

Accounting for 2.3-1 to 2.3-12 Accounting – answers for the
Overhead Principles and assigned exercises
2016 by
Let’s Practice

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Wrap-up session Marlon Oyzon
& Consultation Flores
Week 6 Module 3 Learning Activities Integrated Cost Compilation of

Topic 1 JIT and 3.1-1 to 3.1.3 Accounting – answers for the
Backflush Principles and assigned exercises
Costing Self - Assessments Applications, and problems
2016 by
Let’s Practice
Marlon Oyzon
& Consultation

Topic 2 3.2-1 to 3.2-5 Accounting – answers for the
Activity-based Principles and assigned exercises
Costing Self - Assessments Applications, and problems
2016 by
Let’s Practice
Marlon Oyzon
& Consultation
Week 8 Module 4 Job Learning Activities Integrated Cost Compilation of

Order Costing 4.1-1 to 4.1-6 Accounting – answers for the
Principles and assigned exercises
2016 by
Let’s Practice
Marlon Oyzon
Midterm Exam
& Consultation

Topic 1 Process 5.1-1 to 5.1-9 Accounting – answers for the
Costing- Principles and assigned exercises
2016 by
Let’s Practice
Marlon Oyzon
& Consultation

Costing FIFO Principles and assigned exercises

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2016 by
Let’s Practice Marlon Oyzon
Flores
Wrap-up session
& Consultation

Costing Principles and assigned exercises
Weighted Self - Assessments Applications, and problems
Average
2016 by
Let’s Practice
Marlon Oyzon
& Consultation

Topic 1 Cost of 6.1-1 to 6.1-4 Accounting – answers for the
Scrap, Spoilage, Principles and assigned exercises
Defective Units, Self - Assessments Applications, and problems
and Rework 2016 by
Let’s Practice
Marlon Oyzon
& Consultation

6.2-1 to 6.2-3 Accounting – answers for the
Topic 2 Lost Principles and assigned exercises
Units, Self - Assessments Applications, and problems
Evaporation, and
2016 by
Increase in Unit Let’s Practice
Marlon Oyzon
& Consultation
Week 14-15 Module 7 Learning Activities Integrated Cost Compilation of

Cost-Volume-Pro 7-1 to 7-6 Accounting – answers for the
fit Relationship Principles and assigned exercises
2016 by
Let’s Practice
Marlon Oyzon
& Consultation

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Accounting for 8-1 to 8-4 Accounting – answers for the
Joint Cost and Principles and assigned exercises
By-Products Self - Assessments Applications, and problems
2016 by
Let’s Practice
Marlon Oyzon
& Consultation
Week 17-18 Module 9 Learning Activities Integrated Cost Compilation of

Standard Costing 9-1 to 9.6 Accounting – answers for the
and Variance Principles and assigned exercises
Analysis Self - Assessments Applications, and problems
2016 by
Let’s Practice Final Exam
Marlon Oyzon
& Consultation
We will have a synchronous session of two-three hours a week, at the time indicated in your
matriculation form. This meeting will be conducted via zoom or google meet for those with
internet connectivity. Announcements will be posted in our class GC. Please tune in.
Our interaction through synchronous sessions would be approximately 2-3 hours on a weekly
basis. You are expected to do your part as a diligent and responsible learner. Refer to this RED
learning kit as a complete guide on how to acquire the competencies and comply with the
course requirements. Though we have scheduled synchronous sessions, you can give me a ring
or send a message in our class GC for urgent concerns. I will try to respond within the day or in
24 hours.
Aside from our interaction and your interaction with the content, you are also encouraged to
interact with your peers or classmates in this course. There are requirements that need
collaboration with your classmates. May you enjoy this activity.
These are the exam schedules. Place and manner of examinations are to be announced.
Prelim Exam- Sept 1-4 2021
Midterm Exam - Oct 8-12 2021
Semi-final exam- Nov 12-16 2021
Final Exam - Dec 15-18 2021

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COURSE REQUIREMENTS & GRADING SYSTEM
Grading System
This will be our Grading System. Take particular note of the components so that you can
strategize on how you can achieve a good final mark on this subject:
Midterm
70% Participation
Attendance/Weekly log-in/Consultation – 10%
Participation in formative assessment – 10%
Graded Projects/Activities/Summative Assessment – 50%
30% Prelim and Midterm Exams
Final
70% Participation
Attendance/Weekly log-in/Consultation – 10%
Participation in formative assessment – 10%
Graded Projects/Activities/Summative Assessment – 50%
30% Semi-final and Final Exams
Final Grade = (Midterm + Final) / 2
Cut-off for every assessment to be marked 75% is 60%. This means that for 10-item assessment,
the student should get at least 6 correct answers to get the 75% mark.
GRADING SYSTEM
Range Numerical Grade Interpretation
99% - 100% 1.0 Excellent
96% - 98% 1.25 Very Superior
93% - 95% 1.50 Superior
90% - 92% 1.75 Very Good
87% - 89% 2.0 Good
84% - 86% 2.25 Very Satisfactory
81% - 83% 2.50 Satisfactory
78% - 80% 2.75 Fair
75% - 77% 3.0 Pass
74 and below 5.0 Fail
ASSESSMENT TOOLS
Rubrics for Discussion Forums
Criteria Satisfactory Very Satisfactory Excellent
Observations and I give simplistic I give an adequate I give sophisticated and
Insights observations, provide little degree of observations, thoughtful
(Max. 50 pts) or no insight, comment or some insight and observations, high
analysis. My work is degree of insight and

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analysis. My work is more reflective and analysis. My work has
descriptive than reflective considered outcomes evidence that
(30 pts) but lack depth outcomes have been
processed and
(40 pts) reflected upon.
(50pts)
Comments and I rarely engage with other I engage with other I actively engage with
Discussions group members and do not group members, but other group members,
(Max. 30 pts) use relevant literature or rarely use relevant and adequately use
factors on the pertinent literature or factors on relevant literature or
issues and discussion. the pertinent issues and factors on the
discussion to support pertinent issues and
the argument with discussion to support
(20 pts) relevant evidence. the argument with
relevant evidence and
(25pts) introduce new
perspectives.
(30pts)
Language and My work is not well My work has better My work has an
Structure organized, predominantly structure with a logical excellent coherence
(Max. 20 pts) descriptive with little progression. It uses and progression. Its
interpretation or reflection. limited interpretation ideas and observations
It indicates poor and reflections. It are well structured.
vocabulary and grammar observes competent There is an effective
and with numerous errors. vocabulary and grammar and accurate use of
(10 pts) but with occasional vocabulary and
errors. grammar, very few to
(15 pts) no errors at all.
(20pts)
Rubrics for Simulation/ Problem Solving

Identify a I can identify few aspects of I can clearly identify I can clearly and
problem (25pts) the problem some aspects of the completely identify the
(15pts) problem problem
(20pts) (25pts)
Identify I can identify few standards I can identify with minor I can accurately and
applicable and formula relevant to the errors the standards and completely identify the
standards and identified problem formula relevant to the standards and formula
formula (25pts) (15pts) identified problems relevant to the
(20pts) identified problem
(25pts)
Develop/illustrat I can provide an answer but I can provide accurate I can provide accurate
e the solution with little details of the answer but with answer with complete
(25pts) solutions incomplete and less and organized details of
(15pts) the solutions

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organized details of the (25pts)
solutions
(20pts)
Justify the I can explain the solution I can explain the solution I can clearly explain
solution (25pts) with little basis with less sufficient bases the solution with
(15pts) (20pts) sufficient bases
(25pts)
Rubrics for Essay/Reflection Paper

CONTENT I address the question but I address the question I address the question
(Max. 60 pts) do not give an explanation and give few explanation and give
(30pts) in my own words comprehensive
explanation in my own
(45 pts) words
(60pts)
Language and My work is not well My work has better My work has an
Structure organized, predominantly structure with a logical excellent coherence
(Max. 20 pts) descriptive with little progression. It uses and progression. Its
interpretation or reflection. limited interpretation and ideas and observations
It indicates poor vocabulary reflections. It observes are well structured.
and grammar and with competent vocabulary There is an effective
numerous errors. and grammar but with and accurate use of
(10 pts) occasional errors. vocabulary and
(15 pts) grammar, very few to
no errors at all.
(20pts)
Originality I present less of an original I present somehow an I present an original
(Max. 20 pts) work. Most of the words original work of mine. I work of mine. I use
and thoughts were copied use more of my own only my own words
from others. words and less of copy and thoughts to
paste to express ideas express ideas.
(10 pts)
(15 pts) (20pts)
COURSE ASSESSMENT AND EVALUATION PLAN
COURSE INTENDED LEARNING ASSESSMENT PERFORMANCE

OUTCOMES OUTCOME TOOL TARGET
0 Explain the I Explain the UNC VM and Core n/a

school Values, CBA VM and BSA PEO
philosophies,
discuss course E Discuss the course n/a
requirements, grading system

15
requirements and classroom and school
and grading policies
system and write
the statement of D Write a statement of purpose Essay rubrics At least 90% of the
purpose or or commitment to the course students in the class
commitment and program would obtain at least
a passing mark
1. Explain the I Explain the Pre-test At least 90% of the

basic concepts of basic concepts of cost (objective-type students in the class
cost accounting accounting quiz) would obtain at least
and its a passing mark
importance to E Discuss the elements Recitation or At least 90% of the
decision-making; of costs, the cost systems, the discussion forum students in the class
manufacturing process, and rubrics would obtain at least
the types of inventories for a passing mark
financial reporting; and
D Prepare the Statement Simulation/ At least 90% of the

of Cost of Goods Manufactured Problem -solving students in the class
and Statement of Income and rubrics would obtain at least
Expense. a passing mark
2. Discuss the I Discuss the accounting Pre-test At least 90% of the

control measures concepts for each element of (objective-type students in the class
appropriate to production quiz) would obtain at least
each element of a passing mark
production cost; E Explain the control Recitation or At least 90% of the
measures applicable to each discussion forum students in the class
element of production rubrics would obtain at least
a passing mark
D Prepare journal entries Quiz At least 90% of the

to record transactions of each students in the class
element of production would obtain at least
a passing mark
3. Apply the I Explain the nature of Pre-test At least 90% of the

concepts of Just-In-Time system and (objective-type students in the class
Just-in-time and Activity-based costing quiz) would obtain at least
Activity-based a passing mark
costing
E Quiz At least 90% of the
students in the class

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Compute the product cost would obtain at least
using JIT and ABC a passing mark
D Simulation/ At least 90% of the

Record the transactions using Problem -solving students in the class
backflush costing system rubrics would obtain at least
a passing mark
Prelim Exam
4. Apply the I Explain the principles Pre-test At least 90% of the

accounting of job order costing system and (objective-type students in the class
procedures for illustrate the flow of cost using quiz) would obtain at least
job order costing this system a passing mark
E Prepare the documents Quiz At least 90% of the

that are required in the job students in the class
cost system and calculate the would obtain at least
product cost a passing mark
D Record the Simulation/ At least 90% of the

transactions under job order Problem -solving students in the class
costing and prepare a cost of rubrics would obtain at least
goods manufactured and a passing mark
statement of income and
expense.
5. Apply the I Describe the nature Pre-test At least 90% of the

accounting and characteristics of process (objective-type students in the class
procedures for costing and explain the flow of quiz) would obtain at least
process costing costs in this system a passing mark
E Calculate product costs Quiz At least 90% of the

according to the process students in the class
costing for both FIFO and would obtain at least
Average Method, even or a passing mark
uneven application of cost

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D Prepare a cost of Simulation/ At least 90% of the
production report Problem -solving students in the class
rubrics would obtain at least
a passing mark
Midterm Exam-
Summative test -
MCQ
6. Apply the I Discuss the accounting Pre-test At least 90% of the

accounting treatment for normal and (objective-type students in the class
treatment for abnormal spoilage in job order quiz) would obtain at least
production losses costing and in process costing; a passing mark
in both job order
and process E Compute the unit cost Quiz At least 90% of the
costing when production losses are students in the class
incurred would obtain at least
a passing mark
D Record the Quiz At least 90% of the

transactions involving students in the class
production losses would obtain at least
a passing mark
7. Apply the I Describe the concept Pre-test At least 90% of the

concepts of the and importance of (objective-type students in the class
Cost-Volume-Prof understanding the quiz) would obtain at least
it relationship; Cost-Volume-Profit a passing mark
Relationship of the business;
E Compute the Quiz At least 90% of the

contribution margin, students in the class
break-even point, and margin would obtain at least
of safety; a passing mark
D Prepare the Simulation/ At least 90% of the

Profit-Volume Graph and apply Problem -solving students in the class
Cost-Volume-Profit Analysis in rubrics would obtain at least
decision making; a passing mark
Semi-final exam

18
8. Apply the I Pre-test At least 90% of the
concepts Describe joint products and (objective-type students in the class
applicable to by-products and the related quiz) would obtain at least
joint products costing methods; a passing mark
and by-products;
E Quiz At least 90% of the

Apply different methods of students in the class
allocating joint costs to would obtain at least
products and the different a passing mark
accounting treatments for
by-products;
D Illustrate how by-products Simulation/ At least 90% of the

are presented on the Problem -solving students in the class
Statement of Income and rubrics would obtain at least
Expenses. a passing mark
9. Apply the I Explain Standard Pre-test At least 90% of the

concepts of Costing and the importance of (objective-type students in the class
standard costing variance analysis in quiz) would obtain at least
decision-making a passing mark
E Calculate the variances Quiz At least 90% of the

for materials, labor, and students in the class
overhead; would obtain at least
a passing mark
D Prepare journal entries Test At least 90% of the

using the standard costing students in the class
method; Final Exam- would obtain at least
Summative test - a passing mark
MCQ
MODE OF DELIVERY, COMMUNICATION SYSTEM, AND OTHER SUPPORT SYSTEMS

This RED Learning Kit is to be delivered on a printed modular modality. This is the modality that
students may choose if they are facing either a zero internet connectivity at home, or an
unstable internet connectivity. If you have chosen this modality, you are in self-study mode. You
are expected to follow the study guide for this course. A minimum of 3 hours per week is
required for you to work for this course or a total of 54 hours in 18 weeks.

19
You are expected to submit the requirements as due for better navigation of the course. For
writing and presentation requirements, you are expected to avail of grammar and spelling
checkers.
Consultation with your teacher should be at least once a week observing the class hours using
these channels
Faculty-in-charge: Sandy E. Chavez, CPA
Email: sandy.chavez@unc.edu.ph
Group Chat – (once we have the list of the students, it is encouraged for them to have FB
messenger.- aside from the email, announcements will be posted here)
Collaboration with group mates and class mates should be at least once a week at a schedule
agreed upon through ur Group Chat or through text messaging. Hence it is important that you
provide me with your FB messenger account and your cellphone number if possible.
On the other hand, if you choose the Flexi Tech modality, it means that your internet
connectivity at home is stable, and therefore you can make use of the Learning Management
System or LMS for your learning activities at home. In this modality, you will have learning
sessions that will be done asynchronously, meaning, you will follow through the lessons,
instructions and activities using the LMS by connecting on-line. You can do this at your own pace
and time, preferably at the time that is prescribed in your schedule of classes to help you in
managing your time properly. You will also have synchronous classes with your teacher and
classmates, meaning, you will get to meet with them virtually by using platforms such as Zoom
or Google Hangouts. The schedules are provided in the class schedule. However, whenever
there are adjustments in the schedule of meetings because of certain exigencies, you will be
informed about it through a message in the Group Chat which we will create, or through text
messaging.
Section Day Time Google Meet Details

2007 MTH 9:30-11:00am meet.google.com/fsx-xsio-uqj
2094 TF 9:30-11:00am meet.google.com/xtv-jriy-kzg
In a face-to-face mode of delivery, we meet during class hours at an assigned room. That has
changed in a remote set up whether flexi kit or flexi tech solutions. Instead of meeting every
week at a pre-assigned time and place, a large portion of your work will involve independent
study tasks. This means you will need to pace yourself, direct your own learning experience, be
disciplined in managing your time, and target to complete assignments on or before the due
date.
Every week, I designed a module which provides details on how you should engage with the core
topic and whether this will be supported by a live meeting via Google Meet. The lesson/topic for
20
each week is designed following the UNC outcome-based education delivery format. You must
view these study guides at the start of the week to give you clarity of what lies ahead and what is
expected of you during the week.
In both flexi kit and flexi tech, further consultation can be done outside of class hours: 1:00-2:00
Sat.
STUDENTS’ REQUIRED SKILLS IN A DISTANCE LEARNING MODE

Distance learning covering both flexible tech-driven and printed modular modalities may sound
so wonderful that some of you may start with an unrealistic vision. In reality, these learning
modalities require just as much, if not more, time, energy, motivation and discipline as
traditional classroom courses. So, it is imperative that you possess specific skills and apply
learning strategies to be successful in these learning modalities.
To better equip you for distance learning, it is highly recommended that you take and complete a
Coursera course- MINDSHIFT: Break Through Obstacles to Learning and Discover Your Hidden
Potential. Mindshift teaches the essentials of online learning. It provides practical insights from
science and certain mental tools so you can learn and do more—far more—than you might have
ever dreamed!
You can avail this course as a free course, which means no certificate will be provided to you
after completion. However, the skills and learning strategies that you will gain are helpful in your
university journey.
Aside from the Coursera course, we have the summary of skills and learning strategies that will
surely help you in this distance learning mode: I would like you to carefully read the list and
apply these in all your courses.
1. Persistence
Persistence is perhaps the biggest key to succeed in distance learning. This means that you
should have the willingness to tolerate technical problems, initiative to seek help when needed,
discipline to work daily in every class, and motivation to persist through challenges.
You should understand that you will run into challenges, but keep trying and ask for help. You
have to set up a manageable study schedule and stick to it. You are expected to log in and make
progress every day. Have that discipline, stick to your schedules even after the novelty of going
to distance learning starts to wear off! Keep going! Your daily little progress when sums up will
be surely of significant value at the end of this course.
2. Effective Time-Management Skills

Next, time management. You must be able to manage your time well. This flexibility is one of the
great benefits of distance learning. But, it can also be a drawback if you procrastinate, unable to
stick to a routine study schedule, or is not able to complete assignments without daily reminders
from your teacher.

21
Effective time-management skills don't just happen. You have to learn this by practice. Once you
do, you will benefit from it throughout your life. So, follow the tips below to develop yours:
● You are encouraged to review the syllabus for each of the courses. You must develop a
comprehensive plan for completing the course requirements and assessments.
● Make a daily "To Do" list. And have fun checking things off the list as you complete them.
It takes time to develop good habits. But, at the end, you will surely gain satisfaction from being
well-organized and in accomplishing your tasks.
3. Effective and Appropriate Communication Skills

Another is about communication. This skill is vital in distance learning because you must seek
help when you need it. We, your teachers, are willing to help you, but we are unable to pick up
on non-verbal cues, such as a look of confusion on your face. You are advised to follow these
tips:
● Use the tools provided by your courses as channels for communication. Our school and
your program provide several ways for us to communicate. These might include e-mail,
discussion groups, chat room office hours, cell phones, and even text messaging. We
want to help you to succeed in your classes and will surely answer your questions.
You may feel awkward to talk with your teachers this way, but these channels aim to
bridge the communication gaps in distance learning. So, go ahead and see the channels
specified in this course.
● Use appropriate style and language for school. When communicating with your
teachers and other staff, you should write in full, grammatically correct sentences and
with a respectful tone. While many of you are used to a very informal style of writing in
chat rooms, blogs, text messages, and so forth, for academic training in UNC along
English Immersive Environment (EIE), you are encouraged to be mindful of your
language and sentence construction .
Because of the distance, it's tempting for some of you to say things out of anger or frustration
that you would never say to your teacher in person. We, your teachers in distance learning are
both professionals and persons. We expect to be treated with respect and courtesy in the same
way that you do in a physical classroom; and with persons whom you encounter every day like
your family. Let us always remember the UNC Core Value: We Respect Each Other and Work as a
Team.
4. Basic Technical Skills

The fourth skill is about technology. You as learners need basic technical skills to succeed. These
include your ability to create new documents, use a word processing program, navigate the
internet and the learning management system, and download software and files. We will have
an orientation on how to use the learning management system and other online tools.

22
If you lack basic computer skills, we are encouraging you to find an online tutorial and learn from
there. You may also want to check the UNC’s main website for its hardware and software
requirements to see the compatibility of your own gadgets
5. Reading and Writing Skills

Another is about reading and writing as the main ways to communicate in distance learning
modality. Although some hard copies of textbooks might be required, you should be comfortable
reading a lot of documents on a computer screen and able to type.
Though some tests and quizzes have multiple choice questions, many of your assignments will
involve writing short or long answers. So appreciate these learning activities to improve your
writing skills.
6. Motivation and Independence

The sixth skills are about motivation and independence. To be successful, you must want to
succeed. Distance learning requires independence, internal motivation, responsibility, and a
certain level of maturity.
Kindly reflect on these questions:
What are your reasons for attending school?

Are you determined and self-motivated to succeed in school?
Your answers are worthwhile reasons to work hard in school. In the future, it will give you a
greater level of personal satisfaction with your career. Perhaps it would be simply a personal
pride in your accomplishments.
7. A Good Study Environment

The last but not the least is having a good study environment. This is a critical factor in distance
learning. Refer to the helpful tips below:
● Get some peace and quiet. You will need a quiet place to work without distractions from
things like television, family, or roommates.
● Avoid games. Consider uninstalling any computer games to avoid temptation. Or keep
the games on a different computer in the house.
● Turn off mobile phone devices. Let your friends and family members know the hours
that you will be "at" school.
● Beware surfing the black hole of the Internet. It is easy to lose track of the time as you
wander from site to site.
● Consider ergonomics. Adjust the height of your chair, keyboard, and screen so that you
will be comfortable. Forearms and thighs should be level and parallel to the floor. Wrists
should not be bent while typing.
● Set up good lighting and comfortable seating. Lighting in the room should be at least as
bright as the computer screen to avoid eye strain.
Go back to the above list from time to time to be reminded of helpful tips to succeed in distance
learning or probably in life in general.

23
HONOR CODE
We uphold the UNC Core Values and this is our commitment with respect to academic integrity.
I am an advocate of academic integrity. I commit to be transparent in acknowledging the work of

others. I commit not to cheat on exams, plagiarize or misrepresent the ideas of someone else as
my own, falsify data and engage in instances that tainted academic integrity.
I commit to UNC Core Values of Doing the Right Things Right!
SELF-ASSESSMENT (Do not skip this!)
Before we proceed to module 1, let us check if you and I have the same understanding of what
this course is all about. You have to get a perfect score in this first test. You are free to go back to
the discussion above, in case you are unsure of your answer.
ALL ABOUT THE COURSE
Based on your reading of course information, answer the following questions:
1. What is the objective of this course?

_______________________________________________________________________
2. What is the final outcome of this course?

_______________________________________________________________________
3. What are the modules that you have to complete in this course?
1.______________________________________________________________________
2.______________________________________________________________________
3.______________________________________________________________________
4.______________________________________________________________________
5.
4. What are the resources that you need in this course?

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
____________________________________________________________________
5. How will you describe the learning style appropriate for distance learning modality/
printed modular approach?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
____________________________________________________________________

24
6. What is the minimum number of hours per week that you have to devote in this course?
_______________________________________________________________________
When are the prescribed consultation hours with me?

_______________________________________________________________________
Does this course require collaborative work?

_______________________________________________________________________
7. What are the communication channels available for you and for the class?
________________________________________________________________________
________________________________________________________________________
_____________________________________________________________________
8. What are the 7 skills that you have to develop and demonstrate in order to succeed in
distance learning?
1.______________________________________________________________________
2.______________________________________________________________________
3.______________________________________________________________________
4.______________________________________________________________________
5.______________________________________________________________________
6.______________________________________________________________________
7.______________________________________________________________________
9. State the honor code

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
____________________________________________________________________
10. What is your personal commitment in this class?

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
___________________________________________________________________
Except for number 10, I know you have realized the clues for answers from the discussion of
course information.
COST ACCOUNTING AND CONTROL

25
1. COST ACCOUNTING TERMS, CONCEPTS,
AND CLASSIFICATIONS
INTRODUCTION
This module is intended for you to learn about the various cost concepts, elements of cost,
methods, and techniques of cost control, cost classification, and its purpose and also to expose
you to the preparation of financial statements for manufacturing and service companies.
These are the topics included in this module:

1. Introduction to Cost Accounting, Scope, and Objectives of Cost Accounting
2. Relationship between Cost Accounting, Financial Accounting and Management
Accounting
3. Parts/Components of Accounting System
4. Elements of Cost
5. Classification of Inventories
6. Statement of Cost of Goods Manufactured, Manufacturing Process, and Statement of
Income and Expenses of a Service and Manufacturing Companies
After every topic, there will be non-graded self-assessment questions to check your knowledge
about the completed lesson. A key to correction will be provided for you to know the correct
answer. In this manner, you will be able to review the topic where you got an incorrect answer.
After each module, there will be a graded assessment in the form of quizzes, either True or False,
Multiple-choice, and Fill-in the blanks questions. This graded learning activity aims to check your
knowledge about the different processes covered in the module.
I will be available for consultation to guide you with the tasks as well as in giving feedback on
your submissions and participation.
LEARNING OUTCOMES
At the end of this module, you should be able to:
I Explain the basic concepts of cost accounting
E Discuss the elements of costs, the cost systems, the manufacturing process, and
the types of inventories for financial reporting; and
D Prepare the Statement of Cost of Goods Manufactured and Statement of Income
and Expense.
TOPIC 1.1: INTRODUCTION TO COST ACCOUNTING, SCOPE, AND OBJECTIVES OF COST

ACCOUNTING
Consider your favorite snacks and beverages, could you prepare the breakdown of the costs
associated with these. What do you think is the importance of identifying these costs in

26
producing a certain product? Proceed to the learning activities below to discover about the
purpose and scope of cost accounting.
Learning Activity 1-1
Read: Chapter 1 – Cost Accounting and Concepts, pp. 1-3

Flores (2016).Integrated Cost Accounting – Principles and Applications
Self-Assessment/Review Questions:
1. What is Cost Accounting?
2. What are the three (3) major functional activities of cost
accounting? Costing, Cost Control, and Budgeting
3. What are the five most important objectives of Cost Accounting? To
ascertain cost, to determine the SP, To control cost, to facilitate the
preparation of FS & other reports, and to provide information for
decision-making.
TOPIC 1.2: RELATIONSHIP BETWEEN COST ACCOUNTING, FINANCIAL ACCOUNTING

AND MANAGEMENT ACCOUNTING
With the learnings that you got from topic 1, let us compare your lessons in your previous
accounting subjects with this current subject. Let us recall the Income Statement that you have
learned in Fundamentals of Accounting. What are the cost components that you can still recall?
What about the users of Financial Statements? Can you identify them? Do the learning activities
below to help you recall the concepts in financial accounting and to learn more about cost
accounting and its relationship to both financial and management accounting.

To summarize the Relationship of Financial and Management Accounting watch this video.
Click https://www.youtube.com/watch?v=Ep7DqVxFHaY link to open resources.
1. What is the accounting period used in Cost Accounting and Financial Accounting? Cost
accounting provides data more frequently without a specific period required. Financial

27
accounting Financial Statements and other reports generally prepared for one (1) year
but can also be prepared at a regular interval such as monthly, quarterly, or
semi-annual.
2. Management accounting provides financial and non-financial data to internal users to
perform key business decisions and policies, while financial accounting provides
financial information to external users?
3. ________________ covers all transactions of the business that affect the preparation
and presentation of financial statements, while _____________ covers all transactions
affecting the cost of a product, activity or services. Financial Accounting Cost
Accounting.
TOPIC 1.3: PARTS/COMPONENTS OF ACCOUNTING SYSTEM

You have learned in your previous lessons that understanding the operations would make
accounting easier. Now, let us look at this familiar production process at home. Do you cook rice?
Can you tell me the procedures that you follow? Are costs incurred along with these procedures?
Can you classify these costs? Can you determine the appropriate method of costing? You will
find the answers by doing the activities below:

1. What are the five (5) parts or components of the cost accounting system? Costing Method,
Costing Technique, Cost Accumulation, Cost Flow Assumption, and Inventory System
2. What cost flow assumption system is typical for high-value products, with low sales volume
and that can be easily differentiated? Specific Identification
3. Under the _____________ inventory system, the inventory account is updated immediately
after each transaction? Perpetual
4. What are the three kinds of costs classified by behavior or variability? Variable Cost, Fixed
Cost, and Mixed/Semi-variable Cost
5. What are the three kinds of costs classified by nature of expense? Materials, Labor and
Overhead
TOPIC 1.4: ELEMENTS OF COST

Let us go back to your favorite snacks and beverages identified in topic 1. Did you complete the
comprehensive list of costs associated with these? In this topic, I would like you to think as a cost
accountant and properly classify the listed items as cost elements.

28

To summarize the cost classified “By Nature of Expense” watch this video.
Clickhttps://www.youtube.com/watch?v=bgp_AAxUJpQ link to open resource.
1. What are the elements of a product cost? Direct Materials, Direct Labor and Factory
Overhead
2. In a manufacturing company __________________ is prepared before a Statement of Income
and Expense can be generated. Cost of Goods Manufactured
3. Differentiate product cost to period cost. Product costs are costs necessary to manufacture a
product, while period costs are non-manufacturing costs that are expensed within an
accounting period
TOPIC 1. 5: CLASSIFICATION OF INVENTORIES

Let us again remember your Fundamentals of Accounting. Can you tell me an inventory account
that you have learned? What is it? What about in your Financial Accounting and Reporting
subject? How many inventories can you recall? What about the measurement principles
applicable to these inventories? Can you explain them? Do the learning activities below to recall
the concepts of inventories.
Read: Chapter 1 – Cost Accounting and Concepts, pp. 15

1. What are the three (3) types of inventory that are presented in the Statement of Financial
Position of a manufacturing company? Raw Materials Inventory, Work-in-process Inventory
and Finished Goods Inventory
2. ___________________ pertains to the account used for direct and indirect materials
purchased that will be used in the manufacturing process? Raw Materials Inventory
3. ____________________ it is the cost of an uncompleted job order or process at the end
of the period. Work-in-process Inventory

29
4. ____________________ is used to accumulate the production costs incurred relating to
finished goods. Finished Goods Inventory
5. ____________________ is used by other companies to account for all supplies and
indirect materials? Supplies Inventory
TOPIC 1.6: STATEMENT OF COST OF GOODS MANUFACTURED, MANUFACTURING

PROCESS, AND STATEMENT OF INCOME AND EXPENSE
In your Fundamentals of Accounting subjects, what was the nature of business where you have
prepared the financial statements? What about manufacturing operations? Can you illustrate
the difference between the Income Statement of merchandise and manufacturing entities? To
do that, proceed to the learning activities below.

1. ____________________ Income statement format that segregates the operating and
non-operating revenues and presents the gross margin and operating income? Multi-Step
2. ____________________ shows the movement of raw materials and work in process
inventories and is prepared before the Statement of Income and Expense is generated? Cost
of Goods Manufactured
3. The flow of cost in the manufacturing process starts with the Procurement, ______________,
warehouse, and _____________? Production and Sales
LET’S PRACTICE!
Solve at least 1 exercise/problem related to the topic. As part of summative/graded assessments, the
compilation of solved problems will be submitted at designated pick-up points or using the
communication channel available to you on a specified date.
Solve Problem:
P1-1 and P1-2 on page 38
Chapter 1 – Cost Accounting and Concepts
Integrated Cost Accounting – Principles and Applications
By: Marlon Oyzon Flores 2016 First Edition
Problem P1-1
Lowell Company maintains perpetual inventory records. The following accounts were selected
from their chart of accounts.

30
Code/Account Name
A. Cash
B. Accounts Receivable
C. Raw Materials Inventory
D. Work in process Inventory
E. Finished goods inventory
F. Accounts Payable
G. Direct labor
H. Factory Overhead
I. Cost of Goods Sold
J. Sales
K. Operating Expense
The following transaction took place during the current month. Put the appropriate account code in the
columns below to indicate the account (s) to be debited and credited for each transaction.
Debit Credit
1. Raw materials purchase on account _____ _____
2. Direct materials were requisitioned for Job 1225 _____ _____
3. Issued a check to vendor for repair services on factory equipment _____ _____
4. Factory labor for the month was paid as incurred _____ _____
5. Direct and indirect labor used were recognized _____ _____
6. Raw materials previously purchased on account were paid _____ _____
7. The production department requisitioned indirect materials for
For the use in the factory _____ _____
8. Overhead was applied to production based on a predetermined
overhead rate of P60 per labor hour _____ _____
9. Completed goods were transferred to warehouse _____ _____
10. Goods costing P100,000 were sold for P135,000 on account _____ _____
Problem P1-2
Dartmouth Company reported the following inventory balances as of October 31, 2015.
Raw Materials P80,000
Work in process 110,000
Finished goods 190,000
The transactions occurred during the month of November:

1. Purchased P25,000 worth of materials on account.
2. Issued P18,000 worth of materials to production, of which P15,000 were direct to the product.
3. Factory payroll of P34,000 was accrued and distributed as follows: P30,000 for direct labor and
P4,000 for supervisors (ignore payroll taxes and deductions).
4. Factory utility costs of P8,000 were accrued.

31
5. Prepaid insurance of P1,000 on factory equipment expired in November.
6. Straight line depreciation on factory equipment for the month was P10,000.
7. Selling and administrative expenses were P40,000 (P30,000 was paid in cash and P10,000 was
accrued.
8. Factory overhead was transferred to finished goods inventory.
9. Goods manufactured were transferred to finished goods inventory. Ending inventories were:
work in process, P60,000 and finished goods, P175,000.
10. Sales of P217,000 was made on account.
Required:
a. Journal entries to record the above transactions
b. Statement of cost of goods manufactured
c. Income Statement / Statement of Income and Expenses
KEY TAKEAWAYS:
✔ Different costs of a business have a different impact on its operations, costs, efficiency, and
profits. The management needs to examine the company's cost structure to improve the way
it runs its business.
✔ Inventories of a manufacturing firm have three (3) types of inventories namely raw materials,
work-in-process, and finished goods inventory.
✔ Statement of cost of goods sold in a manufacturing firm shows only the movement of finished
goods and the movement of raw materials and work-in-process are captured in the statement
of cost of goods manufactured that will be prepared before the Statement of Income and
Expense can be generated.
WRAP-UP SESSION AND CONSULTATION

Before this session, list down the topics that need further discussion.
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________
REFERENCES
Edspira. (2014). Financial accounting vs. management Accounting. Retrieved from

https://www.youtube.com/watch?v=Ep7DqVxFHaY

32
Edspira. (2014). 3 types of manufacturing costs. Retrieved from
https://www.youtube.com/watch?v=bgp_AAxUJpQ
2. ACCOUNTING FOR PRODUCTION ELEMENTS
INTRODUCTION
Starting in this module, we will look into the details of elements of costs. In the previous module,
you have learned about the materials, labor and overhead. Module 2 will discuss both
accounting and management aspects related to materials.
LEARNING OUTCOMES
After the end of this module, you should be able to:
I Discuss the accounting concepts for each element of production
E Explain the control measures applicable to each element of production
D Prepare journal entries to record transactions of each element of production
TOPIC 2.1 ACCOUNTING FOR MATERIALS

Specifically, this covers the following subtopics.
1. Procedures for Material Control
2. Materials Control Methods
3. Economic Order Quantity Model
4. Recording of Materials
5. Inventory System/Methods of Costing Materials
6. Methods of Costing Materials
7. Recording of Transactions in Stock Ledger Card
8. Inventory/Stock Discrepancies
9. Inventory/Stock Valuation

33
TOPIC 2.1.1: PROCEDURES FOR MATERIAL CONTROL
Look again at your own kitchen, what happens if you run out of ingredients in the middle of meal
preparation? What happens if these ingredients are not stored properly? These are the same
concerns of those in the manufacturing business. So take a closer look to the topic: Accounting
for Materials in the learning activities below:
Learning Activity 2.1-1
Read: Chapter 3 – Accounting for Materials, pp. 82-86

1. What are the main objectives of materials control? To ensure that there is a regular supply of
materials for an uninterrupted production process, Avoid the possibility of
over/understocking, minimize wastage, Obtain materials favorable price without sacrificing
the quality, provide management updated material information for planning and decision
making, and avoid loss by adopting effective internal control.
2. ______________ is the document used for the transfer of excess materials from one
department, job or activity to another. Materials transfer Slip
3. ______________ is the document used for the issuance of materials to production.
Materials Issuance Slip
4. ____________ is the document used for the transfer or return of excess materials to
the warehouse or storeroom? Materials Return Slip
5. Materials records that indicate both the quantity and value of inventory is called
_____________________? Stock Ledger Card
TOPIC 2.1.2: MATERIALS CONTROL METHODS

What are the control measures applicable to materials? How do we ensure that production will
not be delayed due to understocking or will not incur significant carrying cost due to
overstocking? Read more about this topic in the learning activities below:

34
1. _______________ is an inventory control method used by the company under a
computerized environment that automatically places an order when the supply reaches the
minimum level set by the management. Automatic Order System
2. _______________ is an inventory control method that minimum level is set as a signal to
place an order to avoid stock out and maximum level is set to avoid high storage cost and
spoilage. Min-Max Method
3. __________________ is an inventory control method that uses two (2) bins. The 1st bin is
used up from the time of purchase to reorder and the 2nd bin is used from reorder point until
the receipt of the order. Two-Bin System
4. __________________ is a control method that reviews the entire inventory in a regular
interval and places an order for low quantity items that will not last until the next review.
Order Cycling System
5. __________________ is inventory control that involves classification of different types of
inventories. This method gives the highest degree of control to an item with the largest
inventory value compared to other inventories. ABC System
TOPIC 2.1.3: ECONOMIC ORDER QUANTITY MODEL (EOQ)

How do you balance the impact of overstocking and understocking? What is that appropriate
level of inventory that the entity will have to maintain. Learn more of this in the learning
activities below.
To summarize the Economic-Order-Quantity Model watch this video.

Click: https://www.youtube.com/watch?v=AYpjPWmlyHM link to open
resource.
To summarize the Economic Order Quantity (Tabular Method)

Click: https://www.youtube.com/watch?v=lt-jTE1SvFs link to open resource.
To summarize on How to Calculate Re-Order Point watch this video.

Click: https://www.youtube.com/watch?v=2kKRgtzcses link to open resource
1. The level of inventory order that minimizes the total cost related to inventory management is
called ___________________? Economic Order Quantity
2. What are the four (4) basic assumptions of an Economic Order Quantity (EOQ) Model? The
Annual usage of particular inventory is known, The inventory usage is steady over time,

35
Orders made to replenish the inventory are received at exactly the point in time the inventory
reaches zero, Ordering and carrying costs are constant over the given range of inventory level.
3. Economic Order Quantity can be determined/calculated using the ___________________ and
________________ Approach? Tabular and Mathematical Approach
4. When you multiply the lead time by the average daily usage it will give you the
___________________? Reorder Point
5. Additional inventory maintained on top of reorder point to address unusual events that
caused delays in the delivery of order such as floods, strikes to prevent stockout is called
________________? Safety Stock
LET’S PRACTICE!
Solve Problem:
P3-3 on page 115
Chapter 3 – Accounting for Materials
Problem P3-3
Aeon Lakedown predicts that 10,000 units of materials will be used during the year. The
expected daily usage is 40 units. The expected lead-time is 6 days, and there is a safety stock of
300 units. Aeon expects that the cost of materials will be P480 per unit. It anticipates that it will
cost P200 to place each order. The annual carrying cost is P1.00 per unit.
Required:
1. Calculate the order point
2. Calculate the economic order quantity
3. Calculate the total ordering and carrying costs at EOQ point.
TOPIC 2.1.4: RECORDING OF MATERIALS

After our discussion of internal control measures related to materials. Let us now discuss how
transactions of this cost element will be put into records. Learn more of this topic by doing the
activities below:

36
1. _________________ is the cost of handling materials from suppliers
commonly recorded as part of factory overhead? Materials Handling Charges
and Transportation (Freight-in)
2. _________________ are granted to customers to encourage prompt payment
of accounts and volume purchases? Purchase discounts
3. Purchase price of materials are recorded in the books _________________?
Net of discounts
TOPIC 2.1.5: INVENTORY SYSTEM/METHODS OF COSTING MATERIALS

At how much the inventory will be reported subsequent to its acquisition. If the entity makes
several acquisitions during the year, what unit cost will be used in determining the ending
inventory? Is it the cost of first acquisition or last acquisition or the average? Recall this concept
of measuring inventory in the learning activities below:

To summarize the different methods of costing materials/inventory click the below video links:
FIFO Inventory Method
Click: https://www.youtube.com/watch?v=Wa83L8TvoaM
FIFO Periodic Inventory Method
Click: https://www.youtube.com/watch?v=H-053SIwnJ8
FIFO Perpetual Inventory Method
Click: https://www.youtube.com/watch?v=cnVEC6lovOI
Average Cost Inventory Method
Click:
https://www.youtube.com/watch?v=qAWVVw-dC5A&list=TLPQMjQwNjIwMjCFiS_pR2pVzA&index=6
Average Cost Periodic Method
https://www.youtube.com/watch?v=dU32hfszRs0
Moving Average Inventory Method - Perpetual System
Click: https://www.youtube.com/watch?v=0kVUUVMMo-c
Periodic vs. Perpetual Inventory Accounting
https://www.youtube.com/watch?v=yv4E_d5atd4&t=58s

37
1. An inventory method in which a new average unit cost is calculated every after purchase.
Moving Average Method
2. This method valued materials ending inventories at the most recent purchase price. FIFO
3. This method assumes that the last materials inventory received is issued first to production.
LIFO
4. What are the four (4) methods of costing materials? Specific Identification, FIFO, LIFO, and
Average.
TOPIC 2.1.6: RECORDING OF TRANSACTIONS IN STOCK LEDGER CARD

Can you still recall the perpetual inventory system from your lesson in Fundamentals of
Accounting? What is the document being used by this system to keep track of the inflow and
outflow of inventory? Proceed to the learning activity below to review this concept.
1. What inventory method generates the same materials used and ending inventory balance
from both periodic and perpetual inventory systems? FIFO Method
2. Materials returned from production to the storeroom and remain unissued at the end of the
period produce different results of ending inventory under ______________ periodic and
perpetual system. FIFO Method
3. ______________ this method does not distinguish the old and new purchases, and a new
weighted average unit cost is calculated for the next issuance. Moving Average
TOPIC 2.1.7: INVENTORY/STOCK DISCREPANCIES

What would happen if the records in the stock cards did not match the physical count? How do
you account for the difference? Learn more of this in the activity below:


38
1. What are the common causes of stock discrepancies? Evaporation Loss or Shrinkage, Volume
fluctuation due to temperature, Units purchase different from issues, Incorrect entries in bin
cards, Storage in wrong bins, Short or excess issues or wrong issues of material, Excess or
shortages in packages or bundles not checked at the time of receipt, Pilferage, and theft
2. _______________ loss or shortage is charged to factory overhead. Normal Loss
3. _______________ loss or shortage is charged to the current period under “Inventory Loss or
Shortage” account. Abnormal Loss
TOPIC 2.1.8: INVENTORY/STOCK VALUATION

Is the cost that you have computed in topic 5, the amount to be presented in the Financial
Statements? Recall the measurement principle that you have learned in your Financial
Accounting and Reporting Subject. Do the learning activity to help you remember the concept.
How to Calculate Net Realizable Value of Inventory watch this video.

Click: https://www.youtube.com/watch?v=krWqHWSCWf0 link to open resource
1. ________________ is the estimated selling price in the ordinary course, less estimated cost
of completion and to make a sale. Net Realizable Value
2. ________________ is the actual purchase price of goods and services at the time of
procurement. Historical Cost
3. ________________ represents the cost to replace an existing goods or inventory. Market
Value or Replacement Cost
LET’S PRACTICE!
Solve Problem:
Chapter 3 – Accounting for Materials

39
Problem P3-6
Woodworks Company deals in furniture and uses a periodic inventory system. The following
transactions occurred during the month of March, 2014.
Date Description No. of chairs Unit Cost Total
1-Mar-14 Opening Inventory 100 P40 P4,000
15-Mar-14 New Purchases 50 42 2,100
20-Mar-14 New Purchases 75 45 3,375
Total 225 9,475
The Company sold 200 chairs in March 2014.
Required : Compute ending inventory and cost of goods sold under each of the following methods.
a. FIFO
b. Moving average cost
c. Weighted average method
Problem P3-7
IT Equipment Company running a wholesale business of personal computers. The following
transactions occurred during the year 2016.
Date Transactions Units Unit Cost

1-Jan-16 Beginning Inventory 40 P2,000
12-Feb-16 Purchases 10 2,100
25-Feb-16 Sales 12 2,500
10-Mar-16 Sales 10 2,600
20-Apr-16 Purchases 18 2,150
12-Aug-16 Sales 25 3,000
15-Nov-16 Purchases 15 2,200
Ending Inventory at the end of year is calculated as 36 units of personal computers.
Required:
a. FIFO
b. Moving Average
KEY TAKEAWAYS:
✔ Materials are the major component of the total costs of manufacturing a product, and the
most important assets in a manufacturing business. The total costs of a product can be
reduced and controlled by using the materials efficiently.
✔ Raw Materials inventory is one of the three (3) types of inventory of manufacturing companies
that cannot be found in a merchandising company.

40
✔ FIFO method did not always produce the same ending inventory balance for both periodic and
perpetual systems. It produces different ending inventory balances when there are materials
issued to production and subsequently returned to the storeroom and remain unissued at the
accounting period.
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________
REFERENCES
Edspira. (2013). EOQ economic-order-quantity formula and explanation. Retrieved from

https://www.youtube.com/watch?v=AYpjPWmlyHM
Edspira. (2014). FIFO inventory method. Retrieved from

ttps://www.youtube.com/watch?v=Wa83L8TvoaM
Edspira. (2018). FIFO periodic inventory method. Retrieved from
https://www.youtube.com/watch?v=H-053SIwnJ8
Edspira. (2018). FIFO perpetual inventory method. Retrieved from
https://www.youtube.com/watch?v=cnVEC6lovOI
Edspira. (2014). Average cost inventory method. Retrieved from
https://www.youtube.com/watch?v=qAWVVw-dC5A&list=TLPQMjQwNjIwMjCFiS_pR2pV
zA&index=6
Edspira. (2018). Average cost periodic method. Retrieved from
https://www.youtube.com/watch?v=dU32hfszRs
Edspira. (2018). Average cost perpetual inventory method. Retrieved from
https://www.youtube.com/watch?v=0kVUUVMMo-c
Edspira. (2015). Periodic vs. perpetual inventory accounting. Retrieved from
https://www.youtube.com/watch?v=yv4E_d5atd4&t=58s
TOPIC 2.2 ACCOUNTING FOR LABOR
INTRODUCTION
This section is about pay or salary. Is it interesting? Our focus is on labor accounting, where
recognition and distribution of labor costs will be covered. Moreover, control measures along
attendance and time recording, and efficiency and productivity will be discussed.
41
Specifically, it covers the following topics.
1. Labor Control
2. Attendance and Time Recording
3. Measurement of Labor Efficiency and Productivity
4. Labor Turn-over
5. Accounting for Labor Cost
6. Recording of Payroll
TOPIC 2.2.1: PROCEDURES FOR LABOR CONTROL

Just like in our discussion of materials in the previous module, there should be internal control
measures to be observed for labor transactions. How do you ensure that pay is an appropriate
amount? What is your basis in determining the pay? Learn more by doing the activity below:
Read Chapter 4 – Accounting for Labor, pp. 120

1. This is an element of cost that pertains to the salaries and wages given to employees? Labor
Cost
2. Labor internal control includes segregation of duties between ________________ and
________________. Time Keeping and Payroll Processing
3. List down at least three (3) labor-management controls. Proper Authorization of overtime,
Verification and calculation of incentive scheme, Payment of salaries through payroll bank
accounts or checks, Periodic verification of employee information with the records or
personnel department, and Authorization and verification of any changes in employee
records.
TOPIC 2.2.2: ATTENDANCE AND TIME TRACKING

Have you observed how UNC records and tracks the attendance of the employees? Can you
identify and describe them? To help you answer these questions, do the learning activity below:
Read Chapter 4 – Accounting for Labor, pp. 120-121

42
1. List at least four (4) attendance tracking used by companies in a manual and/or computerized
environment. Logbook or Attendance Register, Timecard or Bundy Clock, Biometrics, ID
Scanning etc….
2. What is the document used to record the time spent by the operator on each job? Job Card or
Time Ticket or Job Ticket
3. This document used when the employee has several small jobs during normal working hours?
Daily or Weekly Time Sheet
TOPIC 2.2.3: MEASUREMENT OF LABOR EFFICIENCY AND PRODUCTIVITY

How companies can ensure that product pricing is competitive. If you are the human resource
manager or operations manager, how can you save cost on labor? Do the learning activity below
to help you answer this question.

1. It involves a systematic analysis of human work which consists of method, time, and motion
study concerning the performance of a job. Work-Study
2. _____________ it involves the analysis of time required to complete a task under normal
working conditions. Time Study
3. ______________ study of body motions used in the performance of an operation. Motion
Study
4. _______________ study, analysis and examination of the method of work performance.
Method study
TOPIC 2.2.4: LABOR TURN-OVER

What is the cost to the company if there is high labor turnover? Is this good or bad for the
company? Discover the answers in the learning activity below.


43
1. What are the three types of measuring labor turn-over? Separation Method, Replacement
Method, and Flux Method
2. When you add the labor turn-over rate under Separation and Replacement Methods it will
give you the same turn-over rate under ________________. Flux Method
3. List at least three (3) causes of labor turn-over. Dissatisfaction with the job, Unsatisfactory
working conditions and facilities, Poor morale and low levels of motivation within the
workplace, Bad relationship with co-workers/superiors, Lack of employee welfare activities,
and lack of incentive and promotion
TOPIC 2.2.5: ACCOUNTING FOR LABOR COST

Can you tell me the classification of labor cost? Do you have an idea about payroll taxes? Learn
more of these in the activity below:
1. What is the portion of labor cost that is directly traceable to product, job, or activity? Direct
Labor
2. It represents the cost of labor by the other workers that cannot be directly identified with the
product. Indirect Labor
3. What are the two types of labor idle time and its treatment? Normal Idle time is charged to
FOH or can be added as part of direct labor costs and Abnormal Idle Time is treated as Period
Costs.
4. What is the treatment of overtime when it is paid to complete the job at the request of the
customer? Charge to factory overhead of that particular job.
5. What are those payroll deductions and contributions required by the Philippine Government?
SSS, PHIC, HDMF, EC, and Withholding Tax on Compensation
TOPIC 2.2.6: RECORDING OF PAYROLL

How will labor costs be put into records? Can you compare the accounting procedures for
materials and labor? Learn more about labor accounting in the activity below. Then, proceed
with the comparison.


44
1. Payroll amount pertaining to direct labor cost is charged to _________________ while
indirect labor cost is charged to __________________?
2. Sales salaries and other incentives and administrative expenses are recorded as
_______________. Operating Expense.
3. Which among the four (4) payroll deductions and contributions required by the government
is purely from the employee? Withholding Tax on Compensation
LET’S PRACTICE!
Solve Problem:
Chapter 4 – Accounting for Labor
Problem P4-1
Hansel Corporation provided the following data:
No. of employees at the beginning of the month 600
No. of employees at the end of the year 640
No. of employees resigned 40
No. of employees discharged 10
No. of employees replaced 20
Required: Calculate the labor turnover by applying three methods:

a. Separation method
b. Replacement method
c. Flux method
Problem P4-2
Hakone Company determined P284,200 payroll for the week consisting of P240,000 earned by 80 direct
laborers and P44,200 earned by 20 indirect laborers. The total factory bonuses to be paid at year-end is
estimated at P980,000. All factory workers receive a three-week paid vacation and 10 paid holidays.
Required: Prepare the journal entries to:

a. Distribute the weekly payroll, and
b. Accrue the bonus, vacation, and holiday pay.

45
KEY TAKEAWAYS:
✔ Labor is the second major component of the total costs of manufacturing a product. The total
costs of a product can be reduced and controlled by hiring efficient workers.
✔ Labor costs can be classified into two main classifications, direct (production) and indirect
(non-production) cost of labor. If the cost of labor is incorrectly allocated, it can cause the
wrong pricing of the product or services and it will affect its profitability.
✔ Direct labor costs include wages of the employees that manufacture a product, while indirect
costs are associated with wages of the employees not directly part of the manufacturing
process such as maintenance of factory building.
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________
TOPIC 3 ACCOUNTING FOR MANUFACTURING OVERHEAD COST

This covers the accounting for overhead with recording of both actual and applied overhead.
Allocation of departmental overhead is likewise included in this module.
This includes the following topics: The First step in allocating the Manufacturing Overhead Cost
1. Nature of Overheads
2. Collecting Overhead Costs
3. Classification of Overheads
4. Separating Semi-Variable/Mixed Costs into Fixed and Variable and its Purpose
5. Steps in Accounting for Factory Overhead
6. Predetermined Overhead Rate
7. Application base used in Calculating Predetermined Overhead Rate
8. Alternative Capacity Measures
9. Recording of Actual and Applied Overhead
10. Overhead Variance
11. Departmentalization of Factory Overhead and Classification of Departments and Its
Objectives

46
12. Allocating Overhead Costs and Methods of Allocating Service Department Costs to
Producing Departments
TOPIC 3.3.1: NATURE OF OVERHEADS

In the discussion of the first two elements of production: materials and labor, can you recall
what are those classified as overhead? Review that concept and learn more about overhead by
doing the activity below:
Read: Chapter 5 – Accounting for Manufacturing Overhead, pp. 142

1. What are the three (3) kinds of overhead that relate to producing activities? Indirect
materials, Indirect Labor, and Other indirect manufacturing expenses.
2. It is a kind of overhead that is used in a production process, but they are not directly
traceable to a cost object. Indirect Materials
3. It is a kind of overhead that refers to the wages paid to workers whose duties are not
directly related to the manufacturing of products or services. Indirect labor
TOPIC 3.3.2: COLLECTING OVERHEAD COSTS

Recall how materials and labor costs are collected. What documents were used to determine the
issuance of materials and incurrence of labor costs? Which of these will be applicable to
overhead? Learn more in the activity below:
1. ____________ indicates the cost of indirect materials issued to the manufacturing
department. Materials Requisition Slip
2. ____________ this document supports materials and services purchased that are not directly
traceable to products. Invoices

47
TOPIC 3.3.3: CLASSIFICATION OF OVERHEADS
Of the three elements of production costs, overhead has many inclusions. That some would call
it as a ‘dumping ground’ because of its definition- all production costs other than those classified
as Direct Materials and Direct Labor. Learn more by doing the activity below:
Read: Chapter 5 – Accounting for Manufacturing Overhead, pp. 142-143

1. What is the three (3) classification of overheads? Fixed, Variable and Mixed or Semi-variable
overhead
2. What kind of overhead is a set of costs that do not vary or not affected by changes in activity
or volume of production? Fixed Overhead
3. ___________ These are the costs that vary with the level of production or production.
Variable Overhead
TOPIC 3.3.4: SEPARATING SEMI-VARIABLE/MIXED COSTS INTO FIXED AND VARIABLE

AND ITS PURPOSE
What is the purpose of segregating mixed costs into fixed and variable components? Can you
give examples of mixed costs?
To summarize the High-Low Method Inventory System watch this video. Click:
https://www.youtube.com/watch?v=PLMcLKUgq_I link to open resource.
To summarize the Least Squares Regression Method watch this video. Click
https://www.youtube.com/watch?v=Z4Wg9OLHzKU and
https://www.youtube.com/watch?v=yC_Dxp1vSSU link to open resources.
1. This method used the highest and the lowest cost and quantity of output to separate the
fixed and variable cost of the product. High-low Method

48
2. This method used the average of the selected data rather than the highest and the lowest
cost and volume of output. Average Method
3. Fixed cost and variable costs are determined by plotting the mixed cost in a graph called
_______________. Graphical Method or Scatter Diagram
LET’S PRACTICE!
Solve Problem:
P5-1 on page 167
Chapter 5 – Accounting for Manufacturing Overhead
TOPIC 3.3.5: STEPS IN ACCOUNTING FOR FACTORY OVERHEAD

You have already learned the accounting procedures for materials and labor costs.What about
overhead accounting?

Arrange in order the steps in accounting for factory overhead:
___ Prepare the budget estimate of total overhead cost and the related volume of the application
base at the beginning of the year.
___ Analyze the overhead variance and record the necessary adjustment.
___ Apply the overhead to individual products.
___ Determine a cost application base that serves as a common denominator for all the products
manufactured.
___ Obtain the actual application base data for the current year.
___ At year-end, account for any difference between the overhead applied to products or jobs and the
amount of actual overhead.
___ Compute the predetermined overhead rate.
2, 7, 5, 1, 4, 6, and 3

49
TOPIC 3.3.6: PREDETERMINED OVERHEAD RATE
What is predetermined overhead? What is the purpose of calculating it?
1. Predetermined overhead rate is determined __________ the commencement of the period
during which it will be used. Before
2. What are the four (4) factors to be considered in the determination of the predetermined
overhead rate? Base to be used, Activity level to be used, inclusion/exclusion of fixed
overhead, and Used of single rate or several rates
3. The most common base use in the calculation of predetermined overhead rate are: Physical
Output, Percentage of Direct Labor Cost, Percentage of Direct Materials Cost, Direct Labor
Hours, Machine Hours
TOPIC 3.3.7: APPLICATION BASE USED IN CALCULATING PREDETERMINED OVERHEAD

RATE
How do you compute predetermined overhead? What are the considerations in calculating the
rate? Can you give examples of bases that will be used in the calculation?
To summarize the Predetermined Overhead Rate Calculation watch this video. Click:
https://www.youtube.com/watch?v=qrnTwV2zbPM link to open resource.
1. What is the most common method used for calculating the predetermined overhead rate for
the cost centers that have highly manual operations? Direct Labor Hours
2. This method is used in labor-oriented manufacturing, and employees generally have almost
the same hourly rate. Percentage of Direct Labor Hours
3. This method refers to the calculation of a predetermined overhead rate based on the
estimated quantity of production in units under normal capacity. Physical Output Method

50
LET’S PRACTICE!
Solve Problem:
P5-2 on page 167-168
TOPIC 3.3.8: ALTERNATIVE CAPACITY MEASURES

After identifying the application base, the next step is to determine the capacity level that will be
used. Will you estimate the operating capacity without considerations of holidays, coffee breaks
and machine breakdowns?

1. _______________ this refers to the maximum potential volume capacity level that could be
attained under ideal operating conditions. Theoretical Capacity
2. _______________ refers to the attainable level of activity that is sufficient to fill the demand
for the products or activities. Normal capacity
3. This is the highest activity level at which a factory can operate with an acceptable degree of
efficiency. Practical Capacity
TOPIC 3.3.9: RECORDING OF ACTUAL AND APPLIED OVERHEAD

You have learned in previous lessons that there is actual overhead incurred and predetermined
overhead calculated. Given the two, which is used in determining the cost of production? How
do you recognize these costs in the books of accounts?

51
Underapplied or Overapplied Manufacturing Overhead (How to Dispose of It)

https://www.youtube.com/watch?v=FkS_mbt7f6k
1. This is the amount charged to work in the process based on the predetermined
overhead rate. Applied Overhead
2. This is the amount of overhead incurred in the period and debited to a control
account “Factory Overhead Control”.
LET’S PRACTICE!
Solve the Problem below:

Chan Ged Company provided the following information for the month of July, 2015:
Factory overhead incurred P340,600
Applied factory overhead
Cost of goods sold 217,000
Ending work in process inventory 62,000
Ending finished goods inventory 31,000
Total P310,000
Chan Ged Management considers more than 5% under or overapplied factory overhead significant. At
what amount should the cost of goods sold be adjusted for the under or overapplied factory overhead?
(show your solution)
a. P21,420 debit
b. P21,420 credit
c. P30,600 debit
d. P30,600 credit
TOPIC 3.3.10: OVERHEAD VARIANCE

Is the actual overhead equivalent to applied overhead? How do you treat the difference?

52

To summarize the Variable Overhead Spending Variance watch this video. Click:
https://www.youtube.com/watch?v=7GuBJBxjHHE link to open resource.
To summarize the Fixed Overhead Spending Variance watch this video. Click:
https://www.youtube.com/watch?v=PXNHs2OCwbE link to open resource.
To summarize the Fixed Overhead Volume Variance/Idle Capacity Variance watch this video.
Click: https://www.youtube.com/watch?v=HaVDzvKS2RE link to open resource.
To summarize the Variable Overhead Efficiency Variance/Idle Capacity Variance watch this video.
Click: https://www.youtube.com/watch?v=SUUTvSBrxrw link to open resource.
1. It is the difference between the factory overhead control and the total applied factory
overhead. Overhead Variance
2. What are the two parts of the overhead variance? Spending Variance and Idle Capacity
Variance
3. Spending variance is further classified into ________________ and ________________.
Variable Overhead Spending Variance and Fixed Overhead Spending Variance
LET’S PRACTICE!
Solve Problem:
P5-3 on page 168

53
TOPIC 3.3.11: DEPARTMENTALIZATION OF FACTORY OVERHEAD AND CLASSIFICATION
OF DEPARTMENTS AND ITS OBJECTIVES
Do you have any idea of the classification of departments of a manufacturing company? Learn
more about this in the activities below:

1. What are the two main classifications of departments? Producing and Servicing Department
2. What are the objectives of overhead departmentalization? To provide more accurate product
cost information, To assign responsibilities and control costs, To improve decisions about
resource utilization, To allocate limited resources.
TOPIC 3.3.12: ALLOCATING OVERHEAD COSTS AND METHODS OF ALLOCATING SERVICE

DEPARTMENT COSTS TO PRODUCING DEPARTMENTS
From the previous topic, you have learned about producing and servicing departments. How will
you charge the service department costs to the product?
To summarize the 3 Ways Overhead Costs Allocation Method watch this video. Click:
https://www.youtube.com/watch?v=NKRdmOCgWfQ link to open resource.
To summarize the Direct Distribution Method watch this video. Click:

https://www.youtube.com/watch?v=4WCkjt4JBZg link to open resource.
To summarize the Sequential Distribution or Stepdown Method watch this video. Click:
https://www.youtube.com/watch?v=ZlX49U4-LJQ link to open resource.
To summarize the Reciprocal or Algebraic Distribution Method watch this video. Click
https://www.youtube.com/watch?v=3FBENGEkwTo and
https://www.youtube.com/watch?v=-l8qZdOoAWs link to open resource.

54
1. _______________ This method allocates the total cost of each service department directly to
producing departments. Direct Distribution Method
2. _______________ This method recognizes services rendered by one service department to
another service department, but it requires a sequence of allocation. Sequential Distribution
or Step-Down Method
3. _______________ it is the most accurate method of allocating service department cost. It
recognizes the reciprocal services provided by the service department to other service
departments. Algebraic or Reciprocal Distribution Method.
LET’S PRACTICE!
Solve Problem:
P5-4 on page 168
KEY TAKEAWAYS:
✔ Overhead costs refer to all costs to run a business excluding all the direct costs associated with
the manufacturing of a product or service.
✔ Overhead costs can be classified as a fixed cost, variable cost, or semi-variable of mixed costs.
✔ There are different classifications of overhead costs, such as administrative overhead, which
includes costs related to running the business.

55
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________
JUST-IN-TIME AND BACKFLUSH ACCOUNTING

AND ACTIVITY-BASED COSTING
INTRODUCTION
This module consists of topics related to unconventional operations where no inventory is

maintained. This concept is also known as lean operation that derives from a Japanese
Philosophy. Moreover, it covers the activity-based costing.
LEARNING OUTCOMES
I Explain the nature of Just-In-Time system and Activity-based costing
E Compute the product cost using JIT and ABC
D Record the transactions using backflush costing system
TOPIC 1 JUST IN TIME AND BACKFLUSH COSTING

This covers the following topics:
1. Overview of Just-in-Time System
2. Backflush Accounting
3. Variants in Backflush Accounting

56
TOPIC 3.1.1: OVERVIEW OF JUST-IN-TIME SYSTEM
Have you asked yourselves about the possibility of operating without maintaining an inventory?
Think of your own kitchen where ingredients for your scheduled dishes will arrive just in time.
Read: Chapter 7 – Just-In-Time and Backflush Accounting, pp. 188
PowerPoint Presentation (Google Sheet, Docs, Slides – Link to be provided)
1. _______________ it is a production strategy that strives to improve a business return on
investment by reducing in-process inventory and associated carrying costs. Just-In-Time System
2. Enumerate at least two (2) advantages of the JIT System.
TOPIC 3.1.2: BACKFLUSH ACCOUNTING

How does backflush costing differ from traditional costing?
Read: Chapter 7 – Just-In-Time and Backflush Accounting, pp. 188

1. ___________ refers to the costing of products when the manufacturing process has been
completed. Backflush Accounting
2. Backflush accounting is ____________ for product orders that require long production time.
Not suitable
TOPIC 3.1.3: VARIANTS IN BACKFLUSH ACCOUNTING

What are the variants of backflush accounting? Can you give examples of companies where this
accounting method is most appropriate?

57
Read: Chapter 7 – Just-In-Time and Backflush Accounting, pp. 189-192
To summarize the Just-In-Time Inventory System watch this video. Click:

https://www.youtube.com/watch?v=OHhg8vlzfL8 link to open resource.
1. Explain the different variants of backflush accounting.
2. Which of the three (3) backflush accounting variants did not maintain finished goods
inventory accounts and no conversion cost is carried forward in inventory? Variant C
LET’S PRACTICE!
Solve Problem:
P7-5 on page 196
Chapter 7 – Just-In-Time and Backflush Accounting
KEY TAKEAWAYS:
✔ The just-in-time (JIT) inventory system is a management strategy that receives materials when
needed or directly to the production, minimizes inventory, and increases efficiency.
✔ The success of the JIT production process relies on stable production, highly-skilled workers,
no machine breakdowns, and dependable suppliers.
✔ Backflush costing is used by companies that usually have short production cycles, seasonal
products, and a low inventory.

58
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________
TOPIC 2. ACTIVITY-BASED COSTING (ABC)
This focuses on another unconventional costing system - Activity-based costing. Can you give
examples of operations or industries where this costing method is most appropriate?

1. Nature and Characteristics of Activity-Based Costing
2. Advantages and Disadvantages of Activity-Based Costing
3. Calculation of Unit Cost Under Traditional Costing System
4. Calculation of Unit Cost Under ABC System
5. Comparison of Unit Cost Between ABC System and Traditional Costing
TOPIC 3.2.1: NATURE AND CHARACTERISTICS OF ACTIVITY-BASED COSTING

In what industry ABC is applicable? Can you give examples?
Read: Chapter 13 – Activity-Based- Costing, pp. 302

1. ___________ it accumulates overhead costs for each of the activities and assigns costs to
products or services based on the number of activities used. ABC
2. List at least three (3) activity cost pools and identify cost drivers for each activity.
TOPIC 3.2.2: ADVANTAGES AND DISADVANTAGES OF ACTIVITY-BASED COSTING

How activity-based costing differs from traditional costing? How do you accumulate costs in this
method?

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Read: Chapter 13 – Activity-Based- Costing, pp. 302-303

1. List at least three (3) advantages of Activity-Based Costing.
2. List at list two (2) disadvantages of Activity-Based Costing.
TOPIC 3.2.3: CALCULATION OF UNIT COST UNDER TRADITIONAL COSTING SYSTEM

Learn how to compute the product unit cost in this topic. Be able to compare this with the
traditional costing.

1. _______________ costing allocates predetermined overhead to a product or activity using a
specific base such as percentage of direct materials and direct labor, machine hours, and
direct labor hours. Traditional
2. If the prime cost of product A and product B is P65.00 and 50.00 respectively and it takes 1
hour to complete each product, with a predetermined rate of P50.00 per labor hour, how
much is the cost of each product? A – P115.00 and B – P100.00
LET’S PRACTICE!
Solve Problem:
P13-3 on page 312
Chapter 13 – Activity-Based- Costing

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TOPIC 3.2.4: CALCULATION OF UNIT COST UNDER ABC SYSTEM

Practice how to compute the cost of the product under the ABC system.
Read: Chapter 13 – Activity-Based- Costing, pp. 303-305

1. What are the main steps in determining the unit cost under the ABC system?
2. ____________ this step requires the understanding of all the activities necessary to make a
product. Identifying Activities that Consume Resources
LET’S PRACTICE!
TOPIC 3.2.5: COMPARISON OF UNIT COST BETWEEN ABC SYSTEM AND TRADITIONAL
COSTING

To summarize the ABC vs. Traditional Costing, watch this video.

Click: https://www.youtube.com/watch?v=aDycx2hJ6tg link to open resource.
1. _____________ system produces different amounts of overhead rate for each product.
Activity-Based Costing

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2. _____________ system produces the same amount of overhead rate for each product.
Traditional Costing
KEY TAKEAWAYS:
✔ Activity-based costing (ABC) is a method of assigning overhead and indirect costs to products
and services.
✔ The Activity-Based Costing system of cost accounting is based on activities, which are
considered any task, an event with a specific purpose.
✔ Activity-Based Costing is used by the companies to have a better understanding of costs, for
the management to form a more correct pricing policy.
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________
JOB-ORDER COSTING
INTRODUCTION
This module is about the cost accumulation procedure for customized products. Can you give
examples of products where this costing method is appropriate?

1. Job Order Costing System Overview
2. Product Flow in Job Order Costing
3. The flow of Costs in Job Order Cost System
4. Measuring Costs in Job Order Costing
- Bill of Materials and Materials Requisition Slip

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- Employee Time Ticket
- Job Cost Sheet
5. Comprehensive Illustration – Job Order Costing (Normal – Costing)
- Accounting for Materials
- Accounting for Labor
- Accounting for Manufacturing Cost
- Cost of Goods Manufactured and Sold
6. Accounting Treatment for Underapplied and Overapplied Overhead
LEARNING OUTCOMES
I Explain the principles of job order costing system and illustrate the flow of cost using this
system
E Prepare the documents that are required in the job cost system and calculate the
product cost
D Record the transactions under job order costing and prepare a cost of goods
manufactured and statement of income and expense.
TOPIC 4.1: JOB ORDER COSTING SYSTEM OVERVIEW

If you own a flower shop, do you charge your customers the same prices? What if they pick
different kinds and quantities of flowers? Would the price of an arrangement for 2 dozens of red
Roses be the same with 2 dozens of Daisies? Learn more of this cost accumulation procedure by
doing the activity below:
Read: Chapter 2 – Job Order Costing, pp. 40


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1. ___________ it is the system used when many different products are produced each period
or when products are made based on specific customers' order. Job Order Cost
2. List at least three (3) manufacturing companies that use the Job Order Costing system.
Aircraft, Auto repair, and construction company.
TOPIC 4.2: PRODUCT FLOW IN JOB ORDER COSTING

How manufacturing costs are accumulated in job order costing? What document will you use to
record the costs charged to each job?
Read: Chapter 2 – Job Order Costing, pp. 40

1. Manufacturing costs incurred in each job are accumulated separately in a _______________
and transferred to _____________ once completed. Work In Process Inventory, Finished
Goods Inventory
2. Elements of Cost are accumulated separately in work in process in each ______________
and transferred to ______________ and to Cost of Goods Sold. Job Order, Finished Goods
Inventory
TOPIC 4.3: FLOW OF COSTS IN JOB ORDER COST SYSTEM

How do you recognize the incurrence of materials, labor and overhead costs in the job order
costing system? When the job is completed, how will you recognize it?
Read: Chapter 2 – Job Order Costing, pp. 40-42

1. Arrange in order the flow of costs in the Job Order Costing System:
___ Application of factory overhead to work in process.
___ Purchase of direct and indirect materials and return of materials to suppliers.
___ Transfer of completed jobs to finished goods.
___ Incurrence of manufacturing overhead or other indirect resources.

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___ Issuance of direct and indirect materials in the production and return of materials to the
storeroom.
___ Sale of Finished Goods
___ Incurrence of non-manufacturing expenses.
___ Transfer of finished goods to the cost of goods sold
___ Incurrence, distribution, and payment of payroll and accrual of employer’s share in various
contributions. 5, 1, 7, 4, 2, 8, 6, 9, and 3
TOPIC 4.4: MEASURING COSTS IN JOB ORDER COSTING: BILL OF MATERIALS AND
MATERIALS REQUISITION SLIP, EMPLOYEE TIME TICKET, AND JOB COST SHEET
What documents do you use to record the materials, labor and overhead costs incurred in
producing a job?

1. _____________ this document shows the list of all types of required materials to produce a
product along with their respective quantities and costs. Bill of Materials
2. _____________ this document was prepared by the production department and approved by
the production head and it controls the flow of materials into production. Materials
Requisition Slip
3. _____________________ this document contains the total hours spent for each job and a
description of the work and task performed. Employee Time Ticket or Time Report
4. ________________ this is the key document in Job Order Costing the accounts for all cost of
direct materials, direct labor, and factory overhead incurred for a particular job, and it served
also as a subsidiary ledger to the work in process account.
TOPIC 4.5: COMPREHENSIVE ILLUSTRATION – JOB ORDER COSTING (NORMAL –

COSTING) - ACCOUNTING FOR MATERIALS, ACCOUNTING FOR LABOR, ACCOUNTING
FOR MANUFACTURING COST, AND COST OF GOODS MANUFACTURED AND SOLD
Let us now look at the comprehensive illustration of job order costing.

65
1. What is the journal entry for the issuance of direct materials and indirect materials to
production amounting to P50,000.00 and P5,000.00 respectively?
Work in Process P50,000.00
Factory Overhead 5,000.00
Raw Materials Inventory P55,000.00
To record materials issued to production
2. Depreciation expense on factory equipment used in the manufacturing of a product is
debited to ______________________ and credited to Accumulated Depreciation –
Factory Equipment. Factory Overhead Control
3. Factory overhead applied to production is based on the predetermined overhead rate
multiplied by the application base used by the company and is debited to Work in Process
Inventory and credited to ______________________. Applied Factory Overhead
LET’S PRACTICE!
Solve Problem:
P2-1 on page 72
Chapter 2 – Job Order Costing
TOPIC 4.6: ACCOUNTING TREATMENT FOR UNDERAPPLIED AND OVERAPPLIED

OVERHEAD
How will you treat the difference between actual overhead and applied overhead? Will this
affect the product cost?

66

To summarize the Job Order Costing watch this video.

Click: https://www.youtube.com/watch?v=Uw_52M9GLbg link to open resource.
1. Underapplied or overapplied factory overhead is closed out to ___________________ when
the amount of overhead variance is insignificant. Cost of Goods Sold
2. Underapplied or overapplied factory overhead variance significant in amount will be allocated
to ____________, ____________, and ______________. Work in Process, Finished Goods,
and Cost of Goods Sold.
3. _________________ This account will be used for the closing of overapplied or underapplied
factory overhead to Work in Process, Finished Goods, and Cost of Goods Sold. Factory
Overhead Control
LET’S PRACTICE!
Solve Problem:
P2-9 on page 80
Chapter 2 – Job Order Costing
KEY TAKEAWAYS:
✔ Job order costing is a system for assigning and accumulating the manufacturing costs (Direct
Materials, Direct Labor, and Factory Overhead) of an individual unit of output
✔ The Job Cost Sheet will record each item's direct materials and direct labor that were used and
an assigned amount of factory overhead.

67
✔ A work-in-process (WIP) is the cost of unfinished goods in the production process including
direct materials, direct labor, and overhead. Job Cost Sheets is considered as the subsidiary
ledger of the work-in-process account in the Job Order Costing system.
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________
PROCESS COSTING
INTRODUCTION
This module covers the cost accumulation procedure for mass - produced products. Can you give
examples of these products?
This consists of the following topics:

1. Overview of process costing
2. Process costing-FIFO method
3. Process costing- Average method

68
LEARNING OUTCOMES
I Describe the nature and characteristics of process costing and explain the flow of costs
in this system
E Calculate product costs according to the process costing for both FIFO and Average
Method, even or uneven application of cost
D Prepare a cost of production report
TOPIC 1: Introduction process costing systems - Overview of the Process Costing

1. Nature and Characteristics of Process Costing
2. Product Flow in Process Costing
3. Methods of Process Costing
- First-In, First-Out Method
- Average Method
4. Equivalent Production
5. Cost of Production Report
6. Recording of Manufacturing Costs
7. Application of Cost Elements to Production
- Even Application of Cost Elements
- Uneven Application of Cost Elements
8. Comprehensive Illustration – Process Costing
TOPIC 5.1.1 INTRODUCTION PROCESS COSTING SYSTEMS - OVERVIEW OF THE PROCESS

COSTING
How do you compute the cost of mass-produced items? Consider consumer products that you
use every day from the time you wake up in the morning up to bedtime. Do you have any idea
on how these products are manufactured and costs are computed?
Read: Chapter 8 – Process Costing, pp. 198

1. Process costing is used in a manufacturing process of a single product on a ______________.
Continuing basis
2. In process costing, manufacturing costs are accumulated in each ________________ until
completed and transferred to finished goods. Processing Department

69
TOPIC 5.1.2: NATURE AND CHARACTERISTICS OF PROCESS COSTING
Let us compare job order costing with process costing. If the job order is applicable for products
that are manufactured in accordance with customer’s specifications, what kind of products
process costing is applicable?

1. What are the characteristics of process costing?
2. List at least two (2) similarities of Job Order Costing and Process Costing.
3. The nature of a product under Job Order Costing is _______________ and Process costing is
_______________. Each Job is different, All products are identical.
TOPIC 5.1.3: PRODUCT FLOW IN PROCESS COSTING

From your lesson in Operations Management, can you illustrate a manufacturing process of a
particular consumer product? Does this process affect the determination of cost and the
preparation of cost of production report?
Read: Chapter 8 – Process Costing, pp. 199-200

1. What is the three (3) product flow in process costing? Sequential Product Flow, Parallel
Product Flow, and Selective Product Flow
2. ______________ This product flow occurs when each manufactured product undergoes the
same set of operations. Sequential Product Flow
3. _____________ This product flow occurs when processes are done simultaneously and then
brought together to the final process for completion. Parallel Product Flow
4. _____________ This product flow occurs when a product is transferred from the initial
processing department to different departments within the plant depending on the desired
final product. Selective Product Flow

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TOPIC 5.1.4: METHODS OF PROCESS COSTING: FIRST-IN, FIRST-OUT METHOD AND
AVERAGE METHOD
How do these two methods differ from each other? How units of equivalent production will be
computed in each of these methods? How will you compute the unit cost under each of these
methods? What is that instance where both methods will present the same cost of production
report? Find out the answers by doing the learning activities below.
1. _____________ This method of process costing assumes that units that were first placed into
the process are the first units to be completed. FIFO Method
2. _____________ This method of process costing assumes that all units completed are all
processed at the same time. Average Method
TOPIC 5.1.5: EQUIVALENT PRODUCTION

How do you report incomplete work? Does this work-in- process accumulate costs? How do you
compute them?

For videos on how to calculate Equivalent Production Units (EPU) Click the below links to open
resources.
Average EPU’s https://www.youtube.com/watch?v=Txv05196CWs&t=93s
FIFO 1 EPU’s https://www.youtube.com/watch?v=C76QjSgvnyQ&t=23s
FIFO 2 EPU’s https://www.youtube.com/watch?v=y1TLRSL9Yjo&t=42s
1. What is the concept of equivalent production as used in the process costing system? Partially
completed units are converted equivalent to fully completed units for purposes of assigning
costs.

71
2. Equivalent production of an ending inventory of 100 units 50% completed
is______________? 50 units
LET’S PRACTICE!
Solve Multiple Choice Questions:

Number 9 and 10 on page 215
Chapter 8 – Process Costing
TOPIC 5.1.6. COST OF PRODUCTION REPORT

What document do you prepare to present the cost consumed by the production process in a
department? Can you imagine the work to be done if a product passes through five production
departments?

1. What is the Cost of Production Report? It is the report used in process costing that shows the
costs incurred by a given department during the period.
2. List the information shown in the Cost of Production Report.
- Total Unit Cost from preceding department
- Materials, Labor, and Overhead added by the department during the current period.
- Unit cost added by the department.
- Total and unit costs accumulated by the department to the end of operations.
- The cost of the beginning and ending work in process inventories.
- The total costs transferred to the succeeding processing department or finished goods.
LET’S PRACTICE!

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Solve Problem:
P8-1 on page 215
TOPIC 5.1.7. RECORDING OF MANUFACTURING COSTS

How do you record the amount of materials, labor and overhead consumed in the production
process during the period? What is your basis in recording these production elements?

1. What are the entries to record the assignment of manufacturing
costs to departments?
Work in Process – Department ___ xxx
Raw Materials xxx
Payroll xxx
Applied Factory Overhead xxx
2. What are the entries for the transfer of cost to a succeeding department assuming the whole
process was composed of three (3) departments?
3. What is the entry for the transfer of finished goods from the final department?
TOPIC 5.1.8. APPLICATION OF COST ELEMENTS TO PRODUCTION

When materials, labor and overhead are added to production? How is the timing of cost
incurrence reflected in the cost of production report?


73
1. What are the two (2) kinds of application of cost elements to production? Even Application of
Cost Element and Uneven Application of Cost Elements
2. __________________ This method considers that all cost elements are added uniformly or
proportionately at any stage during the production process. Even Application of Cost
Elements
3. ___________________ This method considers that each cost element incurred during
production varies at any stage. Uneven Application of Cost Elements
TOPIC 5.1.9: COMPREHENSIVE ILLUSTRATION – PROCESS COSTING

Now, let us look at the complete picture of cost accumulation procedure- process costing.

To summarize the Process Costing watch this video.

Click: https://www.youtube.com/watch?v=guZc84c5HNI link to open resource.
LET’S PRACTICE!
Solve Problem:
P8-2 on page 216
1. How to determine equivalent production when cost elements are applied evenly? It is
determined by multiplying all cost elements by the percentage of work done.
2. Cost of production report has two parts. The 1st part is the __________________ that
accounts for the units in the production and the 2nd part is the ___________________ that
accounts for the cost of the units in the production. Quantity Schedule and Cost Analysis
3. Cost of the completed units from department A when transferred to department B is debited
to __________________ and credited to __________________. Debit Work in Process –
Department B and Credit Work in Process – Department A

74
KEY TAKEAWAYS:
✔ Process costing is a term used in cost accounting to describe one method for collecting and
assigning manufacturing costs to the units produced.
✔ Process costing is the method of costing applied in the manufacturing industries engaged in
mass or continuous production.
✔ Process costing is a method of costing used to determine the cost of a product at each process
or stage of production.
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________
TOPIC 2 PROCESS COSTING SYSTEMS: FIFO (FIRST-IN-FIRST-OUT) METHOD
Your knowledge in the previous module regarding inventory costing will be useful in this part
This module covers the following topics:
1. Overview
2. Illustration of FIFO – Even Application of Costs
3. Illustration of FIFO – Uneven Application of Costs
TOPIC 5.2.1: OVERVIEW

How will you account for the work-in-process inventory in the cost of production report?
Read: Chapter 9 – Process Costing FIFO Method, pp. 218

To summarize the Process Costing FIFO Method 1 watch this video. Click:
https://www.youtube.com/watch?v=C76QjSgvnyQ link to open resource.
To summarize the Process Costing FIFO Method 2 watch this video. Click:
https://www.youtube.com/watch?v=y1TLRSL9Yjo link to open resource.

75
To summarize the Comparison of FIFO and Average Method of Process Costing watch this video.
Click: https://www.youtube.com/watch?v=P_Nwchc_pcs link to open resource.
To summarize the Cost per Equivalent Unit FIFO vs Average Method of Process Costing watch this
video.
Click: https://www.youtube.com/watch?v=P_Nwchc_pcs&t=75s link to open resource.
1. What are the characteristics of the Process Costing FIFO Method?
- The beginning work- in- process of the month is separately accounted for from the work
done during the current month.
- The equivalent unit of production for completed units is determined separately for
beginning work- in- process that is completed during the period and new units started and
completed during the month.
- The cost incurred and units produced during the current month are used to compute the
unit cost.
TOPIC 5.2.2: ILLUSTRATION OF FIFO – EVEN APPLICATION OF COSTS

Are the materials, labor and overhead added to production all at the same time? Can you give an
example of this kind of manufacturing operation?
Read Chapter 9 – Process Costing Using FIFO Method, pp. 219-227

video.
1. What is the equivalent production of Labor and Overhead if the Materials equivalent
production is equal to 1,000 units under FIFO Even application of cost elements? 1,000 units
2. What is the equivalent production of Work in Process Beginning 2,000 units 40% completed?
1,200 units

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3. What is the equivalent production of Work in Process Ending 2,000 units 40% completed? 800
units
LET’S PRACTICE!
Solve Problem:
P9-2 on page 239
Chapter 9 – Process Costing Using FIFO Method
TOPIC 5.2.3: ILLUSTRATION OF FIFO – UNEVEN APPLICATION OF COSTS

How will you prepare the cost of production if materials, labor and overhead costs are added at
different points of the manufacturing process?
Read Chapter 9 – Process Costing Using FIFO Method, pp. 228 -245
video.
1. What is the equivalent production of the Work In Process Beginning of 2,000 units 50%
complete for Labor and Overhead assuming that all Materials are added at the beginning of
the process? Materials -0-, Labor 1,000, and Overhead 1,000 units.
2. What is the equivalent production of Materials in Work In Process Ending Inventory of 2,000
units 50% completed, if materials are added at the beginning of the process under FIFO
Uneven Application of Cost Elements? 2,000 units
3. In the data in No. 2 above: What is the equivalent production of Labor and Overhead, cost
applied based on the percentage of completion? 1,000 units
KEY TAKEAWAYS:

77
LET’S PRACTICE!
Solve Problem:
P9-9 on page 242
Chapter 9 – Process Costing Using FIFO Method
TOPIC 3PROCESS COSTING SYSTEMS: WEIGHTED-AVERAGE METHOD

This part uses the average costing method in the preparation of the cost of production report. It
also compares the FIFO and average methods. Specifically, it covers the following topics:
1. Overview
2. Comparison of FIFO and Average Method
3. Illustration of Average Method – Even Application of Costs
4. Illustration of Average Method – Uneven Application of Costs
TOPIC 5.3.1: OVERVIEW

In the previous module, you have learned about the FIFO costing method in preparing the cost
of production report. In this topic, you will learn another costing method, that is average costing.
Learning Activity 5-3-1
Read Chapter 10 – Process Costing Using Average Method, pp. 246

PowerPoint Presentation (Google Sheet, Docs, Slides – Link to be provided)

78
1. What are the characteristics of the Average Method?
- Completed units from beginning work in process and new production are not accounted
for separately.
- The average unit cost is determined by aggregating the cost of materials, labor, overhead,
and transferred-in costs and divided by equivalent units of production.
- The completed units and ending work in process inventory are valued using the average
unit cost.
2. ____________ this method assumes that similar products completed and processed during
the same period absorb the same amount of production costs. Average Method
TOPIC 5.3.2: COMPARISON OF FIFO AND AVERAGE METHOD

Now that you have learned the average method from the previous topic. Let us compare it with
the FIFO method. Can you identify the difference between the two methods with respect to the
cost of production report?
Read Chapter 10 – Process Costing Using Average Method, pp. 246

To summarize the Process Costing Average Method watch this video. Click:
https://www.youtube.com/watch?v=Txv05196CWs link to open resource.
To summarize the Comparison of FIFO and Average Method of Process Costing watch this video.
Click: https://www.youtube.com/watch?v=P_Nwchc_pcs link to open resource.
video.
1. What are the key differences in the FIFO and Average Method of process costing?
- FIFO - WIP Inventory accounted separately from units started during the process while in
Average Method no distinction is made between WIP Beginning and units started in the
current period.
- FIFO Method – Work done on beginning inventory is considered in determining the
equivalent production while under Average Method completed units are given 100%
equivalent of production regardless of work done in the previous period.

79
- FIFO cost of beginning WIP is not considered in the computation of unit cost while the
Average Method cost of beginning inventory and cost incurred during the current period
are added to determine the average unit cost.
TOPIC 5.3.3: ILLUSTRATION OF AVERAGE METHOD – EVEN APPLICATION OF COSTS

Let us look at how the cost of production report is prepared under the average costing method.
Read Chapter 10 – Process Costing Using Average Method, pp. 247-250

1. What is the equivalent production of Department B based on the following data? Work in
Process Beginning 1,000 units, Started in Process 1,000 units and No Work in Process Ending
at the end of the period. 2,000 units
LET’S PRACTICE!
Solve Problem:
P10-4 on page 261
Chapter 10 – Process Costing Using Average Method
TOPIC 5.3.4: ILLUSTRATION OF AVERAGE METHOD – UNEVEN APPLICATION OF COSTS

Let us look at another illustration. This time about adding materials, labor and overhead at
different stages of production.
Read Chapter 10 – Process Costing Using Average Method, pp. 251-253


80
1. _________________ under this application of cost equivalent to production of cost elements
differ based on the cost element incurred at any stage of production. Uneven Application of
Cost
KEY TAKEAWAYS:
LET’S PRACTICE!
Solve Problem:
P10-2 on page 259
Chapter 10 – Process Costing Using Average Method
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________
ACCOUNTING FOR PRODUCTION LOSSES

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INTRODUCTION
How will you account for production losses? Is there recovery of cost? How does this impact the
product cost? Find the answers in this module.
LEARNING OUTCOMES
I Discuss the accounting treatment for normal and abnormal spoilage in job order
costing and in process costing;
E Compute the unit cost when production losses are incurred
D Record the transactions involving production losses
TOPIC 1 ACCOUNTING FOR OF SCRAP, SPOILAGE, DEFECTIVE UNITS, AND

REWORK
This covers the following subtopics:
1. Overview of Spoilage, Defective Units, Rework and Scrap
2. Methods of Accounting for Spoilage
- Normal Spoilage
- Abnormal Spoilage
3. Methods of Accounting for Rework
- Normal Rework
- Abnormal Rework
4. Methods of Accounting for Scrap
TOPIC 6.1.1: OVERVIEW OF SPOILAGE, DEFECTIVE UNITS, REWORK AND SCRAP

Distinguish these production losses from one another. Can you give examples of each of these?
Read: Chapter 6 – Spoilage, Defective Units, Rework and Scrap, pp. 172

82
Overview and definition of Spoilage and Defective Units watch this video.
Click: https://www.youtube.com/watch?v=ZRAUbcXt4bI&t=34s
link to open resources.
1. What is Spoilage, Defective Units, Rework, and Scrap?
2. What are the two classifications of Spoilage? Normal and Abnormal Spoilage
TOPIC 6.1.2: METHODS OF ACCOUNTING FOR SPOILAGE (NORMAL SPOILAGE AND

ABNORMAL SPOILAGE)
Differentiate normal and abnormal spoilage. How will you account for this? Which will affect the
product cost?
Read: Chapter 6 – Spoilage, Defective Units, Rework and Scrap, pp.172-175

To summarize the Spoilage and Defective Units watch this video.

Click: https://www.youtube.com/watch?v=y1wOjULlMhI link to open resource.
1. What are the two methods in accounting for normal spoilage? Charge to all production and
charge to a specific job.
2. ________________ is any spoiled unit that exceeds the acceptable level set by the company
or its reason is not considered as normal to the production process. Abnormal Spoilage
3. How many spoiled units are abnormal if the acceptable normal spoilage limit is only 2% only
of 1,000 completed units but the production department reported 250 spoiled units? 50
units
TOPIC 6.1.3: METHODS OF ACCOUNTING FOR REWORK (NORMAL REWORK AND

ABNORMAL REWORK)
What is the difference between spoilage and rework? Can you give examples?

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Read: Chapter 6 – Spoilage, Defective Units, Rework and Scrap, pp. 175-177
To summarize the Spoilage and Defective Units watch this video.

Click: https://www.youtube.com/watch?v=y1wOjULlMhI link to open resource.
1. What are the two (2) methods of accounting for normal rework? Charged to all production
and Charged to Specific Job.
2. What is the accounting treatment of reworks that exceeds the acceptable level set by the
company? It is Abnormal Rework and charged to period costs and debited to “Loss from
Abnormal Rework”.
LET’S PRACTICE!
Solve at least 1 exercise/problem related to the topic. As part of summative/graded assessments,

the compilation of solved problems will be submitted at designated pick-up points or using the

Questions No. 11 and 12 page 182
Chapter 6 – Spoilage, Defective Units, Rework and Scrap
TOPIC 6.1.4: METHODS OF ACCOUNTING FOR SCRAP

What is scrap? Can you give examples? How will you account for this?
Read: Chapter 6 – Spoilage, Defective Units, Rework and Scrap, pp. 177-179
1. What are the three (3) methods of accounting for scrap?
2. Under what method is the sale of scrap recorded by debiting cash or accounts receivable and
crediting Other Income? Revenue Method
LET’S PRACTICE!

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Solve Multiple Choice Question:

Questions No. 25 on page 185
Chapter 6 – Spoilage, Defective Units, Rework and Scrap
KEY TAKEAWAYS:
✔ Reducing spoilage, rework, and scrap is important in the production process to reduce the cost
of the product.
✔ The key objectives in accounting for spoilage are determining the effect of the costs of
spoilage and classifying the costs between normal and abnormal spoilage.
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________
TOPIC 2 ACCOUNTING FOR LOST UNITS, EVAPORATION, AND INCREASE IN

UNITS
This is about production losses in process costing. Specifically, it covers the following topics:
1. Overview/Accounting for Lost Units
2. Accounting for Evaporation Loss
3. Accounting for Increase in Units
TOPIC 6.2.1: OVERVIEW/ACCOUNTING FOR LOST UNITS

How will account for production losses in process costing? How do you compare this with job
order costing?

85
Read: Chapter 11 – Lost Units, Evaporation Loss, and Increase in Units, pp. 264
1. What is the two (2) classification of Lost Units?
2. What are the three (3) stages of production uses as a basis for the apportionment of the Lost
Units costs? Start of the Process, During the Process, and End of the Process
3. ______________ this refers to lost units due to usual events that are inherent to production.
Normal Lost Units
4. ______________ this refers to lost units due to unusual causes or not inherent to the
production such as labor inefficiency and poor quality of materials. Abnormal Loss Units
TOPIC 6.2.2: ACCOUNTING FOR EVAPORATION LOSS

What will happen if you are manufacturing chemicals that evaporate during the process? How
will this affect the product cost?
1. ___________ this kind of loss is common to the manufacturers of liquid products such as
beverages. Evaporation Loss
2. How many complete units of the 1,000 units started and completed during the month if the
product suffered 20% evaporation loss until completion of the product? 800 Units
TOPIC 6.2.3: ACCOUNTING FOR INCREASE IN UNITS

What will happen if the addition of materials like water increases the units of production? What
is the effect on unit cost?

86
1. ______________ _ this is the result of increase in the materials issued to production during
the period. Increase in Units
2. What is the adjusted unit cost if Department B received 8,000 Units with a cost of P16,000.00
and increased the units to 10,000 units by an increase in the materials issued to production?
P1.60 per unit
LET’S PRACTICE!
Solve Problem:
P11-1 on page 276
Chapter 11 – Lost Units, Evaporation Loss, and Increase in Units
KEY TAKEAWAYS:
✔ Evaporation loss is unavoidable in the course of the manufacturing process due to the
inherent nature of materials used.
✔ Evaporation loss can be reduced to some extent if strict control is in place in the
manufacturing process but it cannot be eliminated.
✔ An increase in materials issued to production in the receiving department will increase in units
and a corresponding decrease in the unit cost of items received from the preceding
department.
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________

87
COST-VOLUME-PROFIT (CVP) RELATIONSHIP
INTRODUCTION
This module covers profitability analysis. Would you be interested to know how many units the
company would have to sell where it will gain no profit or incur no loss? The consists of the
following topics:
1. The Basics of Cost-Volume-Profit (CVP) Analysis
2. Significance of Cost Volume Profit Analysis
3. CVP Analysis for Breakeven Planning
4. CVP Analysis for Revenue and Cost Planning
- Break-even Graph
- Computation of Break-even Point
- Construction of Break-even Graph
- Construction of Profit-Volume Graph
5. Assumptions and Limitations of CVP Analysis
6. Sensitivity Analysis of CVP Results
LEARNING OUTCOMES
I Describe the concept and importance of understanding the Cost-Volume-Profit
Relationship of the business;
E Compute the contribution margin, break-even point, and margin of safety;
D Prepare the Profit-Volume Graph and apply Cost-Volume-Profit Analysis in
decision making;

88
TOPIC 1: THE BASICS OF COST-VOLUME-PROFIT (CVP) ANALYSIS
What is the sales level that the company will be at break-even, meaning it will neither incur loss
nor gain profit?
Read Online: Cost-Volume-Profit Analysis

Click: https://www.investopedia.com/terms/c/cost-volume-profit-analysis.asp link to open resource
1. What is Cost-Volume-Profit Analysis? is a method of cost accounting that looks at the impact
that varying levels of costs and volume have on operating profit.
2. What are the several assumptions under cost-volume-profit analysis? Sales Price, Mixed
Products, Variable cost, fixed cost, and volume of activity are constant within the relevant
range.
TOPIC 2: SIGNIFICANCE OF COST VOLUME PROFIT ANALYSIS

What is the importance of knowing the break-even point? Can you give examples of decisions
where CVP analysis is most appropriate?
To summarize the Contribution Margin watch this video.

Click: https://www.youtube.com/watch?v=1TxWhgRPq3s link to open resource.
To summarize the Contribution Margin Ratio watch this video.
Click: https://www.youtube.com/watch?v=ZWXTrCCo17Q link to open resource.
1. ____________ is the most powerful tool used by the managers for decision making. CVP
Analysis
2. What is the excess of the selling price minus the variable that contributes toward the covering
of fixed costs and providing profits? Contribution Margin
3. What is the percentage of contribution margin to sales? Contribution Margin Ratio
TOPIC 3: CVP ANALYSIS FOR BREAKEVEN PLANNING

Let us learn how to compute the break-even point in both sales value and units.

89
Read Online: Break-Even Analysis

Click: https://www.investopedia.com/terms/b/breakevenanalysis.asp link to open resources
1. What is the Break-Even Point? It is the level of sales volume where total revenues and total
expenses are equal. It can be computed in terms of units and sales
2. Total fixed costs divided by weighted average contribution margin will give you
_____________? Break-even Sales Mix Units
3. Break-even Sales is determined by dividing the total fixed costs by the ________________?
Contribution Margin per Unit
LET’S PRACTICE!
Solve the Problem below:
Company A manufactures a standard stone block for the building industry. The production capacity
for the year is 100,000 standard blocks. The selling price per block is P160, variable costs are P60 per
brick and fixed costs are P6,000,000 per annum.
Required:
1. Determine the contribution margin per unit
2. Determine the contribution margin ratio
3. Determine the break-even point in sales, and
4. Determine the break-even point in units
TOPIC 4: CVP ANALYSIS FOR REVENUE AND COST PLANNING

In this topic, you will learn how to prepare a break-even graph, compute the break-even point
and construct the profit-volume graph.
Read Online: Construction of Break-Even Graph and Profit-Volume Graph

Click:
https://www.yourarticlelibrary.com/accounting/break-even-chart/steps-for-construction-of-break-eve
n-chart/65317 link to an online resource

90
Click:
https://www.yourarticlelibrary.com/accounting/pv-graph/profitvolume-pv-graph-method-of-construct
ion-with-graph/66349 link to an online resource
1. What is the equation in determining the revenue required in units with the desired profit?
Total Fixed Costs + Desired Profit divided by Contribution Margin per Unit
2. What is the equation in determining the revenue required peso with the desired profit? Total
Fixed Costs + Desired Profit divided by Contribution Margin Ratio
3. In a break-even graph, what did you call the point where the total sales revenue line
intersects the total cost line? Break-even Point
4. _________________ shows the earnings (or losses) of a company in relation to its volume of
sales. It is used by the companies to establish sales goals, analyze whether new products are
likely to be profitable, or estimate breakeven points. Profit-Volume Graph
LET’S PRACTICE!
Solve the problem below:
Company B Ltd. makes a classroom chair that sells for P500 per unit. It has variable costs of P300 per
unit and incurs fixed costs of P1,000,000 per period.
Required:
a. Compute the company’s break-even sales revenue

b. Compute the company’s break-even number of classroom chairs
c. Prepare a break-even graph for the company
d. Determine the sales value of the company will have to reach to make a profit of P600,000.
e. Prepare a profit-volume graph for the company with P600,000 profit.
TOPIC 5: ASSUMPTIONS AND LIMITATIONS OF CVP ANALYSIS

For purposes of projection, it is interesting to understand when the entity will be at break-even.
Are there limitations associated with this?

91
Read about the assumptions and limitations of CVP analysis
1. List at least five (5) assumptions and limitations of Cost-Volume-Profit (CVP) Analysis.
- The analysis is valid for a limited range of values – the relevant and a limited period.
- All cost are categorized as fixed or variable
- Revenues change proportionately with volumes with selling price remaining constant.
- There is a constant product mix
- Changes in volume alone are responsible for changes in costs and revenues
- There is no significant change in inventories (Sales volume equals production volume)
- Operation leverage questions can be dealt with in the CVP framework.
- The analysis is deterministic and appropriate data can be found.
TOPIC 6: SENSITIVITY ANALYSIS OF CVP RESULTS

In this topic, you will learn about operating leverage. What is the importance of this tool in
decision-making?
Read Online: Operating Leverage

Click: https://www.investopo/operatingleverage.aspedia.com/terms/ to open resources
CVP: Break-Even Sensitivity Analysis watch this video.

Click: https://www.youtube.com/watch?v=BVXjE6GlSjA link to open resource.
To summarize Margin of Safety watch this video
Click: https://www.youtube.com/watch?v=WMRuyiu3lTk link to open resource
Example: Operating Leverage example watch this video
Click: https://www.youtube.com/watch?v=2-QBbc1YW8I link to open resource
To summarize Degree of Operating Leverage watch this video
Click: https://www.youtube.com/watch?v=UK3ClpsFKVA link to open resource
1. How many percents is the increase in operating income if the company’s Degree of operating
Leverage is 6 and its sales are increased by 10%? 60%
2. What are the two (2) measures used to examine the sensitivity of profits to change in sales?
Margin of Safety and Operating Leverage
3. ______________ is the ratio of contribution margin to profit. Operating Leverage
4. ______________ is the excess of actual or budgeted sales over break-even sales and indicates
the amount by which sales could decrease before losses are incurred. Margin of Safety
KEY TAKEAWAYS:

92
✔ Break-even analysis tells you at what level of sales must reach to cover your total costs (fixed
and variable) without any profit and incurred losses.
✔ The Margin of Safety is a safety margin built into break-even projections to give for some
leeway in those estimates.
✔ Cost-volume-profit analysis is a way to find out how changes in variable and fixed costs affect a
company’s profit.
LET’S PRACTICE!
Solve the problem below:

Company A had the following data for August 2019:
Sales P500,000.00
Variable Costs 300,000.00
Contribution Margin P200,000.00
Fixed Cost 150,000.00
Net Operating Income P 50,000.00
Required:
a. Determine the company’s margin of safety
b. Determine the company’s operating leverage.
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________

93
ACCOUNTING FOR JOINT COST AND
BY-PRODUCT
INTRODUCTION

1. Overview of Joint and By-Products
2. Reason for Allocating Joint Costs
3. Methods of Allocating Joint Costs
4. Accounting for By-Products
LEARNING OUTCOMES
I Describe joint products and by-products and the related costing methods;
E Apply different methods of allocating joint costs to products and the different
accounting treatments for by-products;
D Illustrate how by-products are presented on the Statement of Income and Expenses.
TOPIC 1: OVERVIEW OF JOINT AND BY-PRODUCTS

Can you give examples of joint and by-products? How will you account for these two?
Read: Chapter 12 – Joint Costs and By-products Costings, pp. 280


94
1. ___________ is the stage of production at which the joint products
become separable and identifiable. Split-off Point
2. ___________ is the cost incurred after split-off and can be
identified with a particular joint product. Separable Cost
3. What are the two classifications of By-products? By-products sold
in their original form without the need for further processing, and
By-products which require further processing to be sealable.
TOPIC 2: REASON FOR ALLOCATING JOINT COSTS

What are joint costs? How are these incurred in the manufacturing process?
Read: Chapter 12 – Joint Costs and By-products Costings, pp. 281

1. _____________ refer to two or more products that are produced
simultaneously by the same process up to the split-off point. Joint Products
2. _____________ are those products of relatively small total value
that are produced simultaneously and incidentally with the main product.
By-products
3. ______________ are costs that cannot be identified with a
particular joint product. Common Costs
TOPIC 3: METHODS OF ALLOCATING JOINT COSTS

How do you compute the cost of joint products?
Read: Chapter 12 – Joint Costs and By-products Costings, pp. 281-285

To summarize How to Allocate Joint Costs using the Physical Measure/Unit or Quantitative Method
watch this video.
Click: https://www.youtube.com/watch?v=5yWHR_sOp9U link to open resource.
To summarize How to Allocate Joint Costs using Sales Value at Split-Off Point Method watch this video.
Click: https://www.youtube.com/watch?v=B_hGtJoN57s link to open resource.

95
To summarize How to Allocate Joint Costs using Net Realizable Value or Adjusted Sales Value Method
watch this video.
Click: https://www.youtube.com/watch?v=tBqBxsJj7n4 link to open resource
To summarize How to Allocate Joint Costs using Gross Net Realizable Value Method watch this video.
Click: https://www.youtube.com/watch?v=kMVyUUgS4WE link to open resource
To summarize How to Allocate Joint Costs using Gross Relative Sales Value Method watch this video.
Click: https://www.youtube.com/watch?v=Ekxk2lyDkAY link to open resource
1. _________________ this method allocates joint costs based on the physical measurement
unit of the items produced. Quantitative or Physical Unit Method
2. _________________ this the simplest method of allocating joint cost based on the total
revenue generated from the individual products produced after split-off. Sales Value at
Split-Off Method
3. ________________ this method allocates joint costs based on the total revenue of the
products produced after considering the further processing after the split off to make the
sale. Net Realizable Value (or Adjusted Sales Value) Method
LET’S PRACTICE!
Solve Problem:
P12-2 on page 297
Chapter 12 – Joint Costs and By-products Costings
TOPIC 4: ACCOUNTING FOR BY-PRODUCTS

Now, let us record the by-products. How do you prepare the Income Statement?
Read: Chapter 12 – Joint Costs and By-products Costings, pp. 285-289


96
To summarize Accounting for By-products: Sales Method vs. Production Method watch this video.
Click: https://www.youtube.com/watch?v=uZEdVW2LVDs&t=21s link to open resource.
1. What are the methods used to account for the cost of a by-product? Sale Method and
Production Method
2. What are the different treatments of the net revenue from By-products? Additional revenue
from the sale of the main product, Deductions from the cost of goods sold, Other income,
and Deductions from total manufacturing cost.
3. ______________ this method recognizes the by-products at the time their production is
completed. This method is used when by-products are significant and require further
processing costs. Production Method
KEY TAKEAWAYS:
✔ The reason why joint costs are allocated to the main products and by-products is to determine
or to achieve product cost to establish the correct selling price.
✔ Allocation of joint costs to main products is important to determine the correct amount of
inventory for various reasons like a claim for insurance in case of fire, and government
regulation of prices
✔ Joint costing or by-product costing is used when a manufacturing company has a production
process from which final products are split off during a later stage of production.
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________
REFERENCE
Edspira. (2016). Physical measure/unit or quantitative method. Retrieved from.

https://www.youtube.com/watch?v=5yWHR_sOp9U
Edspira. (2016). Joint costs and split-off point. Retrieved from.

https://www.youtube.com/watch?v=B_hGtJoN57s

97
Edspira. (2016). Net realizable value or adjusted sales value method
https://www.youtube.com/watch?v=tBqBxsJj7n4
Edspira. (2016).How to allocate joint costs using gross net realizable value method.
https://www.youtube.com/watch?v=kMVyUUgS4WE
Edspira. (2016). How to allocate joint costs using gross relative sales value method
https://www.youtube.com/watch?v=Ekxk2lyDkA
STANDARD COSTING AND VARIANCE ANALYSIS
INTRODUCTION
This is the last topic for this course. In the previous modules, the cost system used was actual
cost. How will you compare it with the standard cost system?

1. Overview of Standard Costing
2. Advantages and Disadvantages of Standard Costing and its Limitations
3. Types of Variances
4. Direct Materials Variance
5. Direct Labor Variance
6. Overhead Variances
7. Comprehensive Illustration – Standard Costing System
LEARNING OUTCOMES

98
I Explain Standard Costing and the importance of variance analysis in
decision-making
E Calculate the variances for materials, labor, and overhead;
D Prepare journal entries using the standard costing method;
TOPIC 1: OVERVIEW, ESTABLISHMENT OF STANDARD COST AND COMPUTATION AND

ANALYSIS OF ACTUAL COSTS
What is standard costing? How does this differ from the actual cost system? How do you set
standard costs? Find out the answers to these questions by doing the learning activities below:
Read: Chapter 14 – Standard Costing and Variance Analysis, pp. 316-318

Standard Costing and Variance Analysis

Click: https://www.youtube.com/watch?v=yWOdzhjHNSM&t=86s link to open resource.
1. What is Standard Costing? This is a costing method that uses standard costs.
2. _____________ refers to a predetermined cost of material, labor, and overhead for a
prescribed set of working conditions. Standard Cost
3. What are the three (3) activities involved in a standard cost system? Establishment of
standard costs, Accumulation of actual costs, Computation, and analysis of variances.
4. What are the common standards for Variable Factory Overhead? Variable overhead rate
standard, Standard variable overhead application base, and Budgeted variable overhead cost
5. What are the common standards for Direct Labor? Standard Labor Rate, Standard Labor
Efficiency (usage), and Standard direct labor
TOPIC 2: ADVANTAGES, DISADVANTAGES, AND LIMITATIONS OF STANDARD COSTING

Can you compare actual costing with standard costing? Cite advantages, disadvantages and
limitations of standard costing.

To summarize the Advantages of Standard Costing watch this video

Click: https://www.youtube.com/watch?v=YT83hwoC3qY&t=33s link to open resource.
To summarize the Advantages of Standard Costing watch this video

99
Click: https://www.youtube.com/watch?v=7uJMgY4rcYM link to open resource.
1. List at least three disadvantages of standard costing.
2. What are the limitations of Standard Costing?
3. What are the advantages of Standard Costing?
TOPIC 3: TYPES OF VARIANCES

For each element of the product costs, you will determine the variance. Can identify the
variances of materials? What about labor and overhead?
Read: Chapter 14 – Standard Costing and Variance Analysis, pp. 320

1. What are the two (2) kinds of materials variance? Materials Price Variance (MPV), and
Materials Quantity Variance
2. What are the two (2) kinds of labor variance? Labor Efficiency Variance and Labor rate
variance
3. What are the two (2) kinds of overhead variance? this overhead variance? Controlled variance
and Volume variance
TOPIC 4: DIRECT MATERIALS VARIANCE

What are variances for materials? How will you explain favorable and unfavorable variances?

For Illustration on Direct Materials Variance Analysis watch this video.

Click: https://www.youtube.com/watch?v=-e32TQdCjDg&t=87s link to open resource.
For videos on Different Types of Materials Variance click the links below:
Materials Price Variance
Click: https://www.youtube.com/watch?v=MuqaI1Iw7rw&t=24s

100
Materials Quantity Variance when Purchases do NOT equal the Amount Used
Click: https://www.youtube.com/watch?v=hkS1fYzojeQ&t=72s
Materials Quantity Variance (Materials Yield Variance)
Click: https://www.youtube.com/watch?v=HGTJ3Zy5GGc
1. ___________ this material variance indicates whether the amount paid for material used was
less than or more than the standard price. Material Price Variance
2. ___________ this material price variance indicates whether the actual quantity used was less
than or more than the standard quantity allowed for the actual output. Material quantity
variance
3. List at least three (3) common causes of Material quantity variance? Unreasonable materials
quantity standard, Change in product design, Substitution of different quality of materials
used, and Variations in incidence of scrap
LET’S PRACTICE!

Questions nos 23 and 24 page 336
Chapter 14 – Standard Costing and Variance Analysis
TOPIC 5: DIRECT LABOR VARIANCE

What are the variances to be recognized for labor? When do you consider favorable variances or
unfavorable variances?
Read: Chapter 14 – Standard Costing and Variance Analysis, pp. 321

For Illustration on Direct Labor, Variance Analysis watch this video.

Click: https://www.youtube.com/watch?v=zNriZz-zCec&t=68s
link to open resources.

101
For videos on Different Types of Labor Variance click the links below:
Labor Rate Variance
Click: https://www.youtube.com/watch?v=EyGwZuq849Y
Labor Efficiency Variance
https://www.youtube.com/watch?v=1vdUUCNVGJ0
1. ____________ this is the result of using more or less labor time
than the standard time allowed for actual production. This is also known as
labor time variance or labor usage variance. Labor Efficiency Variance
2. What are the common reasons for the labor rate variance?
Unreasonable labor price standard, Change in labor rate, Unanticipated
overtime, and Substitution of different grade of workers
3. ______________ this labor variance indicates whether the actual
amount paid for the labor was less than or more than the standard rate. Labor Rate Variance
LET’S PRACTICE!

Questions nos 25 and 26 page 336 - 337
TOPIC 6: OVERHEAD VARIANCES

What do you call the variances pertaining to overhead costs? How do these variances differ from
those of materials and labor costs?

Variable Overhead Spending Variance

https://www.youtube.com/watch?v=7GuBJBxjHHE&t=57s
Variable Overhead Efficiency Variance
https://www.youtube.com/watch?v=SUUTvSBrxrw
Fixed Overhead Production Volume Variance

102
https://www.youtube.com/watch?v=HaVDzvKS2RE
Fixed Overhead Spending Variance
https://www.youtube.com/watch?v=PXNHs2OCwbE&t=56s
1. What are the four (4) kinds of overhead variances under the
Four-Variance Analysis? Variable overhead spending variance, Variable
overhead efficiency variance, Fixed overhead spending variance, and Fixed
overhead volume variance.
2. ______________ this overhead variance is equal to the actual
variable overhead minus budgeted variable overhead based on actual
hours. Variable overhead spending variance
3. ______________ this is the difference between budgeted and applied fixed overhead
costs. Fixed overhead volume variance
4. What is the common reason for fixed overhead volume variance? Change in production
volume due to change in demand, and Change in productivity of labor or machinery.
LET’S PRACTICE!

Questions nos 37 and 42 page 339-340
TOPIC 7: COMPREHENSIVE ILLUSTRATION – STANDARD COSTING SYSTEM

You will learn how to solve problems with variances on three elements of costs- materials, labor
and overhead.

103
1. What is the materials price variance if Company X purchased on account 1,000 units of
Material-A for P125.00 per unit with a standard cost of P120.00 per unit? Favorable or
Unfavorable? P5,000.00 Unfavorable
2. What is the journal entry for the transaction in the number 1?
Debit: Raw Materials Inventory P125,000.00
Credit: Materials Price Variance P 5,000.00
Accounts Payable 120,000.00
To record the purchase of materials on account
3. Company Y produced 1,000 units of Toy-B for 190 actual labor hours. Standard labor hours to
produce 5 units of Toy-B is 2 hours at a standard rate of P100.00 per labor hour. How much is
the Labor Efficiency Variance? Favorable or Unfavorable? P1,000.00 Favorable
4. What is the journal entry for the transaction in the number 2?
Debit: Work-in-Process P20,000.00
Credit: Labor Efficiency Variance P1,000.00
Payroll 19,000.00
To record distribute the payroll for the period
KEY TAKEAWAYS:
✔ Identifying the standards for quantities for materials, labor and overhead is the most effective
control, rather than an overall total product cost.
✔ Timely evaluation of performance using variance analysis will give the company to maximize
any opportunity for management action.
✔ Management can improve operations, correct errors, and deploy resources more effectively to
reduce costs by knowing the reasons for the variances.
✔ A variance is considered favorable if it improves the net income and unfavorable if it decreases
income.
LET’S PRACTICE!
Solve Problem:
Problem P14-1 on page 341

104
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
________________________________________________
REFERENCES
Edspira. (2014). Standard Costing and Variance Analysis.Retrieved from
https://www.youtube.com/watch?v=yWOdzhjHNSM&t=86s
Edspira. (2018). Advantages of standard costing. Retrieved from

https://www.youtube.com/watch?v=YT83hwoC3qY&t=3
Edspira. (2018). Disadvantages of standard costing. Retrieved from
https://www.youtube.com/watch?v=7uJMgY4rc
Edspira. (2018) Direct materials variance analysis. Retrieved from

https://www.youtube.com/watch?v=-e32TQdCjDg&t=87s link to open resource.
Edspira. (2018). Materials price variance. Retrieved from

hthttps://www.youtube.com/watch?v=MuqaI1Iw7rw&t=24s
Edspira. (2018). Materials quantity variance when purchases do not equal the amount used.
Retrieved from https://www.youtube.com/watch?v=hkS1fYzojeQ&t=72s
Edspira. (2018). Materials quantity variance (materials yield variance). Retrieved from
https://www.youtube.com/watch?v=HGTJ3Zy5GGc
Edspira. (2018). Variable overhead spending variance. Retrieved from

https://www.youtube.com/watch?v=7GuBJBxjHHE&t=57s
Edspira. (2018). Variable overhead efficiency variance. Retrieved from

https://www.youtube.com/watch?v=SUUTvSBrxrw
Edspira. (2018). Fixed overhead production volume variance. Retrieved from

https://www.youtube.com/watch?v=HaVDzvKS2RE
Edspira. (2018). Fixed overhead spending variance. Retrieved from

https://www.youtube.com/watch?v=PXNHs2OCwbE&t=56s

105
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University of Nueva Caceres

COLLEGE OF BUSINESS AND ACCOUNTANCY

COST ACCOUNTING AND CONTROL

Integrated Cost Accounting – Principles

Noel L. Rosco, CPA

No part of this course module/study guide may be reproduced or transmitted in any

Published in the Philippines by the University of Nueva Caceres

Office of the Vice President for Academic Affairs

JH10, JH Bldg., University of Nueva Caceres,

J. Hernandez Ave. Naga City,

Camarines Sur, Philippines

Printed in the Philippines

First printing, 2020

Second printing, July 2021

Cost Accounting and Control

Cost Accounting and Control

UNIVERSITY OF NUEVA CACERES

The University of Nueva Caceres shall be a leading exponent of academic

1. PURSUE the nurturing and strengthening of social institutions with

2. PRODUCE graduates who entrepreneurial, productive, morally

4. PROVIDE the University personnel with the means to enhance their

Cost Accounting and Control

COLLEGE OF BUSINESS AND ACCOUNTANCY

PROGRAM EDUCATIONAL OBJECTIVES

PEO 1 Adapt to the developments in the Accountancy profession through life-long

POb Work effectively and independently in multi-disciplinary and multi-cultural teams

POc Promote “Filipino historical and cultural heritage” (based on RA 7722)

POd Act in recognition of personal and professional development

POe Implement business- related activities by applying the basic functions of

PO g Conduct accounting research, as a tool to critically, analytically and creatively solve

PO h Employ technology as a business tool in capturing financial and non financial

PO i Apply knowledge and skills to successfully respond to various types of assessments

PO j Maintain a commitment to good corporate citizenship, social responsibility and

Cost Accounting and Control

Cost Accounting and Control

PREREQUISITE KNOWLEDGE AND SKILLS

Module 2 Accounting for Materials, labor and overhead

Cost Accounting and Control

Topic 2 Accounting for Labor

Topic 3 Accounting for Manufacturing Overhead

Module 3 Just-in-time and Backflush Accounting, and Activity-based Costing

Topic 2 ABC Costing

Cost Accounting and Control

Module 4 Job-Order Costing

Module 5 Introduction to Process Costing – Five Steps Procedures for

Topic 3 Process Costing- Weighted Average

Module 6 Accounting for production losses

Cost Accounting and Control

Module 7 Cost-Volume-Profit Relationship

Module 8 Accounting for Joint Cost and By-Products

Module 9 Standard Costing and Variance Analysis

2. References at the UNC library

Management and cost accounting control, 2017, Drury, Colin (E-book)

3. Optional Resources- Youtube Channel and other online resources.

Cost Accounting and Control

STUDY PERIOD TOPIC LEARNING LEARNING ASSESSMENT

Week 1-2 Module 0 Learning Activity Integrated Cost Compilation of

Week 3 Module 2 Self - Assessments Integrated Cost Compilation of

Week 4 Topic 2 Learning Activities Integrated Cost Compilation of

Week 5 Topic 3 Learning Activities Integrated Cost Compilation of

Cost Accounting and Control

Week 6 Module 3 Learning Activities Integrated Cost Compilation of

Week 7 Module 3 Learning Activities Integrated Cost Compilation of