process costing, cost & management accounting

7/29/2019 Process Costing, Cost & Management Accounting

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COSTING OFMANUFACTURING

OPERATIONS

DEPARTMENTAL AND ABC

TECHNIQUES


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COST ACCOUNTING SYSTEM

It consists of techniques, personnel, forms

and accounting records used to develop

timely information regarding the cost of

providing products or services

Divisions of Management Accounting:

Cost Accounting , Managerial Planning


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Why need for costing ?

1. For Pricing purpose

2. For Income measurement


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DIRECT COSTS INDIRECT COSTS

FULL COST OF THE UNIT


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MANUFACTURING COSTS

DIRECT COSTS

1. Direct material

2. Direct labor

INDIRECT COSTS

Indirect material

Indirect labor

Equipment repair

Depreciation


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ACCOUNTING FOR

MANUFACTURING OPERATIONS

Manufacturing Manufacturing Manufacturing

Inputs process Outputs

Material

Direct

Indirect

Work in

Progress

PPU

Finished

Goods

Inventory


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FLOW OF COSTSRaw material a/c

Cost of Direct Cost of direct

Materials material used

Cost of Cost of indirect

indirect materials used

Materials

Wages Payable WIP Finished Goods Cost Goods sold

Cost of Cost of direct Cost of direct Cost of Cost of Cost of cost of

Direct labor labor used materials used completed Completed products products

products products sold soldCost of Cost of indirect Cost of direct

Indirect labor used labor used

Labor

Applied factory

overhead

Factory Overhead

Cost of indirect Applied factoryLabor used Overhead

Cost of indirect

Materials used

Utilities

Depreciation


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Finished Goods

PPU

Cost of Goods

sold

Balance Sheet Trading Account

AssetsLiabilities

Purchases Sales


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Matching Principle

Manufacturing costs should be reported

on the income statement only and to the

extent to which they match to the sales

revenue.

Builder can not show any cost of houses built in his

trading a/c unless they are sold


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FULL COSTING

(Absorption Costing)

MARGINAL COSTING

TYPES OF COSTINGCosting is the process of charging costs against each unit.


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1. Single Product ( Process costing )

Produce steady stream of identical products

like Oil refineries, flour mills and breweries

1. Multi-product ( Job costing )

Process of charging full cost when products

differ from each other.

FULL COSTING


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Types of Costing Systems Used to Determine Product Costs

Job-order

Costing

Process

Costing

Many units of a single, homogeneous productflow evenly through a continuous productionprocess.

One unit of product is indistinguishable from other unit of product. Each unit of product is assigned the same

average cost.


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Process

Costing

Job-order

Costing

Typical process cost applications:

Petrochemical refinery

Pharmaceutical manufacturer

Paint manufacturer

Paper mill

Job-order

Costing

Process

Costing

Types of Costing Systems Used to Determine

Product Costs


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Types of Costing Systems Used

to Determine Product Costs

Process

Costing

Job-order

Costing

Many different products are produced each period.

Products are manufactured to order.

Cost are traced or allocated to jobs.

Cost records must be maintained for each distinctproduct or job.


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process costing, cost & management accounting

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