Professional Documents
Culture Documents
DIRECT COSTS
INDIRECT COSTS
MANUFACTURING COSTS
DIRECT COSTS
1. 2.
FLOW OF COSTS
Raw material a/c
Cost of Direct Materials Cost of indirect Materials Cost of direct material used Cost of indirect materials used
Wages Payable
Cost of Cost of direct Direct labor labor used Cost of Indirect Labor Cost of indirect labor used
WIP
Cost of direct Cost of materials used completed products Cost of direct labor used Applied factory overhead
Finished Goods
Cost of Completed products Cost of products sold
Factory Overhead
Cost of indirect Labor used Cost of indirect Materials used Utilities Depreciation Applied factory Overhead
Finished Goods
PPU
Balance Sheet
Assets Liabilities
Trading Account
Purchases
Sales
Matching Principle
Manufacturing costs should be reported on the income statement only and to the extent to which they match to the sales revenue.
Builder can not show any cost of houses built in his trading a/c unless they are sold
TYPES OF COSTING
Costing is the process of charging costs against each unit.
MARGINAL COSTING
FULL COSTING
1.
1.
Process Costing
Job-order Costing
Many units of a single, homogeneous product flow evenly through a continuous production process. One unit of product is indistinguishable from other Each unit of product is assigned the same average cost. unit of product.
manufacturer
Many different products are produced each period. Products are manufactured to order. Cost are traced or allocated to jobs. Cost records must be maintained for each distinct product or job.