Cost Accounting Flashcards
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
Cost Accounting
Cost Accounting - External Focus- GAAP
Managerial Accounting - Internal Focus- Not GAAP
Cost Accounting
Prime Costs
Conversion Costs
Cost Accounting
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
Cost Accounting
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).
Cost Accounting
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
Cost Accounting
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)
Cost Accounting
If Immaterial - Goes to COGS
If Material - Goes to WIP- Finished Goods- or COGS- based on their Ending Balance
Cost Accounting
It always goes to COGS
Cost Accounting
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.
Cost Accounting
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.
Cost Accounting
Beginning Balance DR Net purchases (plus freight-in)CR Direct Materials Used
: Ending balance (goes to BS)
Cost Accounting
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)
Cost Accounting
Beginning BalanceDR COGM
: COGAS (Cost of Goods Avail for Sale)
CR COGS
: Ending Balance (Goes to BS)
Cost Accounting
Inventory (Product) Cost
Part of DM Purchases
Cost Accounting
Selling (Period) Cost
Not part of inventory
Cost Accounting
Used when costs are easily connected to a specific product or product line
Can also be applied to services
Calculation is the same as normal cost accounting - just use your T Accounts
- DM to WIP to FG to COGS
- You’re likely going to be solving for the last job in the queue
Cost Accounting
No services allocated between service departments- even if they serve each other. Only allocate to product(s)
Cost Accounting
Services can be allocated to both other service departments and the product(s)
Cost Accounting
Beginning Inventory+ Units Started- Ending Inventory
: No. Units Shipped
Cost Accounting
FIFO
Weighted Average
Cost Accounting
Equivalent Units of Production
Cost Accounting
EFU FIFO will always be LESS than EFU Weighted Avg (unless Beginning Inventory is Zero)
Cost Accounting
Beginning Inventory + Current Costs / EFU WA
Cost Accounting
Beginning Inventory + Current Costs / EFU WA
Cost Accounting
Units Shipped + EI x % Complete DM
: EFU (Weighted Average Method)
- Beginning Inventory x % Complete
: EFU (FIFO)
Cost Accounting
Units Shipped+ EI x % Complete CC
: EFU (Weighted Average)
- Beginning Inventory x % Complete
: EFU (FIFO)
Cost Accounting
Current Costs / EFU FIFO
Note: FIFO method uses Current Period costs only and ignores Beginning Inventory
Cost Accounting
Current Costs / EFU FIFO
FIFO method uses Current Period costs only and ignores Beginning Inventory
Cost Accounting
Beginning balance (DM- DL- OH)+ Current Costs (DM- DL- OH)- COGM (Goes to Finished Goods)+ DM EFU x Cost per DM EFU+ CC EFU x Cost per CC EFU
: Ending WIP
Cost Accounting
Net Sales - Product Costs
: Gross Margin
- Period Costs
: Operating Income
Cost Accounting
Focuses on eliminating non-value-added activities for poor quality and inventory and things customers don’t want or don’t care about
Inventory is expensive to store and storing something is not a value-added expenditure
Uses Cost Pools - Different departments can have different OH rates
Uses Several OH rates based on Activity - Cost Pool / Cost Driver
Cost Accounting
Cost Pools and Allocations increase compared to a traditional costing system
Cost Accounting
Connected to Just-in-Time Production- which is part of Activity-Based Costing and Total Quality Management (TQM)
- Works backward to flush out COGS
- Mostly GAAP
Cost Accounting
Usually immaterial and common costs aren’t allocated to them
Low Market Value
Can be valued at NRV
Can be treated as a contra expense and netted against COGS - Can be treated as a contra sale and netted against Sales
Recognition rules are very flexible with valuing and classifying by-products
Cost Accounting
Measure how costs change relative to activity levels
High-Low Method
Change in Cost (High-Low pts) / Change in Activity (High-Low pts)
Cost Accounting