Here are the key steps to calculate Cost of Goods Manufactured and Cost of Goods Sold for HH Company for February 200X:1. Cost of Goods Started: Direct Materials: $15,000 (beginning) + $90,000 (purchased) = $105,000Direct Labor: N/A (not provided)Indirect Manufacturing Costs: $15,000 + $40,000 + $50,000 + $60,000 + $5,500 + $25,000 + $8,500 = $204,000Total Cost of Goods Started: $105,000 + $204,000 = $309,0002. Add: Work in Process
Cost accounting measures and reports on the costs of resources used in an organization. It provides data for both management accounting, which helps managers make internal decisions, and financial accounting. Cost accounting involves determining the costs of products, services, projects and other cost objects. It aims to provide cost data for setting prices, controlling costs, determining profitable products, and aiding decision making. Management accounting focuses on internal reporting to help managers maximize profits through planning, controlling operations and decision making.
Similar to Here are the key steps to calculate Cost of Goods Manufactured and Cost of Goods Sold for HH Company for February 200X:1. Cost of Goods Started: Direct Materials: $15,000 (beginning) + $90,000 (purchased) = $105,000Direct Labor: N/A (not provided)Indirect Manufacturing Costs: $15,000 + $40,000 + $50,000 + $60,000 + $5,500 + $25,000 + $8,500 = $204,000Total Cost of Goods Started: $105,000 + $204,000 = $309,0002. Add: Work in Process
Similar to Here are the key steps to calculate Cost of Goods Manufactured and Cost of Goods Sold for HH Company for February 200X:1. Cost of Goods Started: Direct Materials: $15,000 (beginning) + $90,000 (purchased) = $105,000Direct Labor: N/A (not provided)Indirect Manufacturing Costs: $15,000 + $40,000 + $50,000 + $60,000 + $5,500 + $25,000 + $8,500 = $204,000Total Cost of Goods Started: $105,000 + $204,000 = $309,0002. Add: Work in Process (20)
Call Girls In Panjim North Goa 9971646499 Genuine Service
Here are the key steps to calculate Cost of Goods Manufactured and Cost of Goods Sold for HH Company for February 200X:1. Cost of Goods Started: Direct Materials: $15,000 (beginning) + $90,000 (purchased) = $105,000Direct Labor: N/A (not provided)Indirect Manufacturing Costs: $15,000 + $40,000 + $50,000 + $60,000 + $5,500 + $25,000 + $8,500 = $204,000Total Cost of Goods Started: $105,000 + $204,000 = $309,0002. Add: Work in Process
2. Overview of Cost and Management
Accounting
Cost Accounting measures and reports
financial and nonfinancial information relating
to the cost of acquiring or consuming
resources in an organization. It provides
information for both management accounting
and financial accounting.
3. Management Accounting measures and reports
financial and nonfinancial information that helps
managers make decisions to fulfill the goals of
an organization. It focuses on internal
reporting.
4. Objectives of Cost Accounting:
Fixing selling price,
Making a foundation of total cost,
Determining the profitable products,
Controlling costs becomes easier,
Helps in proper decision making,
Enhances communication among
departmental managers, etc.
5. Objectives of Management Accounting:
The primary objective of Management
Accounting is to enable management to
maximize profits or minimize losses,
The fundamental objective of Management
Accounting is to provide relevant information
to managers for use in planning, controlling
operations and decision making.
6. Cost Accounting vs Financial Accounting
Cost Accounting involves the preparation of a
broad range of reports that management
needs to run a business.
Financial Accounting involves the preparation
of a standard set of reports for an outside
audience.
7. Management Accounting vs
Financial Accounting
Management Accounting is designed to produce useful
information for a company’s internal use. Business
managers collect information that encourages strategic
planning, helps them se realistic goals, and encourages
an efficient directing of company resources,
Financial Accounting has some internal use as well, but
it is much more concerned with informing those outside
of a company. Financial statements are designed to
disclose the firm’s business performance and financial
health.
8. Introduction
Accounting systems provide information useful to
users in the form of Financial Accounting and
Management Accounting reports
Cost Accounting is a bridge between them
Cost Accounting is a method for determining cost of a
product, service, project or thing.
Aids financial accounting by providing product cost
information to be reported in financial statements
Aids management accounting by providing cost
information to managers for performing their tasks-
planning and control.
12/27/2022
9. Basic Cost Terminology
Cost – sacrificed resource to achieve a specific objective
Actual cost – a cost that has occurred
Budgeted cost – a predicted cost
Expense – a cost that has given a benefit and now expired.
Loss – unintentionally incurred in the context of business
operation
Cost object – anything of interest for which a separate cost
is desired.
It may be a product, service, project, department, division, branch,
customer, etc
12/27/2022
10. Cost Object Examples at BMW
Cost Object Illustration
Product BMW X 5 sports activity vehicle
Service Dealer-support telephone hotline
Project R&D project on DVD system enhancement
Customer
Herb Chambers Motors, a dealer that
purchases a broad range of BMW vehicles
Activity Setting up production machines
Department Environmental, Health & Safety
12/27/2022
11. Basic Cost Terminology
Cost accumulation – a collection of cost data in an
organized manner
Cost assignment – a general term that includes
gathering accumulated costs to a cost object. This
includes:
Tracing accumulated costs with a direct relationship to
the cost object and
Allocating accumulated costs with an indirect
relationship to a cost object
12/27/2022
12. Direct & Indirect Costs
Direct costs – can be conveniently and economically
traced (tracked) to a cost object.
Used by a single cost object
Avoided if the cost object is avoided
Direct materials- cost of materials specifically used in manufacturing a
product. E.g. Lumber & metal frame cost in chair, cost of cottons in textile
factory, etc
Direct labor-specific labor cost that can be identified with work involved in
production. E.g. salary, wages and fringe benefits for direct factory workers
12/27/2022
13. Direct & Indirect Costs
Indirect costs – cannot be conveniently or
economically traced (tracked) to a cost object. Instead
of being traced, these costs are allocated to a cost
object in a rational and systematic manner
Can be classified in to
Those indirectly related to cost objects (common costs)
E.g. salary of supervisors managing production, electricity,
rent, salary of janitors, property taxes, etc
Those directly related to cost object but is not
economically feasible to trace them.
E.g. glues, nails, etc
15. Factors Affecting Direct / Indirect
Cost Classification
Cost Materiality
Availability of information-gathering technology
Operational Design
12/27/2022
16. Cost Behavior
Variable costs – change in total in proportion to
changes in the related level of activity or volume.
DM, DL, IM, IL (in some instances), some selling & adm. exp
Fixed costs – remain unchanged in total regardless of
changes in the related level of activity or volume
Salary of plant supervisor, depreciation exp., property taxes, etc
Semi-variable (mixed) costs- have both variable & fixed
cost portion. E.g. telephone and electricity costs
Semi-fixed (step-function) costs-fixed over some activity
ranges & change dramatically as level of activity moves
from one range to another.
Costs are fixed or variable only with respect to a
specific activity or a given time period
12/27/2022
17. Cost Behavior, continued
Variable costs – are constant on a per-unit basis. If a
product takes 5 pounds of materials each, it stays the
same per unit regardless of one, ten or a thousand
units are produced
Fixed costs – change inversely with the level of
production on per unit basis. As more units are
produced, the same fixed cost is spread over more
and more units, reducing the cost per unit
12/27/2022
18. Cost Behavior Summarized
Total Dollars Cost per Unit
Variable Costs
Change in
proportion with
output
More output = More cost
Fixed Costs
Unchanged in
relation to output
Change inversely
with output
More output = lower cost
per unit
12/27/2022
Total Dollars Cost Per Unit
Variable Costs
Change in
proportion with
output
More output = More cost
Unchanged in
relation to output
Fixed Costs Unchanged in
relation to
output
Change inversely
with output
More output = lower cost
per unit
20. Other Cost Concepts
Cost Driver – a variable that causally affects costs over
a given time span. E.g. labor hours for labor cost, Kilowatt hours
for energy cost, no. of advertisements for adv. Expense, etc
Fixed costs have no cost driver in the short run
Cost driver is a cost allocation base for indirect costs
Relevant Range – the band of normal activity level (or
volume) in which there is a specific relationship
between the level of activity (or volume) and a given
cost
For example, fixed costs are considered fixed only within
the relevant range.
12/27/2022
22. A Cost Caveat
Unit costs should be used cautiously. Since unit costs
change with a different level of output or volume, it
may be more prudent to base decisions on a total
dollar basis.
Unit costs that include fixed costs should always
reference a given level of output or activity
Unit Costs are also called Average Costs
12/27/2022
23. Multiple Classification of Costs
Costs may be classified as:
Direct / Indirect, and
Variable / Fixed
These multiple classifications give rise to important
cost combinations:
Direct & Variable
Direct & Fixed
Indirect & Variable
Indirect & Fixed
12/27/2022
25. Other Cost Types
Differential & Marginal costs
Controllable and Noncontrollable costs
Opportunity costs
Sunk costs
Relevant and Irrelevant costs
26. Different Types of Firms
Manufacturing-sector companies – create and sell
their own products
Merchandising-sector companies – product resellers
Service-sector companies – provide services
(intangible products)
12/27/2022
27. Types of Manufacturing Inventories
Direct Materials – resources in-stock and available for
use
Work-in-Process (or progress) – products started but
not yet completed. Often abbreviated as WIP
Finished Goods – products completed and ready for
sale
12/27/2022
28. Types of Product Costs
Also known as Inventoriable Costs
Direct Materials
Direct Labor
Indirect Manufacturing – factory costs that are not
traceable to the product. Other common names for this
type of cost include Manufacturing Overhead costs or
Factory Overhead costs.
12/27/2022
29. Accounting Distinction Between
Costs
Inventoriable costs – product manufacturing costs.
These costs are capitalized as assets (inventory) until
they are sold and transferred to Cost of Goods Sold.
Period costs – have no future value and are expensed as
incurred.
12/27/2022
30. Cost Flows
The Cost of Goods Manufactured and the Cost of
Goods Sold section of the Income Statement are
accounting representations of the actual flow of costs
through a production system.
Note the importance of inventory accounts in the
following accounting reports, and in the cost flow chart
12/27/2022
34. Illustration
Assume the following information is available for the HH Company for February 200X.
Indirect manufacturing costs:
Beginning inventories: Indirect materials $15,000
Direct materials $15,000 Indirect labor 40,000
Work in process 38,000 Depreciation 50,000
Finished goods 26,000 Electric power 60,000
Ending inventories: Property taxes & Insurance 5,500
Direct materials 20,000 Repair and maintenance 25,000
Work in process 40,000 Miscellaneous 8,500
Finished goods 28,000 Selling and Administrative expenses 45,000
Direct materials purchased 90,000 Sales 625,000
Direct labor used 100,000
Required
Assume full absorption costing is used prepare an Income Statement and separate
Schedule of Cost of Goods Manufactured for the HH Company for February.
35. Other Cost Considerations
Prime cost is a term referring to all direct
manufacturing costs (labor and materials)
Conversion cost is a term referring to direct labor and
factory overhead costs, collectively
Overtime labor costs are considered part of overhead
due to the inability to precisely know the true cause of
these costs
12/27/2022
36. Different Definitions of Costs
for Different Applications
Pricing and product-mix decisions – may use a “super”
cost approach (comprehensive)
Contracting with government agencies – very specific
definitions of cost for “cost plus profit” contracts
Preparing external-use financial statements – GAAP-
driven product costs only
12/27/2022
38. Three Common Features of
Cost Accounting & Cost Management
1. Calculating the cost of products, services, and other
cost objects
2. Obtaining information for planning & control, and
performance evaluation
3. Analyzing the relevant information for making
decisions
12/27/2022