Tech Startup Growth Hacking 101 - Basics on Growth Marketing
I. Cost Accounting.pdf
1. COMPARISON OF FINANCIAL,
MANAGERIAL AND COST ACCOUNTING
Financial accounting – the use of accounting
information for reporting to external parties,
including investors and creditors.
Managerial accounting – focuses on the
needs of parties with the org rather than
interested parties outside the organization.
Cost accounting – intersection between
financial and managerial accounting.
Merchandise Inventory beg.
Purchases
Cost of goods available for sale
(Merchandise Inventory end.)
Cost of goods Sold
1. Determining the selling price of a
product.
2. Meeting competition.
3. Bidding on contracts.
4. Analyzing profitability.
Planning and controlling operations –
important functions of cost accounting.
Planning – process of establishing objectives
or goals for the firm and determining the
means by which the firm will attain them.
Planning can be divided into three (3)
components:
1. Strategic Planning – concerned with
setting long range goals and objectives to
determine the overall direction of the
company.
2. Tactical planning – concerned with plans
for a shorter range or time period) and
emphasizes plans to achieve the
strategic goals.
3. Operations planning – related to the day
to day implementation of tactical plans. It
emphasizes the coordination of the major
factors of production (materials, labor,
and facilities)
Control process of monitoring the
company’s operations and determining
whether the objectives identified in the
planning process are being accomplished.
Two Basic Product-Costing Systems
1. Job order costing – system for allocating
costs to groups of unique products.
2. Process costing – a system applicable to
a continuous process of production of the
same or similar goods.
Job order vs Process costing
- Two traditional basis approaches to
product cost accounting systems.
Characteristics of Job Order Costing
Job order cost accounting system – a
product costing system used by companies
making one-of-a-kind/special-order
products.
*Computing unit costs, total manufacturing
cost for each job order ÷ number of good
units produced for that order.
The primary characteristics of a job order
cost system are:
1. Collects all manufacturing costs and
assigns them to specific job/batches of
product.
2. It measures costs for each completed
job, rather than for set time periods.
3. It uses just one WIP Control account in
the general ledger. Supported by a
subsidiary ledger of job order cost cards
or sheets for each job in process at any
point of time.
Characteristics of Process Costing
A process cost accountings system is a
product costing system used by companies
that make a large number of similar
products/maintain a continuous production
flow.
The main characteristics of a process
cost accounting system are as follows:
1. Manufacturing costs are grouped by dept
or work center with little concern for
specific job orders.
2. Emphasizes a weekly/monthly time
period rather than the time taken to
complete a specific order.
2. 3. Uses several WIP Inventory accounts –
one for each department/work center in
the manufacturing process.
Operation costing – is a hybrid costing
system often used in repetitive
manufacturing where finished products have
common, as well as distinguishing
characteristics.
Batch – group through the same production
sequence. Costs are allocated too each
batch.
Process vs. Job Order Costing
1. Homogenous
units pass
through a series
of similar
processes.
1. Unique jobs are
worked on
during a time
period.
2. Costs are
accumulated by
processing
department
2. Costs are
accumulated by
individual job.
3. Unit costs are
computed by
dividing the
individual
departments’
costs by the
equivalent
production
3. Unit costs are
determined by
dividing the total
costs on the job
cost sheet by
the number of
units on the job.
4. The cost of
production
report provides
the detail for the
WIP account for
4. The job cost
sheet provides
the details for
the WIP
account.
each
department
Cost accounting – is a system that records,
summarizes, analyzes, and interprets the
details of the costs of materials, labor, and
overhead necessary to produce and sell an
article.
Role of Cost Accounting
• Budgeting – formulation of plans into
figures for the future.
• Controlling Costs – costs are
predetermined for materials, labor and
overhead.
• Pricing – insure not only the recovery of
all costs but also the earning of a profit.
• Determining profit – the matching of
costs against revenues determines
profits.
• Choosing among alternatives – cost
accounting is the source of information
concerning the different revenues and
costs necessary in formulating
alternative course of action.
Cost – represents “an exchange price” or
expenditure made to secure an economic
benefit, generally resources that promise to
produce revenue.
Cost Classification
Cost in Relation to the product
1. Factory cost/production
cost/manufacturing cost/inventory cost =
M + L +O
2. Selling Costs or
Expenses/marketing/distribution costs –
cost to make sales.
3. General and administrative Costs –
incurred in directing the operation of the
company.
Cost in relation to Volume of Production
1. Fixed costs – remain constant in total
amount even though volume of activity
changes. Ex. Taxes, depreciation, rent.
2. Variable costs – vary in total amount in
direct proportion to volume of production.
Ex. Materials, labor, supplies.
3. Semi-variable Costs or Mixed Costs –
include an amount that is fixed within the
relevant range of output of production
and an amount that varies
proportionately when output changes.
Ex. Power and light.
Cost in relation to Timing of changes
Against Revenues
1. Product costs/Inventoriable costs –
costs that are attached to the product and
matched with revenue in the period in which
the product is sold.
2. Period costs – noninventoriable costs
which are deducted as expenses during the
current period. These are assigned to
periods of time rather to units of product.
3. Cost in relation to timing of Cost
Computation
• Historical costs – referred to actual
costs.
• Budgeted or Predetermined Costs –
costs established from forecasts.
Cost in relation to ease of Traceability to
Cost objective
• Direct costs – costs that can be traced
to a segment of the operation.
• Indirect costs – costs that are not traced
to a particular segment.
Cost Accounting Procedures for
Manufacturing Firms
• System of Cost Accumulation:
1. Actual Cost System (Historical)
2. Standard Cost System (Predetermined)
3. Normal Cost System
Terminologies
▪ Factory costs- the costs of a
manufactured product.
▪ Direct materials – materials that form an
integral part of the finished product.
▪ Direct labor – salaries and wages paid to
the factory employees to convert raw
materials to finished product.
▪ Factory Overhead – costs other than
materials and direct labor that are
associated
▪ with the manufacturing process. The
Factory overhead Control is used to
accumulate the actual overhead incurred
during the manufacturing process.
▪ Prime cost – consists of direct materials
and direct labor.
▪ Conversion cost- consist of direct labor
and factory overhead.
1. Raw materials- costs of direct materials
and factory supplies that will be used in the
manufacturing operations.
2. Work in process, or Goods in process –
cost of direct materials, direct labor, and
factory overhead that have been assigned to
goods started but not yet completed.
3. Finished Goods. – carries the total of the
manufacturing costs attached to completed
production that is being held for sale.
▪ Cost of Goods Manufactured – the
cost of production items that were
finished.
▪ CGM = DM + DL+FO+WIP, beg.-
WIP,end
▪ Cost of Goods Sold = FG Inv, beg +
CGM – FG, end