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    Intro To Cost Acctg Part 2

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    Adrian Saplala
    The document provides an overview of cost accounting concepts including accounting for materials, labor, and factory overhead. It also presents 3 problems involving calculations of manufacturing costs such as prime cost, conversion cost, total manufacturing cost, cost of goods manufactured, cost of goods sold, and net income. Finally, it outlines various classifications of costs based on their nature, timing, controllability, association with cost objects, management discretion, importance in decision making, and behavior.

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    Intro To Cost Acctg Part 2

    Uploaded by

    Adrian Saplala
    22 views6 pages
    The document provides an overview of cost accounting concepts including accounting for materials, labor, and factory overhead. It also presents 3 problems involving calculations of manufacturing costs such as prime cost, conversion cost, total manufacturing cost, cost of goods manufactured, cost of goods sold, and net income. Finally, it outlines various classifications of costs based on their nature, timing, controllability, association with cost objects, management discretion, importance in decision making, and behavior.

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    Intro to Cost Acctg Part 2

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    The document provides an overview of cost accounting concepts including accounting for materials, labor, and factory overhead. It also presents 3 problems involving calculations of manufacturing costs such as prime cost, conversion cost, total manufacturing cost, cost of goods manufactured, cost of goods sold, and net income. Finally, it outlines various classifications of costs based on their nature, timing, controllability, association with cost objects, management discretion, importance in decision making, and behavior.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    22 views6 pages

    Intro To Cost Acctg Part 2

    Uploaded by

    Adrian Saplala
    The document provides an overview of cost accounting concepts including accounting for materials, labor, and factory overhead. It also presents 3 problems involving calculations of manufacturing costs such as prime cost, conversion cost, total manufacturing cost, cost of goods manufactured, cost of goods sold, and net income. Finally, it outlines various classifications of costs based on their nature, timing, controllability, association with cost objects, management discretion, importance in decision making, and behavior.

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    © All Rights Reserved
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    of 6

    INTRODUCTION: COST ACCOUNTING (Part 2)

    ACCOUNTING FOR MATERIALS:

    • Upon Purchase: (Direct materials and Indirect materials)

    Materials (or Stores Control)… ......................................... xxx


    Accounts payable ..................................................... xxx

    • Issued to production/Requisitioned/Materials used/Applied to Production:

    Work-in-process (Direct materials)… ................................xxx


    Factory Overhead Control or Actual FOH (Indirect materials).. xxx
    Materials (or Stores Control)………………………………… xxx
    • Upon Payment:
    Accounts payable ............................................................ xxx
    Cash………………………………………………………………….. xxx
    ACCOUNTING FOR LABOR:

    • Labor Incurrence: (Factory Labor: Direct and Indirect Labor, Sales and admin. Salaries):
    Payroll ...............................................................................xxx
    Withholding tax payable……………………………………… xxx
    SSS Premiums payable……………………………………….. xxx
    PhilHealth Premiums payable………………………………. xxx
    Accrued payroll…………………………………………………..
    • Labor Distribution/Labor applied to production:

    Work-in-process – Direct labor…......................................xxx


    Factory Overhead Control or Actual FOH (Indirect labor) xxx
    Sales salaries .....................................................................xxx
    General and administrative expenses .............................. xxx
    Payroll……………………………………………………………… xxx
    • Payment of Payroll:
    Accrued payroll ................................................................. xxx
    Cash…………………………………………………………………. xxx
    ACCOUNTING FOR FACTORY OVERHEAD:

    • Incurrence of FOH:

    Factory Overhead Control or Actual FOH........................ xxx


    Cash, Accounts payable, Accum. dep., Prep. Exp. … xxx
    • FOH Applied to production:

    Work-in-Process .............................................................. xxx


    Applied Factory Overhead (Std. FOH Rate* x Actual Base).... xxx

    Dean Carlo S. Maneja, CPA


    PROBLEM 1
    “Our Beloved Summer” Company inventories show the following costs:

    Beginning Ending
    Finished Goods 54,000 72,000
    Work in process 18,000 12,000

    • Sales amounting to P 500,000 is recorded during the year.


    • Materials:
    a) Direct materials used - P 90,000
    b) Indirect materials used – P 10,000
    • Labor:
    a) Direct Labor – P 60,000
    b) Indirect Labor – P 10,000
    • Other noted expenses of the company are:
    a) Factory rent expense – P 10,000
    b) Electric bill amounting to P 100,000. 50% of the electricity is traceable to the corporate
    office in Seoul, 30% is traceable to the selling area which displays the products and the
    remaining 20% is traceable to the factory.
    c) P 50,000 depreciation expense because of the equipment used for producing the
    merchandise. P 10,000 depreciation expense because of the computers used for
    generating accounting reports and schedules.

    1. How much is the prime cost?


    a. P 250,000 c. P 150,000
    b. P 160,000 d. P 90,000

    2. How much is the conversion cost?


    a. P 250,000 c. P 150,000
    b. P 160,000 d. P 90,000

    3. How much is the total manufacturing cost?


    a. P 250,000 c. P 150,000
    b. P 160,000 d. P 90,000

    Dean Carlo S. Maneja, CPA


    4. How much is the cost of goods manufactured?
    a. P 238,000 c. P 256,000
    b. P 250,000 d. P 258,000

    5. How much is the cost of goods sold?


    a. P 238,000 c. P 256,000
    b. P 250,000 d. P 258,000

    6. How much is the operating / commercial expense?


    a. P 90,000 c. P 238,000
    b. P 172,000 d. P 262,000

    7. How much is the net income?


    a. P 90,000 c. P 238,000
    b. P 172,000 d. P 262,000

    PROBLEM 2
    “Hometown Cha Cha Cha” Inc. showed a Cost of Goods Sold (COGS) of P 4,320,000 in the
    statement of comprehensive income after the first year of operations:

    The Total Manufacturing Cost (TMC) comprises the following:


    • Raw materials used 50%
    • Direct Labor 30%
    • Manufacturing / Factory Overhead 20%

    Goods in process at year-end amounted to 10% of the total manufacturing cost.

    Finished goods at year-end amounted to 20% of the cost of goods manufactured (COGM).

    1. How much is the Total Manufacturing Cost?


    a. 4,320,000 c. 6,000,000
    b. 5,400,000 d. 8,640,000

    Dean Carlo S. Maneja, CPA


    2. What is the amount of the direct labor cost incurred?
    a. 1,296,000 c. 1,800,000
    b. 1,620,000 d. 2,592,000

    3. What is the amount of Goods in process at year-end?


    a. 432,000 c. 540,000
    b. 600,000 d. 864,000

    4. How much is the cost of goods manufactured?


    a. 7,776,000 c. 3,888,000
    b. 4,860,000 d. 5,400,000

    5. What is the amount of Finished Goods at year-end?


    a. 972,000 c. 1,080,000
    b. 1,555,200 d. 777,600

    PROBLEM 3
    “Reply 1988” Company inventories provided the following information below:

    Increase in raw materials inventory 150,000


    Decrease in goods in process inventory 200,000
    Decrease in finished goods inventory 350,000
    Raw materials purchases 4,550,000
    Direct labor payroll 2,000,000
    Factory overhead 3,000,000

    1. How much is the Total Manufacturing Cost?


    a. 9,150,000 c. 9,600,000
    b. 9,400,000 d. 9,950,000

    2. How much is the Cost of Goods Manufactured?


    a. 9,150,000 c. 9,600,000
    b. 9,400,000 d. 9,950,000

    Dean Carlo S. Maneja, CPA


    3. How much is the Cost of Goods Manufactured?
    a. 9,150,000 c. 9,600,000
    b. 9,400,000 d. 9,950,000

    BASIC CLASSIFICATION OF COSTS

    1. As to the nature of the cost


    a. Manufacturing cost – these are costs incurred in relation to the
    manufacturingprocess or the production of a certain product.
    b. Commercial expenses – these are the operating expenses of the
    businessnormally classified as marketing, selling, and
    administrative expenses.

    2. As to the timing of recognition of expenses


    a. Product costs – these are costs included as part of the cost of an
    inventory (which is initially classified as an asset but transferred to
    expense when sold).
    b. Period costs – these are costs automatically charged to current operations.

    3. As to controllability
    a. Controllable cost - these are costs that can be modified by a certain
    individual inan organization.
    b. Non-controllable costs - these are costs that cannot be modified by
    a certainindividual in an organization.

    4. As to association with cost objects


    a. Direct cost - these are costs that can easily be traced to a certain cost object.
    b. Indirect cost - these are costs that cannot easily be traced to a
    certain costobject.

    5. As to management discretion
    a. Committed cost – these are costs that a company is already bound to
    incur forcertain period of time.
    b. Discretionary cost – these are costs that a company can still opt not to incur.

    6. As to importance in the decision-making process


    a. Relevant costs –costs not yet incurred by the company and are
    differentialbetween two alternatives.
    b. Irrelevant costs – costs already incurred by the company or costs that
    are notdifferential between two alternatives.
    c. Differential costs –costs that differ between two alternatives at hand.
    d. Sunk costs - costs that are already incurred, historical costs.
    e. Avoidable costs - costs that the company can save if another
    alternative hasbeen chosen over the other.

    Dean Carlo S. Maneja, CPA


    f. Unavoidable costs –costs that the company will continue to incur
    regardless ofthe alternative chosen.
    g. Opportunity costs - cost of income that was not earned because
    anotheralternative has been chosen.
    h. Out-of-pocket cost – costs that require cash outlay at the onset of incurrence.

    7. As to behavior (general classification)


    a. Variable costs - costs that vary directly (in total) in relation to the
    cost driver,within the relevant range.
    b. Fixed costs - costs that remain constant (in total) in relation to the cost
    driver,within the relevant range.
    c. Mixed cost – costs that possess both the characteristics of a variable and
    a fixedcost.

    Dean Carlo S. Maneja, CPA

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