VanDerbeck Ch01 Autosaved
VanDerbeck Ch01 Autosaved
VanDerbeck Ch01 Autosaved
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Learning Objectives (cont.)
• Describe the relationship of cost
accounting to nancial and
management accounting.
• Identify the three basic elements of
manufacturing costs.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Learning Objectives (cont.)
• Illustrate basic cost accounting
procedures.
• Distinguish between the two basic
types of cost accounting systems.
• Illustrate a job order cost system.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
What is Cost Accounting?
• Cost Accounting provides the
detailed information that
management needs to control current
operations and plan for the future.
• Management uses this information to
decide how to allocate resources to
the most e cient and pro table
areas of the business.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Types of Businesses that
use Cost Accounting
• All types of business entities-
manufacturing, merchandising, and
service businesses-require cost
accounting information systems to
track their activities.
• Manufacturers convert purchased
raw materials into nished goods by
using labor, technology, and facilities.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Types of Businesses that
use Cost Accounting
• Merchandisers purchase nished
goods for resale.
• For-pro t service businesses, such as
health clubs, accounting rms, and
NHL hockey teams, sell services rather
than products.
• Not-for-pro t service agencies, such as
charities, governmental agencies, and
some health care facilities, provide at
little or no cost the user.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
The Nature of the
Manufacturing Process
• The nature of the manufacturing
process requires that the accounting
information systems of
manufacturers be designed to
accumulate detailed cost data
relating to the production process.
• The manufacturing process requires
the conversion of raw materials into
nished goods through the use of
labor and other factory resources.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
The Nature of the
Manufacturing Process
• Product quality is as important a
competitive weapon as control in the
global arena.
• ISO 9000 standards requires that
manufacturers have a well-de ned
quality control system, and that they
consistently maintain a high level of
product quality.
• ISO 14000 – environmental
management
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Uses of Cost Accounting
Information
• Principles of cost accounting have
been developed to enable
manufacturers to process the many
di erent costs associated with
manufacturing and to provide built-in
control features.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Uses of Cost Accounting
Information
• The information produced by a cost
accounting system provides a basis
for:
• Determining Product Costs and Pricing
• Planning and Control
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Determining Product Costs and Pricing
Unit cost information is also useful in
making important marketing decisions
such as:
1. Determining the selling price of a
product.
2. Meeting competition
3. Bidding on contract
4. Analyzing pro tability
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Planning and Control
E ective planning is facilitated by the
following:
1. Clearly de ned objective
2. A production plan
E ective control is achieved as follows:
1. Assigning responsibility
2. Periodically measuring and comparing
results
3. Taking necessary corrective action.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Professional Ethics, CMA
Certi cation, and Corporate
Governance
• IMA – Institute of Management
Accountants
• CMA – Certi ed Management
Accountant certi cate
• Sarbanes-Oxley Act of 2002 – written
to protect shareholders and
stakeholders by improving corporate
governance
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Professional Ethics, CMA
Certi cation, and Corporate
Governance
• Corporate governance is the means by
which a company is directed and
controlled.
• Key elements of Sarbanes-Oxley
• CEO and CFO certi cation of nancial
statements
• Requires that a company’s annual report
contain an internal control report
• Increased criminal penalties for violations
of securities law.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Relationship of Cost Accounting to
Financial and Management
Accounting
• Financial accounting meets the needs
of investors, creditors, and other
external users of nancial
information.
• Management accounting focuses on
historical and estimated data that
management needs to conduct
ongoing operations and do long-
range planning.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Relationship of Cost Accounting to
Financial and Management
Accounting
• Cost accounting includes those parts
of nancial and management
accounting that collect and analyze
cost information.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Relationship of Cost Accounting to
Financial and Management
Accounting
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Relationship of Cost Accounting to
Financial and Management
Accounting
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Relationship of Cost Accounting to
Financial and Management
Accounting
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost of Goods Sold
M e rc h an d is in g C o m p an y M an u fac tu rin g C o m p an y
C o st o f g o o d s so ld : C o st o f g o o d s so ld :
B e g . m e rc h a n d ise B e g . fi n i s h e d
i n v e n to r y $ 1 4,2 00 g o o d s in v. $ 1 4 , 2 00
+ P u rc h a se s 234,1 50 + C o st o f g o o d s
G o o d s a va ila b le m a n u fa c tu r e d 234,1 50
fo r s a l e $ 2 48,3 50 G o o d s a va ila b le
- E n d in g fo r s a l e $ 2 48,3 50
m e rc h a n d ise - E n d in g
i n v e n to r y (1 2 , 1 0 0 ) fi n i s h e d g o o d s
= C o st o f g o o d s i n v e n to r y (1 2 , 1 00)
so ld $ 236,250 = C o st o f g o o d s
so ld $ 236,250
Quick Check
If your inventory balance at the
beginning of the month was $1,000, you
bought $100 during the month, and sold
$300 during the month, what would be
the balance at the end of the month?
A. $1,000.
B. $ 800.
C. $1,200.
D. $ 200.
If your inventory balance at the
Quick
beginningCheck
of the month was $1,000, you
bought $100 during the month, and sold
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost of Goods Sold
Merchandising Company
Beg. Merchandise inventory ??? 1,000
+ Purchases 100
Goods available for sales 1,100
- Ending Merchandise inventory 800
= Cost of goods sold 300
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost of Goods Sold
Merchandising Company
Beg. Merchandise inventory 1,000
+ Purchases ??? 100
Goods available for sales 1,100
- Ending Merchandise inventory 800
= Cost of goods sold 300
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost of Goods Sold
Merchandising Company
Beg. Merchandise inventory 1,000
+ Purchases 100
Goods available for sales 1,100
- Ending Merchandise inventory 800
= Cost of goods sold ??? 300
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Elements of
Manufacturing Costs
• Manufacturing or production costs
are classi ed into three basic
elements: (1) direct materials, (2)
direct labor, and (3) factory overhead.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Manufacturing Costs
Direct Direct Manufacturing
Materials Labor Overhead
The Product
Direct Materials
Raw materials that become an integral
part of the product and that can be
conveniently traced directly to it.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
E5-1 ANSWER
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
E1-5
a. Steel used in an overhead door plant DM
b. Cloth used in a shirt factory DM
c. Fiberglass used by a sailboat builder DM
d. Cleaning solvent for the factory oor FOH
e. Wages of a binder employed in a printing plant DL
f. Insurance on factory machines FOH
g. Rent paid for factory buildings FOH
h. Wages of the Machining Department supervisor FOH
i. Leather used in a shoe factory DM
j. Wages of a factory janitor FOH
k. Electric power consumed in operating factory machines FOH
l. Depreciation on corporate o ces S&A
m. Fuel used in heating a factory FOH
n. Paint used in the manufacture of jet skis DM
o. Wages of an ironworker in the construction business DL
p. Electricity used in lighting sales o ces S&A
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-6
a. Materials 58,000
Accounts Payable 58,000
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-6
b.Work in Process 47,000
Factory Overhead (Indirect materials) 15,000
Materials 62,000
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-6
c. Payroll 48,000
Wages Payable 48,000
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-6
Work in Process (41,000 – 12,000) 29,000
Factory Overhead (Indirect labor) 12,000
Selling and Adm Exp (Salaries) 7,000
Payroll 48,000
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-6
FOH (Depreciation of building) 1,600*
FOH (Depreciation of factory equipment) 1,833**
Selling and Administrative Exp. (Depn of bldg. 400*
Selling and Administrative Exp. (Dep’n of OE) 1,000***
Accumulated Depreciation—Building 2,000
Accumulated Depreciation—Factory Equipment 1,833
Accumulated Depreciation—O ce Equipment 1,000
*480,000 5% = 24,000/12 = 2,000 (4/5 = 1,600; 1/5 = 400)
**220,000 10% = 22,000/12 = 1,833 (rounded)
***60,000 20% = 12,000/12 = 1,000
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-6
f. FOH (Miscellaneous) (11,000 ¾) 8,250
S & A Exp (Misc) (11,000 ¼) 2,750
Accounts Payable 11,000
g.Work in Process 38,683*
Factory Overhead 38,683
*$15,000 + $12,000 + $1,600 + $1,833 + $8,250
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-6
h.Finished Goods 91,000
Work in Process 91,000
i. Accounts Receivable 362,000
Sales 362,000
Cost of Goods Sold 188,000
Finished Goods 188,000
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-6
j. Cash 345,000
Accounts Receivable 345,000
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Assignment:
• Exercise 1-3
• Exercise 1-4
• Exercise 1-10
• Problem 1-2
Deadline: Feb 6, Sunday 11:59PM
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
ANSWER to Exercise 1-
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost Accounting Systems
• To provide management with data
needed for e ective cost control, two
basic types of cost accounting
systems have been developed:
• Process Cost System
• Job order Cost System
• Both systems are used to gather cost
data and to allocate costs to goods
manufactured.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Job order cost system
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Process cost system
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Figure 1-14 Uses of Cost Systems
Cost Service
Merchandising Manufacturing
Systems Business
Business Business
Job LumberAccounting Custom home
Order rm, plumber
company, builder,
personal shipbuilder
computer
retailer
Process Airline, hotel, Newspaper Softdrink
housekeepin publishing, bottler, paper
g agricultural producer
wholesaler
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost Accounting Systems
• Some companies use both a job order
and a process cost system.
• A standard cost system, which is not
a third system can be used with
either a job order of a process cost
system, uses predetermined standard
costs to furnish a measurement that
helps management make decisions
regarding e ciency of operations.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Illustration of a Job Order
Cost System
• With a job order cost system, costs
are accumulated by job.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Figure 1-15
Job Cost
Sheet
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Illustration of a Job Order Cost
System
1. Indirect Materials with a cost of $6,580 are
issued to the factory, and direct materials are
issued as follows: Job 101 Job 102
Wood veneer sheets $18,980 $29,960
Wheel assemblies 7,760 14,140
$26,740 $35,100
Journal entry:
Debit Credit
Work in Process (102 and 102) $61,840
Factory Overhead (102 and 6,580
102)
Illustration of a Job Order Cost
System
2. Indirect labor costs of $15,190 and direct
labor costs are incurred as follows:
Job 101 Job 102
Direct labor $12,880 $19,620
Journal entry:
Debit Credit
Work in Process (101 and 102) $32,500
Factory Overhead (101 and 15,190
102)
Payroll $47,690
Illustration of a Job Order Cost
System
3. Monthly depreciation expense for the building,
allocated according to the square footage
used by manufacturing (90%) and selling and
admin (10%), is recorded as follows:
Journal entry:
Debit Credit
Factory Overhead (Depn of Bldg) $2,250
Selling and Admin Exp (Depn of 250
Bldg)
Accum Dep’n - Building $2,500
Illustration of a Job Order
Cost System
4. The entry to record monthly depreciation for
machinery and equipment, all of which is used for
manufacturing operations, is recorded as follows:
Journal entry:
Debit Credit
Factory Overhead (Depn of M $3,000
and E)
Accum. Depreciation – M $3,000
and E
Illustration of a Job Order
Cost System
5. The cost of utilities for February is $4,200,
again allocated by building square footage,
recorded as follows:
Journal entry:
Debit Credit
Factory Overhead (Utilities) $3,780
Selling and Admin Exp 420
(Utilities)
Accounts Payable $4,200
Illustration of a Job Order
Cost System
6. Total charges to FOH for the month is $30,800.
Assume that Jobs 101 and 102 are the only jobs
worked on during the period and that factory
overhead is allocated as follows: 35% to Job 101, 65%
to Job 102.
Total FOH 35% 65%
Job 101 Job 102
$30,800 $10,780 $20,020
Journal entry:
Debit Credit
Work in process (101 and 102) $30,800
Factory overhead $30,800
7) Assuming that both jobs were completed by the
end of the month, the costs of producing the two
jobs can be summarized as follows:
Journal entry: (completed jobs be transferred to FG)
Debit Credit
Finished goods $125,140
Work in process $125,140
Job101 (1,000 units) Job 102 (2,000 units)
Total Cost Unit Cost Total Cost Unit Cost
DM $26,740 $26.74 $35,100 $17.55
DL 12,880 12.88 19,620 9.81
FOH 10,780 10.78 20,020 $10.01
TOTAL $50,400 $50.40 $74,740 $37.37
8) When the goods are shipped and billed to the
customers, the following entries are made to
record the sale and the cost of the jobs:
Journal entry:
Debit Credit
Accounts receivable $189,000
Sales $189,000
Cost of Goods Sold 125,140
Finished Goods 125,140
Job101 (1,000 units) Job 102 (2,000 units)
Total Cost Unit Cost Total Cost Unit Cost
Selling price $75,000 $75.00 $114,000 $57.00
Cost 50,400 50.10 74,740 36.37
Gross Pro t 24,600 $24.90 $39,260 $19.63
Standards of Ethical Conduct
for Management
Accountants
• Competence
• Con dentiality
• Integrity
• Credibility
71
An Ethics Perspective:
IMA Guidelines for Ethical
Behavior
2. Perform professional
duties in accordance with
relevant laws, regulations,
and technical standards.
1. Maintain 3. Provide decision
professional Competence support
competence. information and
recommendation.
3. Recognize and
communicate professional
limitations that preclude
responsible judgment 72
An Ethics Perspective:
IMA Guidelines for Ethical
Behavior 1. Keep information
con dential except when
disclosure is authorized of
legally required.
2. Ensure that
subordinates do
not disclose
con dential
Con dentiality
information.
3. Refrain from using
con dential information for
unethical or illegal
advantage. 73
An Ethics Perspective:
IMA Guidelines for Ethical
Behavior 1. Mitigate con icts of
interest and advise others
of potential con icts.
2. Refrain from
conduct that
would prejudice
carrying out
Integrity
duties ethically.
3. Abstain from activities that
might discredit the
profession.
74
An Ethics Perspective:
IMA Guidelines for Ethical
Behavior
1. Communicate information
fairly and objectively.
3. Disclose delays or
Credibility de ciencies in information
timeliness, processing, or
internal controls.
2. Disclose all relevant
information that could
in uence a user’s
understanding of reports
and recommendations.
75
An Ethics Perspective:
Why Have Ethical Standards?
Ethical standards in business are essential for a
smooth functioning economy.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost Behavior Patterns
• Variable costs are costs that vary in
direct proportion to volume changes.
• Example: wood veneer sheet
Unit cost – P1,000
@ 10 units = P10,000
@ 50 units = P50,000
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost Behavior Patterns
• Fixed costs are costs that remain the
same in total, when production levels
increase or decrease.
• Example: Depreciation of Factory
Equipment
Per month : P3,000
@ 10 units = P3,000 per unit = P300
@ 20 units = P3,000 per unit = P150
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost Behavior Patterns
• Semivariable costs (mixed costs) have
characteristics of both variable and xed costs.
Type A (step-variable cost)
Example: salaries of factory supervisor
Type B:
Example: electricity
variable: to power the machine
xed: to light and heat the factory
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost Behavior Patterns
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Product cost vs Period
cost
Product costs - include all the costs that are
involved in acquiring or making product
example: depreciation of factory
equipment
Period costs – are expensed on the income
statement in the period in which they are
incurred.
example: depreciation of o ce equipment
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Quiz on Thursday.
Coverage: Chapter 1
Type of test:
• - Problem solving (COGM, COGS, Job
order) (30 points)
• - Journal entries (10 points)
• - Multiple choice – theory (20 items
• - True or false (20 items)
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost Behavior
– how costs change as
volume changes
• Variable costs
• Fixed costs
• Semivariable costs (Mixed cost)
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost Behavior Patterns
• Variable costs are costs that vary in
direct proportion to volume changes.
• Example: wood veneer sheet
Unit cost – P1,000
@ 10 units = P10,000
@ 50 units = P50,000
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost Behavior Patterns
• Fixed costs are costs that remain the
same in total, when production levels
increase or decrease.
• Example: Depreciation of Factory
Equipment
Per month : P3,000
@ 10 units = P3,000 per unit = P300
@ 20 units = P3,000 per unit = P150
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost Behavior Patterns
• Semivariable costs (mixed costs) have
characteristics of both variable and xed costs.
Type A (step-variable cost)
Example: salaries of factory supervisor
Type B:
Example: electricity
variable: to power the machine
xed: to light and heat the factory
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost Behavior Patterns
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Product cost vs Period
cost
Product costs - include all the costs that are
involved in acquiring or making product
example: depreciation of factory
equipment
Period costs – are expensed on the income
statement in the period in which they are
incurred.
example: depreciation of o ce equipment
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Quiz on Thursday.
Coverage: Chapter 1
Type of test:
• - Problem solving (COGM, COGS, Job
order) (30 points)
• - Journal entries (10 points)
• - Multiple choice – theory (20 items
• - True or false (20 items)
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
E1-5
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Exercise 1-3
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Exercise 1-4
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Exercise 1-10
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-7
1. Purchase of raw materials and factory supplies
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-7
2. Issuance of raw materials and factory supplies into
production. (consider the beginning and ending
balance)
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost of Materials Used
Merchandising Company
Beg. materials inventory 6,000
+ Purchases 45,000
Materials available 51,000
- Ending Merchandise inventory 5,500
= Direct materials used ??? 45,
500
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Cost of Materials Used
Merchandising Company
Beg. Indirect materials inventory 800
+ Purchases 10,000
Materials available 10,800
- Ending Merchandise inventory 900
= Direct materials used ??? 9,900
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-7
3. The recording of payroll.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-7
4. The distribution of payroll.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-7
5. The payment of payroll.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-7
6. The recording of FOH incurred.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-7
7. The adjusting entry for FOH.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-7
8. The entry to transfer FOH cost to WIP.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-7
9. The entry to transfer cost of completed product to
FG.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-7
10. The entry to record the COGS.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-13
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-13
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Problem 1-13
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
MINI-CASE
Principles of Cost Accounting, 17th Edition, Edward J. VanDerbeck, ©2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in
whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.