Cost Accounting
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Financial Accounting |
Managerial Accounting |
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External Users |
Internal Users |
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Financial Statements |
Internal Reports |
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General Information |
Special Information |
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GAAP |
No GAAP |
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Periodically (Regularly) |
Any time (On demand) |
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Historical Cost |
Future Cost |
Managerial Accounting’s Purpose & Range
- Costing, Decision Making (Planning), Evaluation (Control)
Cost Flow
Manufacturing Cost = Product Cost = Inventoriable Cost
= DM + DL + OH
Non-Manufacturing Cost = Period Cost
= S&A
Direct Cost (DM, DL) vs. Indirect Cost (FOH)
Variable Cost (DM, DL, VOH, VS&A) vs. Fixed Cost (FOH, FS&A) vs. Semi Variable Cost
Prime Cost (DM, DL) vs. Conversion Cost (DL, OH)
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Materials |
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Work In Process |
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Finished Goods | |||
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B. I Purchase |
Issue E. I |
→ |
B. WIP DM DL OH |
CGM E. WIP |
→ |
B. F/G CGM |
CGS E. F/G |
Job Order Costing
Each job is unique, Not homogeneous products
OH Application base can be DL, DLH, or MH
OH Actual Rate = Actual Total OH / Actual Total Allocation Base
OH Predetermined Rate = Estimated Total OH / Estimated Total Allocation Base
Actual Rate > Predetermined Rate: Underapplied
Actual Rate < Predetermined Rate: Overapplied
Service Department’s OH Allocation
- Direct Method: Allocates Svc. Dept. Cost directly to Product dept.
- Step Method: Allocates to other Svc. Dept. First, and then allocates to Prod. Dept.
Activity Based Costing (ABC)
Unit level – DM, DL
Batch level – Ordering, Setup, Materials handling
Product level – Engineering change, Inventory Management
Facility level – Management of plant, Personnel Administration
Advantage: Identify and eliminate activities that add no-value to the product
Disadvantage: Costly
Facility level activities are difficult to assign to products
Benefit only for the company with various products, relatively small in volume,
and high overhead cost
Process Costing
1. Visualize the physical flow of units
2. Compute Equivalent Units of Production (EUP)
3. Determine costs to allocate
4. Compute Unit Cost per EUP for DM and for Conversion Cost
5. Allocate Total Costs to FG and to EWIP