Direct material - What is directly traceable ACCOUNTING FOR MATERIALS Materials

- What cost is significant - Same way as inventories Beginning

- Net of Vat Materials 30,000.00 Purchases
- Can be inclusive of both Cash/AP 30,000.00 Returns
direct and indirect, gagamit nalang ng SL's Allowances
Discounts
Materials used WIP xx
xx xx Materials xx
End

Direct labor

Factory overhead - Indirect materials ACCOUNTING FOR FACTORY OVERHEAD Factory Overhead
- Often estimated - Indirect labor - Net of VAT xx/1.12 Beginning
- Other overheads Materials 30,000.00 Purchases
Cash/AP 30,000.00 Returns
Allowances
Discounts
Materials WIP xx
xx xx Materials xx
End

Tax
Materials are inclusive of Purchase
VAT

Proforma entries Materials 4

Input VAT 1
Cash 5

Subject pa yan sa PERCENTAGE TAX BASED ON MATERIALS

Materials 4
Input Vat 1
EWT Payable 0.04
Cash 4.96

*For entities to be subject to INPUT VAT, dapat parehas silang VAT taxpayer nung ka transact nya

IF HINDI PAREHAS VAT TAXPAYERS

Materials 5
EWT Payable 0.05
Cash 4.95
 BASIC COST ACCOUNTING CONCEPTS
- It is the field of accounting that measures, records, and reports information about costs Cost of rendering services/buying and selling a product/cost of production
- Cost accounting systems show 1. What costs were incurred
2. Where/how these costs were utilized a. unit costs
USES OF COST ACCOUNTING DATA 1. Determining product cost - Cost procedures must be able to determine b. total costs If eto lang available, info is insignificant
Determine selling price of product High enough to cover expenses and have a profit
Meeting competition Reduce price/eliminate if cannot reduce to compete
Bidding Bid price must cover expenses and have a profit
Analyzing profitability Know how much a product is earning; eliminate least profitable

2. POLC-M Planning Set objectives/goals A. Strategic - LONG TERM

Projection through HC B. Tactical - SHORT TERM
C. Operations - DAY-TO-DAY
Organizing
Leading
Controlling monitoring company's operations, determining whether objectives are being accomplished
Motivating

COMPARED TO FINANCIAL AND MANAGERIAL ACCOUNTING

FINANCIAL ACCOUNTING MANAGERIAL ACCOUNTING
1. Primarily for external users (investors/creditors) financers 1. Primarily for internal users (managers)
2. Focuses on the enterprise as a whole 2. Addresses individual/divisional concerns
3. Historical, quantitative, monetary, and verifiable 3. Current/Forecasted, quantitative/qualitative, monetary or non/monetary, and futuristic

Required by SEC & BIR Not required

Financial accounting data is used in the managerial accounting system
Management decisions today wtill affect FS in the future periods
Uses cost accounting data to evaluate COST ACCOUNTING Uses cost accounting info as basis for decisions
and make decisions about the organization Provides product cost information/ supplies the numbers for managers inside the company

BASIC PRODUCT-COSTING SYSTEMS

JOB ORDER COSTING PROCESS COSTING
- Allocating costs to groups of unique/customer-specified product - Applicable to continuous process of production of similar goods
- Subsidiary record ( job cost sheet) keeps track of all WIP, FG, and other costs per job order - Each processing department becomes a cost center
But still uses one WIP Control account, may JOB SHEET lang talaga per JOB ORDER Uses several WIP Accounts per department

ex: Manufacturers of ships, airplanes, machines, special orders, set quantity of a product for inv rep. More economical to account for product-related costs for a period of time
More detailed/higher bookkeeping costs Less detailed/lower bookkeeping costs
Used also in service industry firms
Unit cost: TMC per job order/units produced per JO Unit cost: TMC per production/ units produced
HYBRID/OPERATION COSTING
- Have common products as well as distinguishing characteristics
- Unique products are separated in batches Each batch is accounted for as job order
ex: clothing, television, furniture
Chosen depending on what fits best for an industry, or what is more beneficial/less costly
They both offer product unit cost information
 BASIC COST CONCEPTS
- Manufacturing encompasses a wide range of organizations 1. Industrial sector
2. Service sector provision of distinct products for customers/patrons
- Understanding cost structure of a manufacturing company provides a broad understanding of costing that is helpful in understanding cost structures of different organizations
Definition
- C/NC assets sacrificed for goods and services expected to bring current/future benefit to the organization

Used up: Expenses (expired/utilized portion of an asset) ex: depreciation of a machinery, expired portion of a deferred asset
Loss (expired portion without producing any benefit) ex: bad debts, impairments

COST CLASSIFICATIONS
Related to Product
Manufacturing/Product/Inventoriable Costs Non-manufacturing/PERIOD costs
Direct materials Direct labor Factor Overhead Marketing/selling Administrative/general
1. Directly traceable 1. Directly traceable/working 1. Not directly traceable to product 1. Secure customer orders 1. Executive/organizational/clerical not included
under production/marketing
2. Timely purchasing is 2. Wages to people working 2. Catch-all for manufacturing costs 2. Get FG's to hands of customer (freight out)
important directly on the product not classified as direct mats/labor

3. Over-purchase can lead to 3. Manufacutring overhead/burden/ 3. Order-getting/filling costs

high storage costs indirect manufacturing costs

ex: machine operators, ex: indirect mats/labor, depreciation exp, ex: advertising, shipping, sales travel, commissions, ex: executive compensation, office shit, etc.
assembly line workers Maintenance, taxes, insurance, pension, sales salaries, FG storage costs
rent, utility ON FACTORY/PRODUCTION
PRIME COSTS
CONVERSION COSTS

As to Variability
How cost changes in relation to changes in the activity of the organization Relevant range used by managerial accountant in specifying cost behavior/limiting description to specific range
Fixed Costs Variable Costs Mixed Costs
1. Constant irrespective of the volume of production 1. Vary respective to the volume of production 1. Costs with both fixed and variable components
Semivariable Step
2. Per unit cost: inverse relationship with activity 2. Per unit cost: direct relationship with activity 1. FC - minimum fee 1. Changes abruptly at various
2. VC - cost charged for activity activity levels
3. Assignable to departments 2. FC within a very small relevant
range
ex: Rent, Insurance, Depreciation, Salaries RIDS ex: Direct materials and labor,royalties/commissions of salesmen SEPARATING MIXED COSTS
Committed Managed Regression/Method of Least Square High-Low Point Method
1. Long-term 1. Short-term Relevant formulas:
2. Modified in response to 1. Y= a + bx 1. Highest - lowest cost
changes in objectives 2. Ey = Na + b(Ex) Compare 2. Divide by highest - lowest activity
3. Exy = Exa + b((Ex) ^2 w each 3. Apply computed VC/u to high
4. After solving, substitute sa eq. 2 and low, subtract it to TC to get FC
Need kunin sums ng:
x y xy x2
 Ind Dependent

OTHER CLASSIFICATIONS
Common cost Joint cost Capital Expenditure Direct departmental charges
1. Employed in 2/more accounting periods 1. Incurred for 2/more products at the same time 1. Expenditure benefits more than 1 accounting periods 1. Immediately charged to
2. Subject to allocation Cream --separate cost --> particular departments
ex: Raw milk - process -> Split off Revenue Expenditure
Skim --separate cost --> 1. Expenditure benefits only 1 accounting period Indirect departmental charges
1. Later allocated/transferred to
dept's who indirectly benefited

COSTS FOR PLANNING, CONTROL, AND ANALYTICAL PROCESSES

Standard Cost Opportunity cost Marginal revenue Revenue obtained from selling one more unit
1. Pre-determined/estimated cost 1. Benefit given up by choosing an alternative over the other Marginal cost Cost incurred in producing one more unit of product
2. Made to have timely information Relevant cost affects management's decision
3. Formed from past experiences Differential cost a. Incremental cost - increase Out-of-pocket cost Abono
4. Benchmark in budgetary control system 1. Present in one, absent in another b. Decremental cost - decrease Sunk cost Wala ka na magagawa about it
2. Can be either fixed or variable

Controllable cost Non-controllable cost

1. Management has the power to authorize the cost 1. No power to control/authorize the cost

Responsibility accounting
Each department of an organization is responsible for costs they incur

Manufacturing require most complex and comprehensive cost accounting system

need ng product costing for inventory valuation and measure COGS reported on external financial statements