Cost Accounting 1 Flashcards
What is Cost Accounting?
Cost Accounting is a component of GAAP that records Ending Inventory on the Balance Sheet for
o Direct Materials
o Direct Labor
o Work in Process
o Finished Goods
Cost Accounting also records for the Income Statement
What is the difference between Cost Accounting and Managerial Accounting?
Cost Accounting - External Focus- GAAP
Managerial Accounting - Internal Focus- Not GAAP
What are Product Costs (aka Inventory Costs)?
Prime Costs
Conversion Costs
What are included in Prime Costs?
Direct Material USED - Have become part of the product or had a direct impact on the product
Direct Labor Used - Employees who worked on product and had direct impact
What is Factory Overhead?
All factory costs except for DM and DL used in production- including Spoilage (except for abnormal spoilage- which is a period cost and not included in OH).
What is included in Fixed Factory Overhead?
FFO : Estimated Costs / Normal Capacity
Uses Normal Activity
Examples of Fixed Factory OH: Depreciation (SL)- Utilities- Taxes
Under/Over-applied Fixed OH always goes to COGS
What is included in Variable Overhead?
VO : Estimated Activity / Actual Activity
Uses Actual Activity
Examples of Variable Factory OH: Deprecation (Units of Prod)- Indirect materials (supplies & insignificant items)- Indirect labor (factory foreman- janitors- machine maintenance)
Where is Under/Over-applied Variable OH recorded?
If Immaterial - Goes to COGS
If Material - Goes to WIP- Finished Goods- or COGS- based on their Ending Balance
Where is Under/Over-applied Fixed OH recorded?
It always goes to COGS
What is indicated by a Debit balance in Actual Factory Overhead? How is it corrected?
Under-applied overhead.
If it’s Fixed OH- under-applied goes to COGS.
If it’s Variable OH- under-applied goes to COGS if immaterial- but is allocated to WIP- FG or COGS based on ending balances.
What is indicated by a Credit balance in Applied Factory Overhead? How is it corrected?
A credit balance indicates over-applied overhead.
If Fixed overhead- it is corrected from COGS.
If Variable overhead- it is corrected through COGS if immaterial- but if material overage is allocated to WIP- FG or COGS based on ending balances.
Which variables are used to calculate Direct Material balances?
Beginning Balance DR Net purchases (plus freight-in)CR Direct Materials Used
: Ending balance (goes to BS)
What variables are used to calculated Work in Process (WIP)?
Beginning Balance (End Bal of Previous WIP)DR Direct Materials UsedDR Direct Labor Used (Conversion Cost)CR COGMDR Factory Overhead Applied (Conversion Cost)
: Ending Balance (Goes to BS)
What variables are included in Finished Goods calculations?
Beginning BalanceDR COGM
: COGAS (Cost of Goods Avail for Sale)
CR COGS
: Ending Balance (Goes to BS)
How does Freight In affect Cost Accounting calculations?
Inventory (Product) Cost
Part of DM Purchases
