Cost Accounting : PERTEMUAN V Dr Rilla Gantino, SE., AK., MM MM-FEB

  

Cost Accounting :

_{PERTEMUAN V}

_{Dr Rilla Gantino, SE., AK., MM}

MM-FEB KEMAMPUAN AKHIR YANG DIHARAPKAN

  Mahasiswa mampu menguraikan pengerian liabilities dan equity, jenis-jenis nya dan menilai liabilities dan equity serta mengerti tentang pencatatan dan pelaporan liabilities dan equity

Cost and management accounting

• Provides management with costs for products, inventories, operations or functions and compares actual to predetermined data
• It also provides a variety of data for many day-to-day decision as well as essential information for long-range decisions

Functions of managerial accounting

• Determining the cost
• Providing relevant information for better decision-making
• Providing information for planning, control, decision-making and application

  

Planning

• Deals with the estimation of product costs, setting up of costing system to record cost data, preparation of cost standards and budgets, planning of materials and manpower resources, analysing cost behavior with changes in levels of activity

  

Control

• Deals with the maintenance of product costing record, comparison of actual performance with standards or budgets, anlaysis of variances, recommendation of corrective actions, controlling cost to ensure operational efciency and effectiveness

  

Decision-making

• Deals with whether it is more proftable to make or buy a component, determine the economic order quantity and production batch size, replace fxed asset, add or drop products, decide pricing

Application

• Cost accounting has extended from manufacturing operations to a variety of service industries such as hotels, bands, airline, etc
• Cost accounting system should be fexible and adaptable to meet the new business environment and the changing nature of the company

Element of cost

• Cost object
• Cost • Cost unit
• Cost centre
• Proft centre

Cost object

• It is an activity or item or operation for which a separate measurement of costs is desired
• E.g. the cost of operating the personnel department of a company, the cost of a repair fob, and the cost for control

Cost

• It is the amount of expenditure incurred on a specifc cost object
• Total cost = quantity used * cost per unit (unit cost)

  

Cost unit

• It is a quantitative unit of product or service in which costs are ascertained, e.g. cost per table made, cost per metre of cloth

Cost centre

• It is a location or function of an organisation in respect of which costs are ascertained
• E.g. the rent, rates and maintenance of buildings; the wages and salaries of strorekeepers

Proft centre

• It is location or function where managers are accountable for sales revenues and expenses
• E.g. division of a company that is responsible for the sales of products

Cost classifcation

• Direct cost
• Indirect cost (overhead)

  

Direct cost

• Cost that can be identifed specifcally with or traced to a given cost object
• The direct costs consist of the following three elements:
• – Direct materials
• – Direct labour
• – Direct expenses

Direct materials

• The cost of materials – the cost of materials used entering into and becoming the elements of a product or service
• E.g. fabrics in garments

Direct labour

• The cost of remuneration for working time
• E.g. assembly workers’ wages in toy assembly

Direct expenses

• Other costs which are incurred for a specifc product or service
• E.g. royalties

  

Indirect cost (overhead)

• Cost that cannot be identifed specifcally with or traced to a given cost object
• They are identifed with cost centres as overheads
• – Indirect materials
• – Indirect labour
• – Indirect expenses

  

Indirect materials

• Such as stationery, consumable supplies, spare parts for machine that assist to the production of fnal products

  

Indirect labour

• Such as salaries of factory supervision and ofce staff that do not directly involve in production of the fnal product

  

Indirect expenses

• Such as rent, rates, depreciation, maintenance expenses that do not have instant relationships with the manufacturing processes

  Cost accumulation

• •Prime cost = direct materials + direct labour + direct expenses

• Production cost = Prime cost + factory overhead _{OR = Direct materials + Conversion cost}
• Conversion cost is the production cost of converting raw materials into _{finished product}
• Total cost = Prime cost + Overheads (admin, selling,distribution cost) _{OR = Production cost + period cost (administrative, selling,}

  distribution and finance cost)

• •Period cost is treated as expenses and matched against sales for calculating

  _{profit, e.g. office rental}

  

Cost coding

• A code is a system of symbols designed to be applied to a classifed

  set of items to give a brief, accurate

  reference, facilitating entry, collation and analysis
• Coding is important in modern computerised accounting systems for catergories various composite accounting items

Reasons

• To reducing error owing to descriptions
• Enable easy recalling
• Reduce computer fle size as a code

  

Cost behaviour

• Costs can be classifed into variable, fxed, semi-variable, or step-costs according to how they behave with respect of changes in activity levels

Variable cost

• It increases or decreases in direct proportion to levels of activity, but the unit variable cost remains constant
• E.g. cost of food served in a restaurant

  

Fixed cost

• Total fxed cost remains constant over a relevant range of activity level but unit fxed cost falls with an increase in activity volume

Semi-variable cost

• It processes characteristics of both fxed and variable cost
• It increases or decreases with activity level but not in direct proportion

  

Step cost

• It remains constant for a range of activity levels, then, on further increase in activity, the cost jumps to a new level and remains constant over a certain range until the next jump occurs

Cost for stock valuation

• Unexpired and expired cost
• Product and period cost

Unexpired cost

• Unexpired costs are the resources that have been acquired and are expected to contribute to the future revenue
• They will be recorded as assets in current period
• They will be charged as expenses when they have been consumed in the generation of revenue

  

Expired costs

• Expired costs are the expenses attributable to the generation of revenue in the current period

Product cost

• Product cost are related to the goods purchased or produced for resale
• If the products are sold, the product cost

  will be included in the cost of goods sold

  and recorded as expenses in current period
• If the products are unsold, the product

  costs will be included in the closing stock

  and recorded as assets in the balance sheet

Period cost

• Period cost related to the operation of a business
• They are treated as fxed cost and charged as expenses when they are incurred
• They should not be included in the stock valuation

  CONTOH……

   Includes cost to purchase goods plus freight-in

  Beginning inventory Plus: Purchases, net Plus: Freight-in Less: Ending inventory Equals: Cost of goods sold

  Any Company Income Statement For the year ended December 31, 2011 Net sales revenue

  $$$$ Cost of goods sold $$$$ Gross proft

  $$$ Operating expenses $$$ Operating income $$$ Other income (expense)

  $$ Net income $$$ Gonzales Brush Company Income Statement For the year ended December 31, 2011 Net sales revenue

  $128,500 Cost of goods sold: Beginning inventory $7,400 Plus: Purchases

  62,800 Less: Ending inventory (6,000) Cost of goods sold

  64,200 Gross proft 64,300 Selling and administrative expense 45,400

  Net income $18,900

  Cost of goods sold Units sold Unit cost of one brush $64,200 5,700 units sold $ ?

  Classify costs and prepare an income statement and statement of cost of goods

manufactured for a manufacturing company

   Use labor, plant, supplies and facilities to convert raw materials into fnished products _

  Finished Three kinds of inventory goods

  

Work in

inventory

process

inventory

  Materials inventory

  Cost object: Anything for which managers want a separate measurement of cost Direct costs Indirect costs

   Includes only indirect costs related to _ manufacturing Examples:

  ◦ Indirect materials

  ◦ Indirect labor

   Other costs related to the manufacturing facility and plant assets

  ◦ Repairs & maintenance

  ◦ Utilities

  ◦ Rent & insurance

  ◦ Property taxes

  ◦ Depreciation

  Any Manufacturing Company Income Statement For the year ended December 31, 2011 Net sales revenue

  $$$$$$$ Cost of goods sold: Beginning fnished goods inventory $$$$$$ Plus: Cost of goods manufactured $$$$$ Less: Ending fnished goods inventory ($$$$$) Cost of goods sold

  $$$$$$ Gross proft $$$$$$ Selling and administrative expense

  $$$$$ Operating income $$$$$$

  Type of company Inventoriable Period costs product costs (Expenses) None Salaries, depreciation,

  Service company _{insurance, property utilities, advertising, Purchases plus freight Salaries, depreciation,} taxes Merchandising _{in utilities, advertising,} company _{taxes and delivery insurance, property Direct materials, Ofce salaries,} expense Manufacturing _{Direct labor and depreciation, utilities,} company _{overhead insurance, property manufacturing advertising, selling expenses} taxes on ofce,

  _Purchase BALANCE SHEET _{material s of} Materials Inventory _s

  _{Direct labor} Sales

  Work in ^&

• _manufacturi

  Process _{ng overhead} When

  Inventory Cost of sales occur

  Goods Sold

• Finished Goods

  Operating Period

  Inventory Costs

  Expenses = Operating Income

  _{Schedule of Cost of Goods Manufactured For the year ended December 31, 2011} Any Manufacturing Company _{Beginning direct materials inventory $$$ Add: Direct materials used} Beginning Work in process inventory $$$ _{Direct materials used Less: Ending direct materials inventory ($$$)} Plus: Direct materials purchased $$$ _{$$$ Total manufacturing costs incurred during the year $$$ Manufacturing overhead} Direct labor _$$$ ^$$$ _{Cost of goods manufactured Less: Ending Work in process inventory $$$} Total manufacturing costs to account for $$$ _$$$

  Beginnin Ending Direct Direct g Work

  Work in material material in process s used s used process Direct Total labor manufacturi ng costs

  Cost of goods manufactured Manufacturi ng overhead

  Beginning inventory Beginning inventory

  Direct materials inventory Work in process inventory Finished goods inventory Beginning inventory

• Purchases and freight-in
• Direct materials
• Cost of goods manufactured = Direct materials available for use
• Direct labor = Cost of goods available for sale
• Manuf. overhead
• Ending inventory - Ending inventory - Ending inventory = Direct materials used = Cost of goods manufactured = Cost of goods sold

  _{Schedule of Cost of Goods Manufactured For the year ended December 31, 2010} Max-Fli Golf Company _{Direct labor Add: Direct materials used} Beginning Work in process inventory _{15,000 7,000} ^$6,000 Manufacturing overhead _{Total manufacturing costs to account for Total manufacturing costs incurred during the year 40,000} ^18,000 _{46,000 Cost of goods manufactured} Less: Ending Work in process inventory _{$ 43,000} ^(3,000)