Professional Documents
Culture Documents
VanDerbeck Edward
Chapter 1
Introduction to Cost Accounting
Learning Objectives
Explain the uses of cost accounting data. Describe the ethical responsibilities and certification requirements for management accountants. Describe the relationship of cost accounting to financial and managerial accounting.
Learning Objectives
Identify the three basic elements of manufacturing costs. Illustrate basic cost accounting procedures. Distinguish between the two basic types of cost accounting systems. Illustrate a job order cost system.
Manufacturers (Ford, General Motors) Merchandisers (WalMart, Kmart) Wholesalers (Beverage Distributors) For-profit Service Businesses (CPAs, Attorneys) Not-for-profit Service Agencies (United Way, Red Cross)
Responsibility Accounting
Responsibility accounting is the assignment of accountability for costs or production results to those individuals who have the most authority to influence them. A cost center is a unit of activity within the factory to which costs may be practically and equitably assigned. The manager of a cost center is responsible for those costs that the manager controls.
Reporting
Cost and production reports for a cost center reflect all cost and production data identified with that center. The performance report will include only those costs and production data that the centers manager can control. A variance is the difference between actual costs and budgeted costs.
Management Accounting
The Institute of Management Accountants (IMA) is the largest organization of accountants in the industry. The Certified Management Accountant (CMA) is comparable to the Certified Public Accountant (CPA) for public accountants. For more information, please visit the IMAs website at www.imanet.org
Cost Accounting vs. Financial and Managerial Accounting Accounting System Cost
Characteristics Users: Focus: Uses of Cost Information: Financial Accounting External Parties Managers Entire business Product costs for calculating cost of goods sold and finished goods, work in process, and raw materials inventory using historical costs and GAAP. Managerial Accounting Managers Segments of the business Budgeting Special decisions such as make or buy a component, keep or replace a facility, and sell a product at a special price. Nonfinancial information such as defect rates, % of return products, and on-time deliveries
Manufacturer
Beginning finished goods inventory Plus cost of goods manufactured Finished goods available for sale Less ending finished goods inventory Cost of good sold
Inventories
Most manufacturers maintain a perpetual inventory system that uses FIFO, LIFO, or moving average methods of costing. An inventory ledger is maintained to provide support for the control accounts. Some manufacturers may use a factory ledger, which contains all of the accounts relating to manufacturing.
Inventories
Merchandiser Current assets: Cash Accounts receivable Mdse. inventory Manufacturer Current assets: Cash Accounts receivable Inventories: Finished goods Work in process Materials
Direct labor
Labor of employees who work directly on the product manufactured.
Factory overhead
Includes all costs related to production other than direct materials and direct labor.
and Cost
Direct Materials
Elements of Cost
Finished Goods
Direct Materials
Direct Labor
Direct Labor
Factory Overhead
Appendix
Standards of Ethical Conduct for Management Accountants Members of the IMA have an obligation to the public, their profession, the organizations they serve, and themselves to maintain the highest standards of ethical conduct.
Competence Confidentiality Integrity Objectivity
Appendix (cont.)
Resolution of Ethical Conflict
When applying the standards of ethical conduct, IMA members may encounter problems in identifying unethical behavior or in resolving an ethical conflict.
Discuss problems with the immediate superior except when it appears that the superior is involved. Clarify relevant ethical issues by confidential discussion with an objective advisor. Consult your own attorney as to legal obligations and rights concerning the ethical conflict. If the conflict remains after exhausting the preceding actions, resign from the organization and submit an informative memorandum to an appropriate member of the organization.