Cost Accounts And Specific Order Costing Methods Flashcards
(9 cards)
What is an integrated cost accounting system, and what does it mean?
A:
is a system where all cost-related data is collected, processed, and reported through a unified framework.
The system integrates various cost accounts (materials, labour, overheads, etc.) into one comprehensive system for streamlined reporting.
List four advantages and four disadvantages of integrated cost accounting systems.
A:
Advantages:
Provides a comprehensive and complete view of costs.
Enhances consistency in cost data and reporting.
Facilitates easier comparison and analysis across different departments.
Reduces duplication of effort by using a single system for all cost elements.
Disadvantages:
Can be complex to design and implement.
May require significant training for staff.
Inflexibility due to the need for standardization across all cost centers.
Higher initial setup and maintenance costs.
What types of accounts are typically maintained in an integrated cost accounting system?
Cost of raw materials, direct and indirect labour, and manufacturing overhead accounts.
Work-in-progress, finished goods, and cost of goods sold accounts.
Auxiliary accounts for variance, cost control, and performance evaluation.
Subsidiary ledgers for detailed tracking of various cost elements.
What is an interlocking cost accounting system, and what does it mean?
A:
is a system where individual cost centers or departments operate their own separate cost accounting systems that are later interconnected (or “interlocked”) for overall cost analysis.
Each department’s system maintains its own set of accounts, which are later reconciled at higher management levels.
How are profits reconciled between integrated and interlocking cost accounting systems?
Identify differences arising from the methods used in data collection and cost allocation in both systems.
Adjust for inter-departmental transactions and overhead apportionment that might be recorded differently.
Compare aggregated cost data from interlocking systems with the single consolidated cost from an integrated system.
Use reconciliation schedules or variance analysis to bridge the differences and arrive at a consistent profit figure.
What is job costing, and what are its key features and procedures
Job Costing
- Q: What is job costing, and what are its key features and procedures?
A:
Meaning: Job costing is a method where costs are accumulated for a specific job or order, typically used for customized products or services.
Features:
Cost accumulation is done per job.
Each job is treated as a separate cost center.
Detailed records for materials, labour, and overhead are maintained for each job.
Suitable for industries where products are unique or produced in small quantities.
Procedures:
Assign a unique job order number.
Record and track all costs incurred (direct and indirect) for each job.
Compute the total cost by summarizing materials, labour, and overhead costs.
Compare the actual cost with estimated cost for performance analysis.
Job Cost Determination: Involves summing direct costs and allocating an appropriate share of overhead.
What is batch costing, and what are its key features and procedures?
A:
Meaning: Batch costing accumulates costs for a group or batch of identical or similar items produced together.
Features:
Similar items are grouped under a common batch number.
It is used when items are manufactured in groups rather than as single jobs.
Cost allocation is done at the batch level.
Facilitates cost control when production is repetitive.
Procedures:
Identify the batch and record all costs associated with the batch (materials, labour, overhead).
Divide the total batch cost by the number of units to determine the unit cost.
Monitor variations within batch costs for improvement.
Batch Cost Determination: Sum all incurred costs for the batch and assign the cost per unit by dividing by the total number of units produced.
Q: What is contract costing, and what are its key features and procedures?
A:
Contract costing is used for long-term contracts (construction, engineering, or large projects), where costs are tracked over the life of the contract.
Features:
Costs are accumulated over the duration of a contract.
Often requires periodic estimation of work done (percentage of completion).
Involves detailed tracking of progress and incurred costs.
Provides a mechanism to determine interim and final profits or losses on contracts.
Procedures:
Set up a contract account and assign a unique contract number.
Record all direct and indirect costs associated with the contract.
Track work progress and compare with revenue recognition standards.
Contract Accounts Preparation & Profit/Loss Determination:
Prepare periodic statements showing costs incurred, work in progress, and recognized revenue.
Calculate profit/loss by comparing cumulative costs with contract revenue based on progress.
