Cost Management ACCOUNTING AND CONTROL HANSEN MOWEN 1
- Slides: 53
Cost Management ACCOUNTING AND CONTROL HANSEN & MOWEN 1
6 Product and Service Costing: A Process Systems Approach 2
Process-Costing Systems: Basic Operational and Cost Concepts 1 An Operational Process System Mixing Selecting Sifting Measuring Blending Tableting Bottling Loading Pressing Costing Loading Counting Capping Packaging 3
Process-Costing Systems: Basic Operational and Cost Concepts 1 Job-Order Costing Manufacturing Costs Direct Materials Direct Labor Applied Overhead Job 205 Job 206 Job 207 Finished Goods 4
Process-Costing Systems: Basic Operational and Cost Concepts 1 Process Costing Manufacturing Costs Direct Materials Direct Labor Applied Overhead Picking Tableting Bottling Finished Goods 5
Process-Costing Systems: Basic Operational and Cost Concepts 1 Operational Model of an Accounting Information System 6
Process-Costing Systems: Basic Operational and Cost Concepts 1 Basic Features of a Process Costing System 7
Process Costing with No Work-in-Process Inventories 2 Services that are homogeneous and repetitively produced can use the process-costing approach. Examples: check processing in a bank, changing oil, dental cleaning, surgical procedures 8
Process Costing with No Work-in-Process Inventories 2 JIT manufacturing firms minimize inventories and strive to reduce work-in-process inventories to insignificant levels. 9
Process Costing with Ending Work-in-Process Inventories 3 PSA Department Production Report for January 10
Process Costing with Ending Work-in-Process Inventories 3 PSA Department Production Report for January 11
Process Costing with Ending Work-in-Process Inventories 3 Cost of Production Report 1. Analysis of the flow of physical units 2. Calculation of equivalent units 3. Computation of unit cost 4. Valuation of inventories (goods transferred out and ending work in process) 5. Cost reconciliation Unit Information Units to be accounted for: Units in beginning work in process Units started and completed 24, 000 Units to be accounted for Units accounted for: Units 20, 000 Units in ending work in process (25% complete) Units accounted for Work completed 0 24, 000 Physical Flow Equivalent Units 20, 000 4, 000 20, 000 1, 000 21, 000 12
Process Costing with Ending Work-in-Process Inventories 3 Nonuniform Application of Productive Inputs 13
FIFO Costing Method 4 Under the FIFO costing method, the equivalent units and manufacturing costs in beginning work in process are excluded from the current-period unit cost calculation. Thus, FIFO recognizes that the work and costs carried over from the prior period legitimately belong to that period. 14
FIFO Costing Method 4 Estrella Company Mixing Department Product and Cost Data: October 15
FIFO Costing Method 4 Step 1: Physical Flow Analysis Physical Flow Schedule: Mixing Department 16
FIFO Costing Method 4 Step 2: Calculation of Equivalent Units of Production: FIFO Method 17
FIFO Costing Method 4 Step 3: Computation of Unit Cost 18
FIFO Costing Method 4 Step 4: Valuation of Inventories 19
FIFO Costing Method 4 Step 5: Cost Reconciliation 20
FIFO Costing Method 4 Production Report: Mixing Department 21
FIFO Costing Method 4 22
Weighted Average Costing Method 5 Step 1: Physical Flow Analysis Physical Flow Schedule: Mixing Department 23
Weighted Average Costing Method 5 Step 2: Calculation of Equivalent Units of Production: Weighted Average Method 24
Weighted Average Costing Method 5 Step 3: Computation of Unit Cost 25
Weighted Average Costing Method 5 Step 4: Valuation of Inventories 26
Weighted Average Costing Method 5 Step 5: Cost Reconciliation 27
Weighted Average Costing Method 5 Production Report: Mixing Department 28
Weighted Average Costing Method 5 29
Weighted Average Costing Method 5 FIFO Compared with Weighted Average 30
Treatment of Transferred-In Goods 6 Estrella Company Tableting Department Production and Cost Data: October 31
Treatment of Transferred-In Goods 6 Step 1: Physical Flow Analysis 32
Treatment of Transferred-In Goods 6 Step 2: Calculation of Equivalent Units of Production: Weighted Average Method 33
Treatment of Transferred-In Goods 6 Step 3: Computation of Unit Cost 34
Treatment of Transferred-In Goods 6 Step 4: Valuation of Inventories 35
Treatment of Transferred-In Goods 6 Production Report: Tableting Department 36
Treatment of Transferred-In Goods 6 37
Operation Costing 7 Basic Features of Operating Costing (a) Batch B Process 1 (b) Direct Materials Batch B (c) (f) Batch A Continued on the next slide Process 2 (d) Panel A: Physical Flow Batch B 38
Operation Costing 7 Process 1 (b) Batch B (c) Process 2 (g) Batch A (d) (h) Process 3 (i) Batch B Batch A (j) (e) Finished Goods 39
Operation Costing 7 40
Operation Costing 7 Operation Costing Example 41
Operation Costing 7 Operation Costing Example The following costs are collected from work orders: 42
Operation Costing 7 Operation Costing Example 1. Work in Process—Picking Materials 4, 000 2. Work in Process—Picking Conversion Costs Applied 1, 000 3. Work in Process—Encapsulating Work in Process—Picking 5, 000 4. Work in Process—Encapsulating Conversion Costs Applied 3, 000 Continued 4, 000 1, 000 5, 000 3, 000 43
Operation Costing 7 Operation Costing Example 5. Work in Process—Bottling Work in Process—Encapsulating 8, 000 6. Work in Process—Bottling Conversion Costs Applied 1, 500 7. Finished Goods Work in Process—Bottling 9, 500 8, 000 1, 500 9, 500 The journal entries for the other work order are not shown but would follow a similar pattern. 44
Appendix: Spoiled Units 8 45
Appendix: Spoiled Units 8 46
Appendix: Spoiled Units 8 47
Appendix: Spoiled Units 8 48
Appendix: Spoiled Units 8 49
Appendix: Spoiled Units 8 50
Appendix: Spoiled Units 8 Abnormal spoilage: 51
Appendix: Spoiled Units 8 Abnormal spoilage: 52
End of Chapter 6 53
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