You are on page 1of 15

Cost Accounting Basic Concepts and Job Order Cost Cycle

Victor S.M. Vergel de Dios

Definition

Cost accounting is a system that records, summarizes, analyzes, and interprets the details of the cost of materials, labor, and overhead necessary to produce and sell an article.

Purpose

Cost accounting purpose is to provide management with the necessary accounting tools for planning and controlling activities.

Relationship of Financial, Management, and Cost Product Costs Accounting

FINANCIAL ACCOUNTING

COST ACCOUNTING

MANAGEMENT ACCOUNTING

Manufacturing Costs Classified

Direct materials Direct Labor Manufacturing Overhead

Indirect Materials Indirect Labor Other Manufacturing Overhead

Prime and Conversion Cost Distinguished:


Total Manufacturing Cost Conversion Cost

Prime Cost

Direct Labor

Direct Materials

Factory Overhead

Inventories for a Manufacturing Company

Raw Materials Inventory Work in Process Inventory Finished Goods Inventory

System of Cost Accumulation

Actual Cost System (Historical) Standard Cost System (Predetermined) Normal Cost System (Hybrid)

Types of Cost System

Job Order Cost System Process Cost System

Work Flow of a Job Order Cost System

Procurement Production Warehousing Selling

Chart of Cost for a Manufacturing Company

Total Costs

Manufacturing Cost

Distribution Cost

Administrative Cost

Direct Materials

Direct Labor

Manufacturing Overhead

Delivery

Sales

Income Statement
Revenue Sales Cost of Goods Sold Finish Goods Inventory - Beg. Add: Cost of Goods Manufactured (Annex - A) Total Goods Available for Sale Less: Finish Goods Inventory - End Gross Profit on Sales Less: Operating Expenses Selling expenses General & Administrative expenses 20,000.00 15,000.00 35,000.00 30,000.00 225,100.00 255,100.00 33,600.00 221,500.00 83,500.00 305,000.00

Net Income before Income Tax


Less: Provision for Income Tax Net Income after Income Tax

48,500.00
14,550.00 33,950.00

Statement of Cost of Goods Manufactured Annex A


Direct Materials Used Materials Inventory - Beg. Add: Material Purchased Total Materials Available Less: Materials Inventory - End Raw Materials Used Less: Indirect Materials used 50,000.00 86,900.00 136,900.00 46,500.00 90,400.00 5,800.00 84,600.00

Direct Labor Manufacturing Overhead Applied (Annex A-1) Total Manufacturing Cost Add: Work in process (Beg.) Total Cost of Goods placed in process Less: Work in process (End) Cost of Goods Manufactured

66,500.00 53,200.00 204,300.00 40,000.00 244,300.00 19,200.00 225,100.00

Statement of Manufacturing Overhead (Annex A-1)


Actual Overhead Cost Incurred Indirect Materials Indirect Labor Payroll Taxes Expense Depreciation - Building Depreciation - Equipment Repairs and Maintenance Light and Water Insurance Taxes and licenses Other Taxes Less: Underapplied Overhead Manufacturing Overhead Applied 5,800.00 35,800.00 9,145.00 2,250.00 3,400.00 2,500.00 4,200.00 970.00 620.00 415.00 65,100.00 11,900.00 53,200.00

The End