What is Cost Accounting?
Cost Accounting is a component of GAAP that records Ending Inventory on the Balance Sheet for o Direct Materials o Direct Labor o Work in Process o Finished Goods Cost Accounting also records for the Income Statement
What is the difference between Cost Accounting and Managerial Accounting?
Cost Accounting - External Focus- GAAP Managerial Accounting - Internal Focus- Not GAAP
What are Product Costs (aka Inventory Costs)?
Prime Costs Conversion Costs
What are included in Prime Costs?
Direct Material USED - Have become part of the product or had a direct impact on the product Direct Labor Used - Employees who worked on product and had direct impact
What is Factory Overhead?
All factory costs except for DM and DL used in production- including Spoilage (except for abnormal spoilage- which is a period cost and not included in OH).
What is included in Fixed Factory Overhead?
FFO : Estimated Costs / Normal Capacity Uses Normal Activity Examples of Fixed Factory OH: Depreciation (SL)- Utilities- Taxes Under/Over-applied Fixed OH always goes to COGS
What is included in Variable Overhead?
VO : Estimated Activity / Actual Activity Uses Actual Activity Examples of Variable Factory OH: Deprecation (Units of Prod)- Indirect materials (supplies & insignificant items)- Indirect labor (factory foreman- janitors- machine maintenance)
Where is Under/Over-applied Variable OH recorded?
If Immaterial - Goes to COGS If Material - Goes to WIP- Finished Goods- or COGS- based on their Ending Balance
Where is Under/Over-applied Fixed OH recorded?
It always goes to COGS
What is indicated by a Debit balance in Actual Factory Overhead? How is it corrected?
Under-applied overhead. If it's Fixed OH- under-applied goes to COGS. If it's Variable OH- under-applied goes to COGS if immaterial- but is allocated to WIP- FG or COGS based on ending balances.
What is indicated by a Credit balance in Applied Factory Overhead? How is it corrected?
A credit balance indicates over-applied overhead. If Fixed overhead- it is corrected from COGS. If Variable overhead- it is corrected through COGS if immaterial- but if material overage is allocated to WIP- FG or COGS based on ending balances.
Which variables are used to calculate Direct Material balances?
Beginning Balance DR Net purchases (plus freight-in) CR Direct Materials Used : Ending balance (goes to BS)
What variables are used to calculated Work in Process (WIP)?
Beginning Balance (End Bal of Previous WIP) DR Direct Materials Used DR Direct Labor Used (Conversion Cost) CR COGM DR Factory Overhead Applied (Conversion Cost) : Ending Balance (Goes to BS)
What variables are included in Finished Goods calculations?
Beginning Balance DR COGM : COGAS (Cost of Goods Avail for Sale) CR COGS : Ending Balance (Goes to BS)
How does Freight In affect Cost Accounting calculations?
Inventory (Product) Cost Part of DM Purchases
How does Freight Out affect Cost Accounting?
Selling (Period) Cost Not part of inventory
When is Job-Order Costing used?
Used when costs are easily connected to a specific product or product line Can also be applied to services Calculation is the same as normal cost accounting - just use your T Accounts - DM to WIP to FG to COGS - You're likely going to be solving for the last job in the queue
What is the Direct Method for allocating service department costs?
No services allocated between service departments- even if they serve each other. Only allocate to product(s)
What is the Step Method for allocating service department costs?
Services can be allocated to both other service departments and the product(s)
Under process costing- how are the units shipped calculated?
Beginning Inventory + Units Started - Ending Inventory : No. Units Shipped
Which two inventory methods are used under Process Costing?
FIFO Weighted Average
What is another name for Process Costing?
Equivalent Units of Production
How will Equivalent Finished Units under FIFO compare to EFU under the Weighted Average method?
EFU FIFO will always be LESS than EFU Weighted Avg (unless Beginning Inventory is Zero)
How are Direct Materials calculated under the Weighted Average Method?
Beginning Inventory + Current Costs / EFU WA
How are Conversion Costs calculated under Weighted Average Method?
Beginning Inventory + Current Costs / EFU WA
How are Equivalent Finished Units calculated for Direct Materials?
Units Shipped + EI x % Complete DM : EFU (Weighted Average Method) - Beginning Inventory x % Complete : EFU (FIFO)
How are Equivalent Finished Units calculated for Conversion Costs?
Units Shipped + EI x % Complete CC : EFU (Weighted Average) - Beginning Inventory x % Complete : EFU (FIFO)
How are Direct Materials calculated under the FIFO method?
Current Costs / EFU FIFO Note: FIFO method uses Current Period costs only and ignores Beginning Inventory
How are Conversion Costs calculated under the FIFO method?
Current Costs / EFU FIFO FIFO method uses Current Period costs only and ignores Beginning Inventory
How is WIP calculated?
Beginning balance (DM- DL- OH) + Current Costs (DM- DL- OH) - COGM (Goes to Finished Goods) + DM EFU x Cost per DM EFU + CC EFU x Cost per CC EFU : Ending WIP