MANAGERIAL AND COST ACCOUNTING

Cost and Cost of Goods Manufactured

Introduction to Managerial and Cost Accounting

Course introduction
Objective
Course outline
Course material
Methodology
Grading

Definition of Accounting
Systematic
Recording
Reporting
Analysis

of financial transactions

Financial Statements
Directors Report
Balance Sheet
Income Statement
Statement of

Core Financial
CashStatements
Flows

Disclosures
Auditors Report

Accounting Equation

Debit
To
Increa
se

Credit To
Increase

Assets = Liabilities + Equity

Accounting Equation

Assets

Debit

Liabilities

Credit

Equity

Credit

Revenue

Credit

Expenses

Debit

Financial Accounting Course

Accounting equation
General Journal
Ledger
Trial Balance
Adjusting entries
Adjusted trial balance
Balance Sheet
Income Statement
Closing entries

Bank reconciliation
Accounts receivable
Notes receivable
Liabilities
& Bonds
Inventory
Property, plant and equipment
& Depreciation
Intangible assets

Financial vs. Managerial Accounting

Financial Accounting External reporting
Financial Statements to show:

Profitability
Liquidity
Solvency
Stability
Managerial Accounting Internal Reporting
Sales Forecasting reports
Budget Analysis
Feasibility Studies
Consolidation Reports
Gross Margins report
Inventory Valuation reports

Cost is a resource sacrificed or forgone to achieve a specific objective.

A cost is usually measured as the monetary amount that must be paid to
acquire goods or services.

Cost terms and classifications

Cost according to inventory types
Finished goods inventory: Units of product that have been completed but not
yet sold to customers.
Work in process inventory: Units of product that are only partially complete.
Raw materials inventory: Any materials that go into the final product.
Costs according to assignment to cost object
Cost object: Anything for which cost data are desired. Examples of cost objects
are products, customers, jobs, and parts of the organization such as departments
or divisions.
1. Direct cost: A cost that can be easily and conveniently traced to a specified
cost object.
2. Indirect cost: A cost that cannot be easily and conveniently traced to a
specified cost object.

Cost terms and classifications

Cost according to nature
Direct materials cost
Materials that become an integral part of a finished product and whose costs can
be conveniently traced to it.
Direct labor cost
Factory labor costs that can be easily traced to individual units of product. Also
called touch labor.
Manufacturing overhead
All manufacturing costs except direct materials and direct labor.
Indirect labor
The labor costs of janitors, supervisors, materials handlers, and other factory
workers that cannot be conveniently traced to particular products.
Indirect materials
Small items of material such as glue and nails that may be an integral part of a
finished product, but whose costs cannot be easily or conveniently traced to it.

Cost terms and classifications

Costs according to cost behavior pattern
Cost behavior
The way in which a cost reacts to changes in the level of activity.
1. Variable cost
A cost that varies, in total, in direct proportion to changes in the level of activity.
A variable cost is constant per unit.
2. Fixed cost
A cost that remains constant, in total, regardless of changes in the level of
activity within the relevant range. If a fixed cost is expressed on a per unit basis,
it varies inversely with the level of activity.
Costs in manufacturing setup
Prime cost: Direct materials cost plus direct labor cost.
Conversion cost: Direct labor cost plus manufacturing overhead cost.

Solution:

Solution:

COST BEHAVIOR