Kế toán, kiểm toán - Chapter 4: Product costing systems

Chapter 4Product costing systems1Product costing systemsProduct costing systemsaccumulate product-related costs and use procedures to assign them to the final productsIn some businesses upstream and downstream costs are regarded as product-relatedProduct costs are the input to the product costing system2Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-Smith3Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithDifferent product costs for different purposesProduct costs can include upstream, manufacturing and downstream costsInclusion of various costs depends on the time frame and type of decision to be madeManagers’ needs for product cost information will vary depending on the type of decision to be made and managers’ personal preferencescontinued4Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithDifferent product costs for different purposesCost for inventory valuation for eternal reporting must include only manufacturing costsFor long-term decision about products a wider definition may be usedProduct costs are used to value inventory, for short-term and strategic decision making, for planning and controlling costs and for cost reimbursementcontinued5Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-Smith6Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithDifferent product costs for different purposesCurrent or future product costs?Current product costs are relevant for inventory valuation Future product costs may be relevant for input into some decisionsFrequency of cost information?Infrequently for long-term decisions, or even short-term decisionsMore regularly for inventory valuation7Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithDesigning product costing systemsIdentify the managers’ needsAll product cost information may not come from a single product costing systemCost and benefits of various alternative systems must be assessed8Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithFlow of costs in manufacturing businessesWhen used for inventory valuation, manufacturing costs only are assigned to products, in line with Australian accounting standardsManufacturing costs consist of Direct materialDirect labourManufacturing overheadcontinued9Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithFlow of costs in manufacturing businessesSeveral manufacturing ledger accountsRaw materials inventory, Work in process inventory, Finished goods inventory, Cost of goods sold expense, and Profit and loss account10Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-Smith11Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithAllocating overhead coststo productsTo estimate the cost of a product we need to identify the cost of resources used to produce the productSome resources are consumed directly, and are traced directly to each productOverhead costs are essential to production, but have no observable relationships to the product  need to be allocatedcontinued12Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithAllocating overhead costs to productsIdentify the overhead cost driverCalculate a predetermined (or budgeted) overhead rate per unit of cost driverApply manufacturing overhead costs to products at the budgeted (or predetermined) overhead rate, multiplied by the quantity of cost driver consumed by the product13Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithAccounting for manufacturing overhead Actual manufacturing overheadManufacturing overhead costs incurred in productionCharged to the manufacturing overhead accountApplied manufacturing overheadEstimate of the overhead resources used to manufacture a productApplied to products using a predetermined overhead ratecontinued14Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-Smith15Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithAccounting for manufacturing overheadDisposing of underapplied or overapplied overhead at the end of the accounting periodClose the underapplied or overapplied to cost of goods sold, orProrate to cost of goods sold, work in process inventory and finished goods inventorycontinued16Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithAccounting for manufacturing overheadMost firms close underapplied or overapplied overhead at the end of the year onlyDo not close monthly as monthly fluctuations will average out over a year 17Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithTypes of product costing systemsJob costingManufacturing costs traced to individual jobsProducts are produced in distinct jobs/batches which are significantly differentPrinters, furniture manufacturers, machinery manufacturersMany service firms—lawyers, accountants, consulting engineerscontinued18Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithTypes of product costing systemsProcess costingProduction costs traced to process/department, and averaged across all units producedMass production or repetitive environmentPetrol production, processed food, chemical and plastics manufacturersRepetitive services – routine processing of cheques by banks, handling of license applications by government departments continued19Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithTypes of product costing systemsProcess costing involves Estimate the cost of production processes, andCalculate the average cost per unit by dividing the cost of the process by the number of units producedThe costs of products that are produced in one department are transferred into the next departmentSome product costing systems have features of both job costing and process costing20Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-Smith21Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithJob costingBill of materials: lists all the materials required for a jobMaterial requisition forms - authorise the movement of raw materials from the warehouse to the production departmentJob cost sheet - summarises the costs of direct material, direct labour and manufacturing overhead for a particular job22Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithJob costingPurchase of materialsRaw material inventory xxxx Account payable xxxxTransferring direct material to jobsWork in process inventory xxxx Raw material inventory xxxxcontinued23Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithJob costingUse of indirect materialManufacturing overhead xxxx Manufacturing supplies inventory xxxxCharging direct labour to jobsWork in process inventory xxxx Wages payable xxxxcontinued24Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithJob costingAccounting for indirect labourManufacturing overhead xxxx Wages payable xxxxAccounting for manufacturing expensesManufacturing overhead xxxx Prepaid rent xxxx Depreciation on equipment xxxx etccontinued25Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithJob costingApplication of manufacturing overheadWork in process inventory xxxx Manufacturing overhead xxxxCompletion of production jobFinished goods inventory xxxx Work in process inventory xxxxcontinued26Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithJob costingSale of goodsAccounts receivable xxxx Sales revenue xxxxCost of goods sold xxxx Finished goods inventory xxxxcontinued27Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithJob costingUnderapplied and overapplied overheadManufacturing overhead xxxx Indirect material xxxx Indirect labour xxxx Depreciation on equipment xxxx etcCost of goods sold xxxx Manufacturing overhead xxxx28Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-SmithProcess costingThe approach taken in process costing depends on The existence of WIP inventory at the end of the accounting periodTheir degree to which products are identical in their consumption of direct material and specific production processesSimple forms of process costing assume no WIP inventory29Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-Smith30Copyright  2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & HiltonSlides prepared by Kim Langfield-Smith