Concepts and the Process of Cost Accounting

Running Head: Cost Accounting
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Project Report: Cost accounting

Cost Accounting
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Job costing:
Normal Solution:
Direct material control
Debit credit
Particulars amount Particulars amount
balance b/d 25898 WIP 820
Purchase 4922 balance c/d 30000
30820 30820
Work in process
Debit credit
Particulars amount Particulars amount
Balance b/d 9700
Direct Material 820 Finished goods 21120
Labour 7400 balance c/d 8800
Factory
overhead 12000
29920 29920
Finished Goods
Debit credit
Particulars amount Particulars amount
Balance b/d 12780 Sales 48000
WIP 21120 balance c/d 18900
gross profit 33000
66900 66900
Accounts Payable
Debit credit
Particulars amount Particulars amount
Cash 8700 Balance b/d 5678
balance c/d 1900
Direct material
(purchase) 4922
10600 10600
Cost of goods sold
Debit credit
Particulars amount Particulars amount
sales 88000 Gross profit 33000

Cost Accounting
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Balance c/d 55000
88000 88000
Formula solution:
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B C D E
Debit credit
Particluars amount Particluars amount
balance b/d =C9-C7 WIP =C15
Purchase =E32 balance c/d 30000
=E9 =SUM(E6:E7)
Debit credit
Particluars amount Particluars amount
Balance b/d 9700
Direct Material =C18-(C16+C17+C14) Finished goods =C24
Labor =3700*2 balance c/d =(1200+7000+600)
Factory overhead 12000
=E18 =SUM(E15:E16)
Debit credit
Particluars amount Particluars amount
Balance b/d 12780 Sales 48000
WIP =C26-(C23+C25) balance c/d 18900
gross profit =88000*(60/160)
=E26 =SUM(E23:E24)
Debit credit
Particluars amount Particluars amount
Cash 8700 Balance b/d 5678
balance c/d 1900 Direct material (purchase) =E34-E31
=SUM(C31:C32) =C34
Debit credit
Particluars amount Particluars amount
sales 88000 Gross prrofit =C25
Balanc c/d =E41-E39
=C39 =C41
Direct material control
Work in process
Finished Goods
Accounts Payable
Cost of goods sold
Management accounting and history:
The concepts and the process of cost account have been changed a lot in last few
decades. The current concept and proceed of cost accounting explains that costing is a crucial
element of each business to evaluate the cost per product of the company. Cost accounting is

Cost Accounting
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proceeding by the companies through evaluating all the related aspect and the performance of
the company (Weygandt, Kimmel & Kieso, 2015). Current modern concept of accounting
explains about process of the company, it is a better way to identify the profit percentage as
well as it briefs about the variances which have occurred into the business in a particular time
period.
Figure 1
The Roman Coliseum has been studied further to evaluate the concept of cost
accounting and the structure of cost accounting. The Roman Coliseum is one of the big and
great buildings of the country; the structure of the building has been prepared by the
architecture after evaluating and figuring out all the related factors. The study on Roman
Coliseum explains that the process of cost accounting should be in a manner that it could
attract the people as well as the internal strength of the company could also be built. Thus, it
has been found that the modern accounting could be applied in current scenario of the
business to make the changes into the structure of the company for good
Process costing:
Normal Solution:
Casablanca Limited
Production Report
Process 1 Physical Equivalent Units Total
Flows Material Labour

Cost Accounting
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Units to account for:
From beginning WIP 5600
Units started during the year 45600
Total units to account for 51200
Units accounted for:
Completed and transferred
out 45600 45600 45600
Ending WIP
Total units accounted for 51200
Total equivalent Units 45600 45600
Summary of cost to be
accounted for
Cost of beginning WIP 45600
Cost incurred during the period 118700 187700
Total cost to be accounted for 45600 118700 187700
Calculation of cost per
equivalent unit
Total cost to be accounted for 45600 118700 187700
Total equivalent units 45600 45600
2.60 4.12
Assign cost to unit transferred
out and units in ending WIP
Cost assigned to unit transfer out 118700 187700 306400
cost assigned to ending WIP
inventory 25614 40504 66118
Total cost accounted for 372518
Work in process a/c
Opening balance 5600
Closing
balance 28560
transfer 22960
28560 28560

Cost Accounting
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Formula solution:
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C D E F G H
Process 1 Physical Total
Flows Material Labour
Units to account for:
From begining WIP 5600
Units started during the year 45600
Total units to account for =E11+E12
Units accounted for:
Completed and transferred out 45600 =E16 =F16
Ending WIP
Total units accounted for =E13
Total equivalent Units =F16+F17 =G16+G17
Summary og cost to be accounted for
Cost of begining WIP 45600
Cost incurred during the period 118700 187700
Total cost to be accunted for =E23 =F24 =G24
Calculation of cost per equivalent unit
Total cost to be accounted for =E25 =F25 =G25
Total quivalent units 45600 45600
=F29/F30 =G29/G30
Assign cost to unit transferred out and units in ending WIP
Cost assigned to unit transfer out =F31*F16 =G31*G16 =F35+G35
ost assined to ening WIP inventory =(32800*30%)*F31 =(32800*30%)*G31 =F36+G36
Total cost accounted for =H35+H36
Opening balance 5600 Closing balance =D42+D43
transfer =32800*70%
=D42+D43 =F42
Casablanca Limited
Production Report
Equivalent Units
Work in process a/c
Joint costing:
Normal Solution:
A)
Product A Product B
Material 60000 40000
Cost
$
1,87,500
$
62,500
Further
Processing
$
45,000
$
25,000
Total cost
$
2,32,500
$
87,500
Total units 60000 40000
Cost per unit
$
3.88
$
2.19

Cost Accounting
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Selling price per
unit
$
4.50
$
2.54
Gross margin rate 16.13% 16.13%
B)
Product A Product B
Material 60000 40000
Cost
$
1,20,000
$
1,30,000
Further
Processing
$
45,000
$
25,000
Total cost
$
1,65,000
$
1,55,000
Total units 60000 40000
Cost per unit
$
2.75
$
3.88
Selling price per
unit
$
4.50
$
4.50
Gross margin rate 63.64% 16.13%
$
1,05,000.00
Formula solution:
A)
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B C D
Product A Product B
Material 60000 40000
Cost =187500 =250000-C5
Further Processing 45000 25000
Total cost =C5+C6 =D5+D6
Total units =C4 =D4
Cost per unit =C7/C8 =D7/D8
Sellinf price per unit 4.5 =D9*116.13%
Gross margin rate =(C10-C9)/C9 0.1613
b)

Cost Accounting
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G H I
Product A Product B
Material 60000 40000
Cost 120000 =250000-H5
Further Processing 45000 25000
Total cost =H5+H6 =I5+I6
Total units =H4 =I4
Cost per unit =H7/H8 =I7/I8
Sellinf price per unit 4.5 =I9*116.13%
Gross margin rate =(H10-H9)/H9 0.1613
=H8*(H10-H9)
Suggestions:
through the above calculations, it has been found that if the company gets an offer
about buying the material for product A is $ 2 per Kg only than it would lead to the total cost
of the product A to $ 1,20,000 and it would lead to the sales price of the product to $ 4.5 per
unit. On the other hand, the current level of cost of product A is $ 2,32,500. It further
explains that if the product C would be manufactured than the total cost of the product C
would be $ 1,65,000 and at this level, the profit of the company would be $ 1,05,000. It
explains that the company should accept the project and must further process the product to
get higher returns.
Variance analysis:
Normal Solution:
Standard cost variance analysis - JEDI limited
Data
Standards
Kg/ hour Per unit Total
Material 12
$
7
$
84
Direct Labour 3
$
30
$
90
Monthly Production Data
Units Produced 22,000
Material Used 2,03,000 kg
Labour Worked Hours

Cost Accounting
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60,000
Material Purchased 3,20,000 Kg
Total Material Purchased
$
20,36,000 6.3625
Total Direct labour variance -2378
Calculation of material purchase price variance
Standard Price (A)
$
7
Actual Price (B)
$
6.36
Actual quantity (C) 3,20,000
DM purchase price variance
(A-B)*C
$
2,04,000.00
Favourable
Calculation of material usage variance
Standard Quantity (A) 2,64,000
Actual Quantity (B) 2,03,000
Standard Price (C)
$
7.00
DM material usage variance
(B-A)*C
$ -
4,27,000.00
Unfavourable
Calculation of actual direct labour rate per hour
Direct Labour Variance 2378
Standard rate
$
30
Actual Hours 60,000
Actual direct labour rate per
hour 45.06
Formula solution:

Cost Accounting
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B C D E
Standard cost varinace analysis - JEDI llimited
Data
Standards
Kg/ hour Per unit Total
Material 12 7 =C9*D9
Direct Labour 3 30 =C10*D10
Monthly Production Data
Units Produced 22000
Material Used 203000 kg
Labour Worked 60000 Hours
Material Purchased 320000 Kg
Total Material Purchased 2036000 =C18/C17
Total Direct labour variance -2378
Standrad Price (A) =D9
Actual Price (B) =C18/C17
Auctual quantity (C) =C17
DM purchase price varinace (A-B)*C =(C25-C26)*C27
=IF(C28>=0, "Favorable", "Unfavourable")
Standrad Quantity (A) =C14*C9
Actual Quantity (B) =C15
Standard Price (C) =C25
DM material usge varinace (B-A)*C =(C34-C33)*C35
=IF(C36>=0, "Favorable", "Unfavourable")
Direct Labour Variance =-D20
Standrad rate =D10
Actual Hours =C16
Actual direct labour rate per hour =((C43*C42)+C41)/40000
Calculation of material purchase price varinace
Calculation of material usage varinace
Calculation of actual direct labor rate per hour
Business report:
Variance analysis is a process over the variation of real figures and the arranged or
estimated conduct in the budgeting planning process and in management costing. Variance
analysis process is basically done to investigate the genuine contrast among the estimated and
real conduct which shows about the total variation among the estimated and real conduct.
This process assists a business to deal with the different part of the organization to
lessen the cost and time utilization of the organization. This investigation is useful for the
organization to break down the lose purposes of the organization. Variance analysis is mainly
conducted by the companies for the following points:
1. Relationship:

Cost Accounting
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The analysis on the actual and estimated figures sets a good relationship between
various factors of an organization so that all the operations could be done perfectly as well as
the cost management could also be done. Through this study, it turns out to be simple for the
organization to deal with the related variables of the organization (Rasiah, 2011)
2. Forecasting:
The analysis think about causes the organization to anticipate the future changes into
the outer market and inside in the organization. Through this investigation, it turns out to be
simple for the organization to break down the progressions which could occur into the
execution of the organization.
3. Performance:
The study of variance analysis explains that the process of production and other
management of the company could be considered through the variance analysis study.
Through this examination, it turns out to be simple for the organization to break down the
execution of the organization based on different angles (Weygandt, Kimmel and Kieso,
2015).
4. Maintain the cost:
Variance analysis thinks about encourages the organization to evaluate and keep up the
cost and income of the organization. Through this investigation, it turns out to be simple for
the organization to break down the progressions which has been occurred into the activities of
the organization and accordingly it turns out to be simple for the organization.
5. Competitive pros of the company:
The analysis think about encourages the organization to anticipate the future changes
into the outside market and inside in the organization. Through this examination, it turns out
to be simple for the organization to maintain the position and competitive level (Garrison et
al, 2010).

Cost Accounting
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Further, it has been analyzed that different classes of difference examination are
accessible for the organization to settle on a superior choice and utilize the fluctuation
investigation in a legitimate way. Overhead difference examination is additionally one of the
parts of the fluctuation investigation which encourages the organization to make a control
over all the indirect costs of the organization.
The above are the few formulas of variances of overheads. This causes the organization
to oversee over the whole circuitous costs, for example, aberrant material, backhanded work
and other roundabout costs these formals and he overhead cost variance analysis assist and
organization to measure the total difference and their favourability in the organization. In this
manner it has been discovered that investigation of variance analysis is critical for an
organization to diminish the level of costs.
Budgeting:
Normal Solution:
Cost of goods sold
Mar June Sept Total
Total Sales 1,37,500 1,09,346 1,19,456 3,66,302
Cost of goods sold (Sales
*60%) 82,500.0 65,607.6 71,673.6 2,19,781
Purchase Budget
Mar June Sept Total
Total Cost of goods sold 82,500 65,608 71,674 2,19,781

Cost Accounting
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Less: Opening inventory
-
47,890
-
54,682
-
56,502
-
1,59,074
Ass: closing inventory
(35000+ 30% of next month
sales) 54,682 56,502 56,600 1,67,784
Total Purchase amount 89,292 67,427 71,772 2,28,491
Inventory Budget
Mar June Sept Total
Opening inventory 47,890 54,682 56,502 1,59,074
Add: Purchase 89,292 67,427 71,772 2,28,491
Less: Cost of goods sold
-
82,500.0
-
65,607.6
-
71,673.6
-
2,19,781.2
Closing inventory 54,682 56,502 56,600 1,67,784
Formula solution:
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C D E F G
Mar June Sept Total
Total Sales =D7 =E7 =F7 =SUM(D16:F16)
Cost of goods sold (Sales *60%)=D16*0.6 =E16*0.6 =F16*0.6 =SUM(D17:F17)
Mar June Sept Total
Total Cost of goods sold =D17 =E17 =F17 =SUM(D23:F23)
Less: Opening inventory -47890 =-D25 =-E25 =SUM(D24:F24)
Ass: closing inventory (35000+ 30% of next month sales)=35000+(30%*E23) =35000+(30%*F23) =35000+(30%*(60%*120000))=SUM(D25:F25)
Total Purchase amount =SUM(D23:D25) =SUM(E23:E25) =SUM(F23:F25) =SUM(G23:G25)
Mar June Sept Total
Opening inventory =-D24 =-E24 =-F24 =-G24
Add: Purchase =D27 =E27 =F27 =G27
Less: Cost of goods sold =-D17 =-E17 =-F17 =-G17
Closing inventory =SUM(D33:D35) =SUM(E33:E35) =SUM(F33:F35) =SUM(G33:G35)
Purchase Budget
Cost of goods sold
Inventory Budget

Cost Accounting
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Budgeting as a choice process:
Budgeting is a crucial process of an organization to identify the future performance and
forecast the level of the sales, expenses and other factors of the company. Budgeting process
makes it easy for the company to make better decisions about the future strategies of the
company. It is base to analyze and evaluate the future performance of an organization.
The cartoon image (which has been given below) express that the government of
America is predicting the future of economy position and political position after the terrorist
attack in the country. In the process, authority of American government is planning to make
new strategies and make the changes into the stricture of the country to make the country
safe. The authority is planning to make investment into the security and the safety of the
country (Kaplan & Anderson, 2013). It explains that the budget is required for each
individual, firm, company and the government to evaluate the performance.
Figure 2

Cost Accounting
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Reference:
Garrison, R. H., Noreen, E. W., Brewer, P. C., & McGowan, A. (2010). Managerial
accounting. Issues in Accounting Education, 25(4), 792-793.
Kaplan, R., & Anderson, S. R. (2013). Time-driven activity-based costing: a simpler and
more powerful path to higher profits. Harvard business press.
Rasiah, D. (2011). Why Activity Based Costing (ABC) is still tagging behind the traditional
costing in Malaysia?. Journal of Applied Finance and Banking, 1(1), 83.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & Managerial Accounting.
John Wiley & Sons.