Professional Documents
Culture Documents
CMA
Professional Level –I
102: Cost Accounting
-Cost
Cost Object; -Expenditures, -Cost, -Expense
Expense and Loss;
Class 102.02 -Cost
Cost Classifications; -Cost Data and Uses;
No. 2 Cost Concepts, -The
The Chart of Accounts;
Classifications -Statement
Statement of Cost of Goods Manufactured and Sold;
and Statements -Income
Income Statement.
Cost Object A cost object is a segment or an entity for which specific cost information is desired. This
segment or entity may include a contract, any customer, a unit of service, a unit of production,
a project, any activity, a subdivision etc. For a cost object a separate and independent cost
measurement is required. Costing systems are designed to calculate the cost of a cost
Cost object is a tangible input for a product manufactured/Service provided, like labor or material. For
example a cloth manufacturing firm requires some amount of predetermined labor and predetermined raw
material for any amount of cloth being manufactured. The cost of employing labor can be directly fixed as
"per man per hour" or "per man per day per hour per minute per annum", so the labor is a cost object as
you can directly associate cost with it. Similarly the raw material like cotton or threads or fabric can be
another cost object. Other examples may include services taken by another firm, for example a
transportation company/ courier company can offer some service to all customers at a fixed rate. so the
cost can be directly associated with it and the company/s
company/service
ervice can be then called as cost object.
Generally, cost object term is used for fixed Cost components of total cost
otherwise anything which is incurring some cost can be called as a cost object
like an Advertisement.
Expenditures - A
payment, or the promise
of a future payment.
Page -13
Friday, March 06, 2015
Md.Monowar Hossain FCMA,CPA,FCS, ACA
GM & Head of ICC, Agarani Bank Limited.
eMail: md.monowar@gmail.com
Class note for
CMA Professional Level –I
102:COA (Cost Accounting)
Cost - A cost is the value of money that has been used up to produce something, and
hence is not available for use anymore.
Valuation in terms of money of (1) effort, (2) material, (3) resources, (4) time and utilities consumed,
(5) risks incurred, and (6) opportunity forgone in production and delivery of a good or service. All
expenses are costs, but not all costs (such as those incurred in acquisition of an income-generating
asset) are expenses.
ELEMENTS OF COST
A loss is associated with a “peripheral” or “incidental” transaction. Examples of losses include the
loss on the sale of an asset used in the business, loss from a lawsuit settlement, and loss from
retirement of bonds. However, there are some losses that are closer to operations, such as the
loss on write-down of inventory from cost to market.
Cost Classifications:
By behavior:
How do costs fluctuate in response to changes in the volume of production inputs (e.g., direct labor hours,
board feet of lumber used) or production outputs (e.g., number of chairs produced).
By function:
Costs incurred as part of the manufacturing or production process are charged to inventory and then
written off as part of cost of goods sold. Selling and administrative expenses [often just S & A Expenses]
are all those costs which are not associated with the manufacturing or production process, such as sales
commissions, sales salaries, accounting, finance, general management salaries and office supplies.
Page -14
Friday, March 06, 2015
Md.Monowar Hossain FCMA,CPA,FCS, ACA
GM & Head of ICC, Agarani Bank Limited.
eMail: md.monowar@gmail.com
Class note for
CMA Professional Level –I
102:COA (Cost Accounting)
By traceability:
Manufacturing costs are classified as either direct or indirect. Indirect costs are also known as overhead
or burden. Indirect costs are those costs which cannot be specifically associated with a particular cost
object (A cost object is any organizational or physical entity to which costs are assigned or charged. A cost
object might be a completed unit of product, a subassembly, a department, a worker in the department, a
product line, or en entire division of a larger corporation.) When we talk about manufacturing costs, the
typical cost object is a unit of output. Selling and administrative expenses may also be traced to products,
product lines, organizational units.
Page -15
Friday, March 06, 2015
Md.Monowar Hossain FCMA,CPA,FCS, ACA
GM & Head of ICC, Agarani Bank Limited.
eMail: md.monowar@gmail.com
Class note for
CMA Professional Level –I
102:COA (Cost Accounting)
Liability Accounts: Accounts Payable (Creditors), Credit Cards, Tax Payable, Employment Expenses
Payable, Bank Loans,Stockholders' Equity Accounts: Common Stock (Share Capital), Retained Earnings
(Revenue Reserves), Drawings
Profit & Loss accounts
Revenue Accounts:Sales Revenue, Sales Returns & Allowances, Sales Discounts, Interest Income,
Cost of Goods Sold Accounts: Purchases and sales Expense All sales Expense Purchase Returns &
Allowances
Expense Accounts:Advertising Expense, Bank Fees, Depreciation Expense, Payroll Expense, Payroll
Tax Expense, Rent Expense, Income Tax Expense, Office Expense, Utilities Expense
Page -16
Friday, March 06, 2015
Md.Monowar Hossain FCMA,CPA,FCS, ACA
GM & Head of ICC, Agarani Bank Limited.
eMail: md.monowar@gmail.com
Class note for
CMA Professional Level –I
102:COA (Cost Accounting)
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Page -17
Friday, March 06, 2015
Md.Monowar Hossain FCMA,CPA,FCS, ACA
GM & Head of ICC, Agarani Bank Limited.
eMail: md.monowar@gmail.com
Class note for
CMA Professional Level –I
102:COA (Cost Accounting)
Cost of goods sold = Direct materials cost + Direct labor cost + Factory overhead cost
+ Opening work in process inventory - Ending work in process inventory
+ Opening finished goods inventory - Ending finished goods inventory
Page -18
Friday, March 06, 2015
Md.Monowar Hossain FCMA,CPA,FCS, ACA
GM & Head of ICC, Agarani Bank Limited.
eMail: md.monowar@gmail.com
Class note for
CMA Professional Level –I
102:COA (Cost Accounting)
Number of units manufactured = Units sold + Ending Finished Goods units - Opening finished goods
units
Per unit cost of goods manufactured = Cost of goods manufactured / Units manufactured
Materials used or consumed = Opening inventory or materials + Net purchases of materials
- Ending inventory of materials
Page -19
Friday, March 06, 2015
Md.Monowar Hossain FCMA,CPA,FCS, ACA
GM & Head of ICC, Agarani Bank Limited.
eMail: md.monowar@gmail.com
Class note for
CMA Professional Level –I
102:COA (Cost Accounting)
Income statement: A financial statement that measures a company's financial performance over a
specific accounting period. Financial performance is assessed by giving a summary of how the business
incurs its revenues and expenses through both operating and non-operating activities. It also shows the
net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year. Also
known as the "profit and loss statement" or "statement of revenue and expense".
Page -20
Friday, March 06, 2015
Md.Monowar Hossain FCMA,CPA,FCS, ACA
GM & Head of ICC, Agarani Bank Limited.
eMail: md.monowar@gmail.com
Class note for
CMA Professional Level –I
102:COA (Cost Accounting)
Page -21
Friday, March 06, 2015
Md.Monowar Hossain FCMA,CPA,FCS, ACA
GM & Head of ICC, Agarani Bank Limited.
eMail: md.monowar@gmail.com
Class note for
CMA Professional Level –I
102:COA (Cost Accounting)
Monyem
Statement of Cost and Profit
For the year ended xxxx
Note : It is assumed that Monyem would have determined the Selling Price of the cake based on his cost
estimate of Tk. 95.00.
(ii) Computation the price that should have been charged in the current year to yield the same
profit as in previous year.
Hence, selling price per cake (Tk. 22,30,000 / 20,000 cakes)..Tk. 111.50
Page -22
Friday, March 06, 2015
Md.Monowar Hossain FCMA,CPA,FCS, ACA
GM & Head of ICC, Agarani Bank Limited.
eMail: md.monowar@gmail.com
Class note for
CMA Professional Level –I
102:COA (Cost Accounting)
Notes :
(i) The cost sheet is completed by Reverse Working. Purchases amount is the balancing figure.
(ii) Direct labour = 175% of factory overhead (given). Hence, if direct labour = 21,00,000,
then Factory Overhead = 21,00,000 ÷ 175% = Tk.12,00,000
(iii) Selling Overhead = Tk. 1,000 per unit = Tk. 5,00,000 (in total).
So, Units sold = Tk. 5,00,000 ÷ Tk.1,000 = 500units.
(iv) Cost of Goods Sold (excluding Administrative Overhead) = Tk. 13,200 per unit
Cost of Goods Sold less Administrative Overhead = 13,200 per unit × 500 units = Tk. 66,00,000
Cost of Goods Sold – Tk. 3,00,000 =Tk. 66,00,000
Hence, Cost of Goods Sold = Tk. 69,00,000
Ans. (ii)
(v) Rate of profit = 26,00 ÷ 100,00 = 26%
Ans. (iii)
(vi) Interest on working capital shall not be considered as “Cost” since it may distort cost comparison.
However, for decision-making purposes, interest is an essential element of cost and has to be included to
determine relevant costs in a decision.
Page -23
Friday, March 06, 2015
Md.Monowar Hossain FCMA,CPA,FCS, ACA
GM & Head of ICC, Agarani Bank Limited.
eMail: md.monowar@gmail.com