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Cost Management ACCOUNTING AND CONTROL

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Presentation on theme: "Cost Management ACCOUNTING AND CONTROL"— Presentation transcript:

1 Cost Management ACCOUNTING AND CONTROL
HANSEN & MOWEN

2 Product and Service Costing: A Process Systems Approach
CHAPTER 6 Product and Service Costing: A Process Systems Approach

3 An Operational Process System
OBJECTIVE 1 Process-Costing Systems: Basic Operational and Cost Concepts An Operational Process System Mixing Tableting Bottling Selecting Sifting Measuring Blending Loading Pressing Costing Loading Counting Capping Packaging

4 1 Process-Costing Systems: Basic Operational and Cost Concepts
OBJECTIVE 1 Process-Costing Systems: Basic Operational and Cost Concepts Job-Order Costing Manufacturing Costs Direct Materials Direct Labor Applied Overhead Job 206 Job 205 Job 207 Finished Goods

5 1 Process-Costing Systems: Basic Operational and Cost Concepts
OBJECTIVE 1 Process-Costing Systems: Basic Operational and Cost Concepts Process Costing Manufacturing Costs Direct Materials Direct Labor Applied Overhead Tableting Picking Bottling Finished Goods

6 Operational Model of an Accounting Information System
OBJECTIVE 1 Process-Costing Systems: Basic Operational and Cost Concepts Operational Model of an Accounting Information System

7 Basic Features of a Process Costing System
OBJECTIVE 1 Process-Costing Systems: Basic Operational and Cost Concepts Basic Features of a Process Costing System

8 2 Process Costing with No Work-in-Process Inventories
OBJECTIVE 2 Process Costing with No Work-in-Process Inventories 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

9 2 Process Costing with No Work-in-Process Inventories
OBJECTIVE 2 Process Costing with No Work-in-Process Inventories JIT manufacturing firms minimize inventories and strive to reduce work-in-process inventories to insignificant levels.

10 PSA Department Production Report for January
OBJECTIVE 3 Process Costing with Ending Work-in-Process Inventories PSA Department Production Report for January

11 PSA Department Production Report for January
OBJECTIVE 3 Process Costing with Ending Work-in-Process Inventories PSA Department Production Report for January

12 Cost of Production Report
OBJECTIVE 3 Process Costing with Ending Work-in-Process Inventories Cost of Production Report Unit Information Units to be accounted for: Units in beginning work in process 0 Units started and completed 24, Units to be accounted for 24,000 Physical Flow Equivalent Units Units accounted for: Units 20,000 20,000 20,000 Units in ending work in process (25% complete) 4, ,000 Units accounted for 24,000 Work completed 21,000 Analysis of the flow of physical units Calculation of equivalent units Computation of unit cost Valuation of inventories (goods transferred out and ending work in process) Cost reconciliation

13 Nonuniform Application of Productive Inputs
OBJECTIVE 3 Process Costing with Ending Work-in-Process Inventories Nonuniform Application of Productive Inputs

14 OBJECTIVE 4 FIFO Costing Method 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.

15 OBJECTIVE 4 FIFO Costing Method Estrella Company Mixing Department Product and Cost Data: October

16 4 FIFO Costing Method Step 1: Physical Flow Analysis
OBJECTIVE 4 FIFO Costing Method Step 1: Physical Flow Analysis Physical Flow Schedule: Mixing Department

17 4 FIFO Costing Method Step 2: Calculation of Equivalent Units
OBJECTIVE 4 FIFO Costing Method Step 2: Calculation of Equivalent Units Equivalent Units of Production: FIFO Method

18 OBJECTIVE 4 FIFO Costing Method Step 3: Computation of Unit Cost

19 OBJECTIVE 4 FIFO Costing Method Step 4: Valuation of Inventories

20 OBJECTIVE 4 FIFO Costing Method Step 5: Cost Reconciliation

21 Production Report: Mixing Department
OBJECTIVE 4 FIFO Costing Method Production Report: Mixing Department

22 OBJECTIVE 4 FIFO Costing Method

23 5 Weighted Average Costing Method Step 1: Physical Flow Analysis
OBJECTIVE 5 Weighted Average Costing Method Step 1: Physical Flow Analysis Physical Flow Schedule: Mixing Department

24 5 Weighted Average Costing Method
OBJECTIVE 5 Weighted Average Costing Method Step 2: Calculation of Equivalent Units Equivalent Units of Production: Weighted Average Method

25 5 Weighted Average Costing Method Step 3: Computation of Unit Cost
OBJECTIVE 5 Weighted Average Costing Method Step 3: Computation of Unit Cost

26 5 Weighted Average Costing Method Step 4: Valuation of Inventories
OBJECTIVE 5 Weighted Average Costing Method Step 4: Valuation of Inventories

27 5 Weighted Average Costing Method Step 5: Cost Reconciliation
OBJECTIVE 5 Weighted Average Costing Method Step 5: Cost Reconciliation

28 Production Report: Mixing Department
OBJECTIVE 5 Weighted Average Costing Method Production Report: Mixing Department

29 OBJECTIVE 5 Weighted Average Costing Method

30 FIFO Compared with Weighted Average
OBJECTIVE 5 Weighted Average Costing Method FIFO Compared with Weighted Average

31 6 Treatment of Transferred-In Goods
OBJECTIVE 6 Treatment of Transferred-In Goods Estrella Company Tableting Department Production and Cost Data: October

32 6 Treatment of Transferred-In Goods Step 1: Physical Flow Analysis
OBJECTIVE 6 Treatment of Transferred-In Goods Step 1: Physical Flow Analysis

33 6 Treatment of Transferred-In Goods
OBJECTIVE 6 Treatment of Transferred-In Goods Step 2: Calculation of Equivalent Units Equivalent Units of Production: Weighted Average Method

34 6 Treatment of Transferred-In Goods Step 3: Computation of Unit Cost
OBJECTIVE 6 Treatment of Transferred-In Goods Step 3: Computation of Unit Cost

35 6 Treatment of Transferred-In Goods Step 4: Valuation of Inventories
OBJECTIVE 6 Treatment of Transferred-In Goods Step 4: Valuation of Inventories

36 Production Report: Tableting Department
OBJECTIVE 6 Treatment of Transferred-In Goods Production Report: Tableting Department

37 OBJECTIVE 6 Treatment of Transferred-In Goods

38 7 Operation Costing Basic Features of Operating Costing Process 1
OBJECTIVE 7 Operation Costing Basic Features of Operating Costing Process 1 (a) (f) Batch B Batch A Batch B (b) Direct Materials Continued on the next slide (c) Process 2 Batch B (d) Panel A: Physical Flow

39 7 Operation Costing Process 1 Batch B Process 2 Batch A Process 3
OBJECTIVE 7 Operation Costing Process 1 (b) Batch B (c) Process 2 Batch A (g) Process 3 (h) (d) Batch A (i) Batch B Finished Goods (e) (j)

40 OBJECTIVE 7 Operation Costing

41 Operation Costing Example
OBJECTIVE 7 Operation Costing Operation Costing Example

42 Operation Costing Example
OBJECTIVE 7 Operation Costing Operation Costing Example The following costs are collected from work orders:

43 Operation Costing Example
OBJECTIVE 7 Operation Costing Operation Costing Example 1. Work in Process—Picking 4,000 Materials 4,000 2. Work in Process—Picking 1,000 Conversion Costs Applied 1,000 3. Work in Process—Encapsulating 5,000 Work in Process—Picking 5,000 4. Work in Process—Encapsulating 3,000 Conversion Costs Applied 3,000 Continued

44 Operation Costing Example
OBJECTIVE 7 Operation Costing Operation Costing Example 5. Work in Process—Bottling 8,000 Work in Process—Encapsulating 8,000 6. Work in Process—Bottling 1,500 Conversion Costs Applied 1,500 7. Finished Goods 9,500 Work in Process—Bottling 9,500 The journal entries for the other work order are not shown but would follow a similar pattern.

45 OBJECTIVE 8 Appendix: Spoiled Units

46 OBJECTIVE 8 Appendix: Spoiled Units

47 OBJECTIVE 8 Appendix: Spoiled Units

48 OBJECTIVE 8 Appendix: Spoiled Units

49 OBJECTIVE 8 Appendix: Spoiled Units

50 OBJECTIVE 8 Appendix: Spoiled Units

51 OBJECTIVE 8 Appendix: Spoiled Units Abnormal spoilage:

52 OBJECTIVE 8 Appendix: Spoiled Units Abnormal spoilage:

53 End of Chapter 6

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