Big Picture

Week 1-3: Unit Learning Outcomes (ULO): At the end of the unit, you are
expected to

a. Distinguish the characteristics of financial, managerial and cost

accounting;
b. Distinguish the differences of merchandising and manufacturing
operation of entities in the industry and differentiate their cost
accounting cycle.
c. Identify the uses of cost accounting data;
d. Distinguish the differences of Process costing system and Job order
costing system;
e. Distinguish the differences between Cost, Expenses and Losses;
f. Define and distinguish the different types of costs and expenditures
that are useful in planning, control and analytical processes; the
cost are not limited to the following:
f.1. Product Cost and Period Cost;
f.2. Prime Cost and Conversion Cost;
f.3. Direct Cost and Indirect Cost;
f.4. Variable Cost, Fixed Cost and Mixed Cost;
f.5. Common Cost and Joint Cost;
f.6. Capital Expenditure and Revenue Expenditure; and
f.7. Controllable Cost and Non-controllable Cost.

Big Picture in Focus: ULOa. Distinguish the characteristics of

financial, managerial and cost accounting;

Metalanguage

For you to demonstrate ULOa, you will need operational understanding of the terms
enumerated below.

Management Accounting is the practice of identifying, measuring, analyzing,

interpreting, and communicating financial information to managers for the pursuit of
an organization's goals. It varies from financial accounting because the intended
purpose of managerial accounting is to assist users internal to the company in making
well-informed business decisions.

Financial Accounting is the field of accounting concerned with the summary,

analysis and reporting of financial transactions related to a business. This involves
the preparation of financial statements available for public
use. Stockholders, suppliers, banks, employees, government agencies, business
owners, and other stakeholders are examples of people interested in receiving such
information for decision making purposes.
Cost Accounting is a systematic set of procedures for recording and reporting
measurements of the cost of manufacturing goods and performing services in the
aggregate and in detail.

Essential Knowledge

To perform the aforesaid big picture (unit learning outcomes), you need to fully
understand the following essential knowledge laid down in the succeeding pages.
Please note that you are not limited to exclusively refer to these resources. Thus, you
are expected to utilize other books, research articles and other resources that are
available in the university’s library e.g. ebrary, search.proquest.com etc., and even
online tutorial websites.

Financial Accounting
Financial accounting is a branch of accounting that reporting financial information
primarily to the external parties, including investors (the suppliers of funds to the firm)
and creditors(debt provider to the entity). It is primarily concerned with the preparation
of financial statements that are useful for external users. The reports focusses on the
enterprise as a whole. The information is based on historical, qualitative, monetary
and verifiable information and is supported by documented evidence. Reports that are
provided in this branch are in the form of financial statements, tax returns and other
formal reports distributed to the various external users. This information may also be
used for financial analysis by management. This is also required for may corporation
firms as a requirements of the SEC (Securities and Exchange Commission) and BIR
(Bureau of Internal Revenue) for compliance with the country’s tax laws. Financial
accounting presents information with some degree of precision in reporting historical
information as at the same time it emphasizes verifiability and freedom from bias of
information that are relevant to the general user and some degree of timeliness in
reporting which is not critical in managerial accounting.

Management/Managerial Accounting
Management/Managerial accounting focusses on reporting information within the
organization rather than outside users. It addresses the individual or divisional
concerns rather than the enterprise as a whole. The information provided may be
current or forecasted, qualitative or quantitative, monetary or non-monetary and
mostly all the data are timely and futuristic. Some of the costs are not recorded on the
books of accounting in the organization. Timing and relevance of information that has
greater significance to the internal users of information and decision maker within the
organization. The measurement of

Timeliness is most important quality of information that should be provided to the

internal users than other thus, management should get the information they need for
thier immediate decisions that cannot wait until tomorrow.

Management accountig is not distinct and separate from financial accounting as the
data from financial accounting are used in managerial accouting system.
Cost Accounting
Cost accounting is an expanded phase of general or financial accounting which
informs management promptly with the costs of rendering a particular service, buying
and selling of products and producing a product. It is the field of accounting that
measures, records and reports information about costs and it is also the essential to
efficient cooperation of business and industry.

Cost accounting provides information to both financial accounting and managerial

accounting as necessary information to finalize their reports. This is an intersection
between financial and managerial accounting. It provides product costs information to
external parties for decision making and also to internal parties for planning and
controlling.

Table a.1 The summary of differences of financial, managerial and cost

accounting.
The Differences Between Financial Accounting, Cost Accounting,
Management Accounting.
BASIS FINANCIAL COST MANAGEMENT
ACCOUNTING ACCOUNTING ACCOUNTING
Ascertainment, To assist the
Record transactions &
allocation, management in
determine financial
OBJECT accumulation and decision-making
position and profit or
accounting for and policy
loss
costs formulation.
Concerned with Deals with
both past and projections of data
Concerned with
NATURE present records for the
historical data
(historical in future(futuristic in
nature) nature)
Certain principles
PRINCIPLE No set of principles
Governed by GAAP followed for
FOLLOWED are followed in it
recording costs
Uses both
Qualitative aspects Only qualitative qualitative and
DATA USED
are not recorded aspect is recorded quantitative
concepts

Let’s Check!
I. Questions:
1. What is financial accounting?
________________________________________________________
________________________________________________________
2. What is managerial accounting?
________________________________________________________
________________________________________________________
 3. What is cost accounting?
________________________________________________________
________________________________________________________
4. What are the distinguishing the difference between the cost accounting,
financial accounting and managerial accounting?
________________________________________________________
________________________________________________________
II. True or False
1. Managerial accounting internal reports are prepared more frequently than
are classified financial statements.
2. Management accounting applies to all forms of business organization
3. Financial accounting reports are general-purpose reports while managerial
accounting reports are usually special purpose reports.
4. Managerial accounting information generally pertains to the entity as a
whole and is highly aggregated.
5. Financial accounting report should be inconformity with the Philippine
Financial Reporting Standards (PFRS).
6. Cost accounting are branch of accounting that deals with the accumulation
of product costa and other costs.
7. Financial Accounting provides a historical perspective, whereas
management accounting emphasizes a current perspective.
8. Financial Accounting is primarily concern with profitability analysis.
9. Management accounting provides information that is generally available
only on a quarterly and annual basis.
10. Cost accounting procedures helps the management to gather data needed
to determine the product cost and generate a meaningful results.
III. Multiple choice
1. Which of the following person are most likely to use the management
accounting information is a(an),
a. Banker evaluating a credit application
b. Shareholder evaluating a stock investment
c. Government taxing authority
d. Assembly department supervisor
2. Which of the following is not an internal user?
a. Creditor c. Controller
b. Cost accountant d. Department Manager
3. Internal reports must be communicated
a. Daily b. Monthly c. Annually d. As needed
4. Which of the following persons generally use financial accounting
information?
a. Regulatory agencies c. Production department supervisor
b. Managers d. Sales executives
5. Which of the following statements about cost accounting is NOT true?
a. It provides costs to internal parties
b. It is an intersection of financial accounting and financial accounting
c. It provides an information that is used for both financial and
management accounting
d. It is concerned with the historical information.
 Let’s Analyze!
Marion Dela Cuestra is a manager of MDC Company and wondering if their company
are still ahead of its competitor. If you are Marion Dela Cuestra where you are going
to get the information for you to analyze your advantage from your competitors? Why?

Q&A List
Do you have any question for clarification?
Questions/Issues Answers
1.
2.
3.
4.
5.

Keywords index
Cost Accounting Management Accounting
Financial Accounting

Self-Help: You can also refer to the sources below to help you
further understand the lesson.

You can also refer to the sources below to help you further understand the
lesson:
De Leon, N. D., De Leon, E. D. and De Leon, G. Jr. M. (2019). Cost accounting and
control. Manila: GIC Enterprise & Co., Inc.
Garrison, R.H., & Noreen, E.W. (2003). Managerial accounting (10th ed.). McGraw-
Hill Company, Inc.
Cabrera, E. B. (2014). Management accounting: concepts and application. Manila:
GIC Enterprise & Co., Inc.

Note:

The content of this manual is based on the textbook for ACC 123 titled “Cost
Accounting and Control” by De Leon, Norma D., De Leon, Ellery D. and De Leon,
Guillermo Jr. M.
 Big Picture in Focus: ULOb. Distinguish the differences of
merchandising and manufacturing operation of entities in the industry
and differentiate their cost accounting cycle.

Metalanguage

For you to demonstrate ULOb, you will need operational understanding of the terms
enumerated below.

Merchandising concern business is one of the most common types

of businesses we interact with daily. It is a business that purchases finished products
and resells them to consumers.

Manufacturing concern business is any industry that makes products from raw
materials by the use of manual labor or machinery and that is usually carried out
systematically with a division of labor

Raw Material Inventory is the total cost of all component parts currently in stock that
have not yet been used in work-in-process or finished goods production.

Work in Process Inventory is materials that have been partially completed through
the production process.

Finished Goods Inventory refers to the number of manufactured products

in stock that are available for customers to purchase.

Direct Materials are those materials and supplies that are consumed during the
manufacture of a product, and which are directly identified with that product.

Direct Labor is the production or services labor that is assigned to a specific product,
cost center, or work order.

Factory Overhead is the costs incurred during the manufacturing process, not
including the costs of direct labor and direct materials. It is normally aggregated and
allocated to units produced during the period.

Cost of Goods Sold is the cost of acquiring or manufacturing the products that a
company sells during a period, so the only costs included in the measure are those
that are directly tied to the production of the products, including the cost of labor,
materials, and manufacturing overhead.
Essential Knowledge

To perform the aforesaid big picture (unit learning outcomes), you need to fully
understand the following essential knowledge laid down in the succeeding pages.
Please note that you are not limited to exclusively refer to these resources. Thus, you
are expected to utilize other books, research articles and other resources that are
available in the university’s library e.g. ebrary, search.proquest.com etc., and even
online tutorial websites.

Merchandising Business Operation

No need to produce products as they buy products and sell the same products
to the end user. Figure 1. Presents the steps of calculating cost of goods sold for
merchandising concern business operation. Figure 2. Presents the cost flow of
merchandising company. The company purchases products or merchandise for cash
or credit to be sold to customer either on cash or on credit also. The unsold inventory
from last period that is called Beginning Merchandise Inventory and the net purchase
that composed of purchases plus freight in less purchase returns and allowances and
purchase discount will be added together to get the cost of goods available for sale.
Then, deduct the unsold product this period that is called Merchandise Inventory,
Ending to get the cost of goods sold or the cost of the product sold this period.

Illustration 1
Jose Company purchase merchandise worth P/ 750,000 pesos and return P/ 50,000
of it to the supplier and paid freight for the purchases P/ 2,750. The company avail the
P/ 25,000 worth of discount. The merchandise beginning and end, respectively are P/
75,000 and P/ 65,000.

Figure b.1 Computation of cost of goods sold for merchandising company.

Merchandise Inventory, Beginning P/ 75,000
Add: Net Purchases
Purchases P/ 750,000
Add:. Freight In 2,750 752,750
Total
Less: Purchase Returns & Allowance 50,000
Purchase Discounts 25,000 (75,000) 677,750
Cost of Goods Available for Sale 752,750
Less: Merchandise Inventory, Ending (65,000)
Cost of Goods Sold 687,750
Figure b.2 Cost flow of merchandising concern business.

Manufacturing Concern Business

All types of business entities needed to have an information system that provide
necessary information. Manufacturing businesses the information system that they
should have is designed to accumulate detailed
costs data relative to the production process.
Thus, they need to have a structured cost
accounting system that will show what are the
cost necessary for the production, where and how
these costs are utilized by the production
process.

The production process and the merchandising

activities must be understand to appreciate the
importance of the efficient cost accounting
system as manufacturing and merchandising
have similar activities as to the following:
a. Buying of goods;
b. Storing of goods;
c. Selling of goods;
d. Must have efficient management;
e. Adequate sources of capital;
f. Employ many workers.

The distinctions of manufacturing and

merchandising are the following:
a. Manufacturers, must produce the
product they are going to sell to the
customers while merchandisers, buy
items in a marketable form to be resold
immediately to the customers;
b. Manufacturing process convert purchase items to make products while in
merchandising no process like this.
Producing goods by the process of transforming raw materials with the use of labor
and other costs and expenses necessary to finish the product that are to be sold to
the costumers. The similarities and differences of merchandising and manufacturing
are presented above. The 3 main costs in manufacturing concern are the direct raw
materials, direct labor and factory overhead that will form part as the total
manufacturing costs. The manufacturing business will maintain 3 different types of
inventory account. First is the Raw Material inventory are used for raw materials that
are used to account unused raw materials. Second is Work in Process inventory that
are used to account those unfinished product that are still on process. Third is the
Finished Goods inventory is that same set up as Merchandise Inventory account that
are used to account unsold completed products that are readily available for sale and
some company use other type of inventor which is the Factory Supplies inventory that
are used to account overheads that are still not used in the production.

The costs of materials used, direct labor costs and factory overhead costs (that are
composed of indirect materials, indirect labor, utility costs, depreciation of factory
building and machineries and equipment, supplies and other factory costs) are
transferred and accumulated to the Work in Process Inventory account during the
accounting period. After the production is completed and the products are already
finished, all the manufacturing costs from Work in Process Inventory account will be
transferred to the Finished Goods Inventory account. The remaining cost in the Work
in Process inventory account will be the Work in Process Inventory, End and this will
be the Work in Process Inventory, beginning in the next accounting period. All the
costs that are transferred to finished goods will be accounted as Cost of Goods Sold
if the products are sold that are reported to the Statement of Comprehensive Income
or the Income Statement of the company and the costs of the unsold product will make
up the balance of Finished Goods Inventory, end that will form part as the costs of
Finished Goods Inventory, beginning for the next accounting period.

Figure b.3 Cost flow for Manufacturing Company

Formula for getting the total Cost of Goods Sold for manufacturing company
Raw Materials Inventory, Beginning P xxxxx
Add: Net raw materials purchases:
Raw materials purchases P xxxxx
Add: Freight In xxxxx P xxxxx
Less: Purchase returns xxxxx
Purchase allowance xxxxx
Purchase discounts xxxxx (xxxxx) xxxxx
Raw Materials available for use xxxxx
Less: Raw Materials Inventory, Ending (xxxxx)
Direct Materials Used xxxxx
Direct Labor xxxxx
Factory Overhead xxxxx
Total Manufacturing Costs xxxxx
Add: Work In Process Inventory, Beginning xxxxx
Total Cost of Goods placed into process xxxxx
Less: Work In Process Inventory, Ending (xxxxx)
Total Cost of Goods Manufactured xxxxx
Add: Finished Goods Inventory, Beginning xxxxx
Total Cost of Goods Available for Sale xxxxx
Less: Finished Goods Inventory, Ending (xxxxx)
Total Cost of Goods of Goods Sold xxxxx

ILLUSTRATION

Joe Mariano Corporation has the following information for the preparation of statement of cost
of goods sold of the company.
Inventory Beg End
Raw Materials 100,000 125,000
Work-In Process 78,000 97,500
Finished Goods 124,500 102,750
Indirect Materials 25,750
Indirect Labor 61,250
Direct Labor 1,756,350
Factory Supervision 96,750
Factory Building Depreciation 120,800
Factory Supplies 176,800
President’s Salary 350,000
Uncollectible Accounts 75,800
Factory Machinery and Equipment Maintenance 35,700
Taxes for Factory Building 27,780
Sales Commission 99,750
Factory Machinery and Equipment Depreciation 102,750
Sales Salaries 76,340
Factory Building Maintenance 55,000
Delivery Expenses 40,700
Raw Material Purchases 1,750,000
Purchase Returns and Allowances 80,000
Purchase Discounts 25,750
Freight In 12,500
Freight Out 23,756

Required: Prepare Statement of Cost of Goods Sold.

SOLUTION:

Raw Materials Inventory, Beginning P 100,000

Add: Net raw materials purchases:
Raw materials purchases P 1,750,000
Add: Freight In 12,500 P 1,762,500
Less: Purchase returns 80,000
Purchase allowance -
Purchase discounts 25,750 (105,750) 1,656,750
Raw Materials available for use 1,756,750
Less: Raw Materials Inventory, Ending (125,000)
Direct Materials Used 1,631,750
Direct Labor 1,756,350
Factory Overhead:
Indirect Materials 25,750
Indirect Labor 61,250
Factory Supervision 96,750
Factory Building Depreciation 120,800
Factory Supplies 176,800
Factory Machinery and Equipment Maintenance 35,700
Taxes for Factory Building 27,780
Factory Machinery and Equipment Depreciation 102,750
Factory Building Maintenance 55,000 702,580
Total Manufacturing Costs 4,090,680
Add: Work In Process Inventory, Beginning 78,000
Total Cost of Goods placed into process 4,168,680
Less: Work In Process Inventory, Ending (97,500)
Total Cost of Goods Manufactured 4,071,180
Add: Finished Goods Inventory, Beginning 124,500
Total Cost of Goods Available for Sale 4,195,680
Less: Finished Goods Inventory, Ending (102,750)
Total Cost of Goods of Goods Sold 4,092,930

The Cost Accounting Cycles with Journal Entry

Purchase of materials and supplies
Journal Entry: Materials xxxxx
Accounts Payable/Cash xxxxx

Return of materials and supplies to supplier

Journal Entry: Accounts Payable/Cash xxxxx
Materials xxxxx

Issuance of direct materials to production

Journal Entry: Work In Process xxxxx
Materials xxxxx

Issuance of indirect materials to production

Journal Entry: Factory Overhead Control xxxxx
Materials xxxxx
Return of direct materials from production to warehouse
Journal Entry: Materials xxxxx
Work In Process xxxxx

Return of indirect material from production to warehouse

Journal Entry: Materials xxxxx
Factory Overhead Control xxxxx

Setting up of payroll liability

Journal Entry: Payroll xxxxx
Withholding Taxes Payable xxxxx
SSS Premium Payable xxxxx
PhilHealth Contribution Payable xxxxx
Pag-Ibig Premium Payable xxxxx
Accrued Payroll xxxxx

Distribution of Payroll
Journal Entry: Work In Process xxxxx
Factory Overhead Control xxxxx
Selling and Administrative Expenses Control xxxxx
Payroll xxxxx

Payment of Payroll
Journal Entry: Accrued Payroll xxxxx
Cash xxxxx

The two types of factory overhead are used:

Factory Overhead Control– used for actual factory overhead costs incurred by the
company.

Factory Overhead Applied– used for factory overhead that are based on the
predetermined rate.

This terms are also used in the process;

Under Applied Factory Overhead– is the result if factory overhead control is greater
than the factory overhead applied.

Over Applied Factory Overhead– is the result if factory overhead control is lesser
than the factory overhead applied.
Occurrence of actual factory overhead.
Journal Entry: Factory Overhead Control xxxxx
Various Accounts** xxxxx
**Cash/Accounts Payable/Contra Asset accounts
Application of factory overhead to production
Journal Entry: Work In Process xxxxx
Factory Overhead Applied xxxxx
To close the two factory overhead accounts with under applied factory overhead
Journal Entry: Factory Overhead Applied xxxxx
Under Applied Factory Overhead xxxxx
Factory Overhead Control xxxxx

To close the under applied factory overhead

Generally, (immaterial amount)
Journal Entry: Cost of Goods Sold xxxxx
Under Applied Factory Overhead xxxxx

Alternatively, (Material amount)

Journal Entry: Cost of Goods Sold xxxxx
Finished Goods Inventory xxxxx
Work In Process Inventory xxxxx
Under Applied Factory Overhead xxxxx

To close the two factory overhead accounts with over applied factory overhead
Journal Entry: Factory Overhead Applied xxxxx
Over Applied Factory Overhead xxxxx
Factory Overhead Control xxxxx

To close the over applied factory overhead

Generally, (immaterial amount)
Journal Entry: Over Applied Factory Overhead xxxxx
Cost of Goods Sold xxxxx

Alternatively, (Material amount)

Journal Entry: Over Applied Factory Overhead xxxxx
Cost of Goods Sold xxxxx
Finished Goods Inventory xxxxx
Work In Process Inventory xxxxx

ILLUSTRATION
Gulmanchi Company has the following information in its financial statements and the
transactions for the year.

Gulmanchi Company
Statement of Financial Position
January 1, 2020

Assets Liabilities & Stockholder’s Equity

Cash P/ 180,000 Liabilities P/ 0
Building 950,000 Capital Stock 1,350,000
Machinery & Equioment 220,000 Total Liabilities &
Total Assets 1,350,000 Stockholder’s Equity 1,350,000

Transaction for the year are the following:

1. Purchase materials on account of P/ 250,000
2. Issuance of materials to production P/ 200,000 direct and 10,000 indirect.
3. Return 2,000 amount of materials to suppliers.
 4. Total payroll of the company is 350,000, consisting 270,000 earned by factory
workers, 45,000 earned from factory supervisory, the remaining amount is
selling and administrative expense. SSS Premium 1,700, Pag-Ibig Premium
600, PhilHealth Premium 450 and Withholding Taxes of 1,050.
5. Depreciation of the building 5%. The building is occupied 25% by office and the
rest are used by the factory.
6. Depreciation of machinery and equipment is 15% per year. This are used by
the production.
7. Accrue cost of utilities of 45,000 in which 30% are used by the office and the
rest is used in the factory.
8. Miscellaneous expense used by the factory for 25,000 was paid.
9. Application rate of factory overhead is 120% based on direct labor costs.
10. All of the processed products for the year is completed.
11. Payment of accounts.
12. Payment of accrued expenses.
13. The 85% of finished goods are sold on account to the customers at 40% based
on cost.
14. The 90% of the accounts was collected.

Requirements:
1. Journalize the transactions above
2. Prepare Statement of Comprehensive Income for the year
3. Prepare Statement of Financial Position

Answer for Requirement No. 1

1. Materials 250,000
Accounts Payable 250,000
Purchases on account

2. Work In Process 200,000

Factory Overhead Control 10,000
Materials 210,000
Issuance of materials to production

3. Accounts Payables 2,000

Materials 2,000
Return of materials to suppliers

4. Payroll 350,000
SSS Premium Payable 1,700
Pag-Ibig Premium Payable 600
PhilHealth Premium Payable 450
Withholding Taxes Payable 1,050
Accrued Payroll 346,200
Accrual of payroll

Work In Process 270,000

Factory Overhead Control 45,000
Selling and Administrative Expense Control 35,000
Payroll 350,000
 Distribution of payroll

Accrued Payroll 346,200

Cash 346,200
Payment of payroll

5. Factory Overhead Control 33,250

Selling and Administrative Expense Control 14,250
Accu. Depre. – Building 47,500
Recognizing the building depreciation

6. Factory Overhead Control 33,000

Accu. Depre. – Machinery and Equip. 33,000
Recognizing the machinery and equip. depreciation

7. Factory Overhead Control 31,500

Selling and Administrative Expense Control 13,500
Accrued Expenses 45,000

Accruals of utilities

8. Factory Overhead control 25,000

Cash 25,000
Payment of factory miscellaneous expenses

9. Work In Process (270,000 * 120%) 324,000

Factory Overhead Applied 324,000
Application of FOH

10. Finished Goods 794,000

Work In Process 794,000
Costs of completed products

Direct Materials 200,000

Direct Labor 270,000
Factory Overhead Applied 324,000
Total Manufacturing Costs 794,000

11. Accounts Payable 248,000

Cash 248,000
Payment of accounts

12. Accrued Expenses 45,000

Cash 45,000
Payment of accrued expenses

13. Accounts Receivables 1,111,600

Sales 1,111,600
Sold products to customers
Cost of Goods Sold 794,000
 Finished Goods 794,000
Cost of product sold

14. Cash 1,000,440

Accounts Receivables 1,000,440
Collection from customers

Cost of Goods Sold 794,000

Multiplied by: Gross Profit Rate 140%
Sales 1,111,600
Multiplied by: Collection Rate 90%
Collections 1,000,440

15. Factory Overhead Applied 324,000

Factory Overhead Control 177,750
Over Applied Factory Overhead 146,250
To close the FOH

Over Applied Factory Overhead 146,250

Cost of Goods Sold 146,205
To close the over applied FOH

Indirect Materials 10,000

Indirect Labor 45,000
Depreciation Expense-Factory Building 33,250
Depreciation Expense-Factory Machinery and Equip. 33,000
Factory Utilities Expense 31,500
Factory Miscellaneous Expense 25,000
Total 177,750

T-ACCOUNTS:
CASH ACCOUNTS RECEIVABLES
Beg 180,000 4. 346,200 13. 1,111,600 18. 1,000,440
14. 1,000,440 8. 25,000
11. 248,000
12. 45,000
1,180,440 664,200 1,111,600 1,000,440
516,240 111,160

BUILDING ACCU. DEPRE. - BUILDING

Beg. 950,000 5. 47,500
950,000 47,500
MACHINERY AND EQUIPMENT ACCU. DEPRE.-MACHINERY &
EQUIP.
Beg. 220,000 6. 33,000
220,000 33,000
 ACCOUNTS PAYABLE ACCRUED EXPENSES
3. 2,000 1. 250,000 13. 45,000 7. 45,000
11. 248,000
250,000 250,000 45,000 45,000
0 0

PAG-IBIG PREMIUM PAYABLE SSS PREMIUM PAYABLE

4. 600 4. 1,700
600 1,700

PHILHEALTH PREMIUM PAYABLE WITHHOLDING TAX PAYABLE

4. 450 4. 1,050
450 1,050

CAPITAL STOCK MATERIALS

Beg. 1,350,000 1. 250,000 2. 210,000
3. 2,000
250,000 212,000
1,350,000 38,000

WORK IN PROCESS FINISHED GOODS

2. 200,000 10. 794,000 10. 794,000 13. 794,000
4. 270,000
9. 324,000
794,000 794,000 794,000 794,000
0 0

FACTORY OVERHEAD CONTROL FACTORY OVERHEAD APPLIED

2. 10,000 4. 177,750 15. 324,000 9. 324,000
4. 45,000
5. 33,250
6. 33,000
7. 31,500
8. 25,000
177,750 177,750 324,000 324,000
0 0

SELLING & ADMIN. EXP. CONTROL PAYROLL

4. 35,000 4. 350,000 4. 350,000
5. 14,250
7. 13,500
62,750 0
 ACCRUED PAYROLL SALES
4. 346,200 4. 346,200 13. 1,111,600
0 1,111,600

COST OF GOODS SOLD OVER APPLIED FACTORY OVERHEAD

13. 794,000 15. 146,250 15. 146,250 15. 146,250
647,750 0

Answer for Requirement No. 2

Sales
1,111,600
Less: Cost of Goods Sold - Actual
Raw Materials Inventory, Beginning P 0
Add: Net raw materials purchases:
Raw materials purchases P 250,000
Add: Freight In 0 P 250,000
Less: Purchase returns 2,000
Purchase allowance 0
Purchase discounts 0 (2,000) 248,000
Raw Materials available for use 248,000
Less: Raw Materials Inventory, Ending 38,000
Indirect Materials Used 10,000 (48,000)
Direct Materials Used 200,000
Direct Labor 270,000
Factory Overhead 324,000
Total Manufacturing Costs 794,000
Add: Work In Process Inventory, Beginning 0
Total Cost of Goods placed into process 794,000
Less: Work In Process Inventory, Ending ( 0)
Total Cost of Goods Manufactured 794,000
Add: Finished Goods Inventory, Beginning 0
Total Cost of Goods Available for Sale 794,000
Less: Finished Goods Inventory, Ending ( 0)
Total Cost of Goods of Goods Sold-Normal 794,000
Add/Less: Under/Over Applied Factory Overhead (146,250)
647,750
Gross Profit P/
463,850
Less: Selling and Administrative Expenses***
62,750
Net Profit
401,100
***Office Payroll 35,000
Depreciation Expense - Office Building 14,250
Office Utilities Expense 13,500
Total 62,750
Gulmanchi Company
Statement of Financial Position
December 31, 2020
 Capital Stock Beginning 1,350,000
Add: Net Profit 401,100
Capital Stock, Ending 1,751,100

Answer for Requirement No. 3

Gulmanchi Company
Statement of Financial Position
December 31, 2020

Assets Liabilities & Stockholder’s Equity

Cash P/ 516,240 Pag-Ibig Premium Payable P/ 600
Accounts Receivables 111,160 SSS Premium Payable 1,700
Inventory 38,000 PhilHealth Premium Payable 450
Building 950,000 Withholding Tax Payable 1,050
Accu. Dep.-Bldg (47,500) Total Liabilities 3,800
Machinery & Equipment 220,000 Capital Stock 1,751,100
Accu. Dep.-M & E (33,000) Total Liabilities and
Total Assets 1,754,900 Stockholder’s Equity 1,754,900

Let’s Check!
I. Questions:
1. What is merchandising concern business?
________________________________________________________
________________________________________________________
________________________________________________________

2. What is manufacturing concern business?

________________________________________________________
________________________________________________________
________________________________________________________

3. What is/are the common characteristics of manufacturing and

merchandising?
________________________________________________________
________________________________________________________
________________________________________________________

4. What are the differences between manufacturing and merchandising?

________________________________________________________
________________________________________________________
________________________________________________________
II. True or False
1. The cost attached to the unsold items are presented in the Work-In Process
Inventory, End
2. Merchandising uses one inventory account only while manufacturing uses
four types of inventory accounts.
3. Cost for the partially completed at the end of the accounting period is
reported in the Work-In Process Inventory, End.
4. Direct labor, direct material, factory overhead, indirect labor and indirect
materials are the cost that comprises the total manufacturing cost.
5. Merchandising is buying materials and process it to be sold while
manufacturing is buying product and selling directly to the customers.

III. Multiple choice theories

1. All of these relates to the characteristics of merchandising and
manufacturing, EXCEPT
a. Merchandising uses only one inventory account while manufacturing
uses three inventory accounts.
b. Merchandising is used by SMEs while manufacturing is used by large
company.
c. Merchandising and manufacturing both compute cost of goods sold.
d. Merchandising is buying and selling while manufacturing is
converting raw materials into finished products.
2. Cost of goods manufactured will usually include
a. only costs incurred during the current period
b. only direct labor and direct materials costs
c. some costs incurred during the prior period as well as costs incurred
during the current period
d. some period costs as well as some product costs
3. Which of the following is correct about the computation of the cost of goods
manufactured?
a. beginning work in process inventory plus total manufacturing cost.
b. finished goods beginning plus cost of goods placed in process
c. ending work in process inventory(WIP) plus total manufacturing
cost.
d. finished goods beginning less cost of goods placed in process
4. Cost of goods sold is higher than cost of goods manufactured
a. If Finished Goods(FG) beginning is higher than finished goods
ending.
b. If FG beginning is lower than finished goods ending.
c. If the FG ending is equal to the cost of goods available for sale
d. If (WIP) inventory beginning is higher than (WIP) inventory, ending.
5. Which of the following should NOT be included as manufacturing overhead
in the manufacture of a wooden chair?
a. Glue on the chair
b. The amount paid to the individual who stains the chair
c. The workman’s compensation insurance of the supervisor who
oversees production.
d. The factory utilities of the department in which production takes
place.
IV. Multiple choice problems
1. Maria Company has yearend manufacturing costs were as follows: Direct
materials and direct labor of 500,000, Depreciation of manufacturing
equipment of 70,000, Depreciation of factory building of 40,000 and
Janitor’s wages for cleaning factory premises for 15,000. How much of
these are the inventoriable costs?
a. 625,000 b. 610,000 c. 585,000 d. 500,000

2. Some selected sales and cost data for Joja Manufacturing Company are
Direct material used of 150,000, Direct labor of 250,000, Factory overhead
of 125,000 and Selling and administrative expenses of 200,000. What is
the amount of the total product cost?
a. 400,000 b. 375,000 c. 200,000 d. 525,000

3. The following information is from Matatag Company for the month of

03/2020:
03/1/20 03/31/20
Materials P40,000 P50,000
Work in Process 25,000 35,000
Finished Goods 60,000 70,000
Direct labor cost 120,000
Factory overhead applied 108,000
Cost of goods sold 378,000
The cost of goods placed in process during March 2020 was:
a. 388,000 b. 398,000 c. 423,000 d. 448,000

4. During 2020, there was no change in the beginning or ending balance in

the Materials inventory account for the DL Co. However, the WP inventory
account increased by P15,000, and the FG inventory account decreased
by P10,000. If purchases of raw materials were P100,000 for the year,
direct labor cost was P150,000, and manufacturing overhead cost was
P200,000, the cost of goods sold for the year would be:
a. P435,000 b. P445,000 c. P465,000 d. P475,000

5. The factory ledger of Pearl Corporation contains the following cost data for
the year ended December 31, 2020:

PARTICULARS 1/1/2020 12/31/2020

Raw materials Inventory 150,000 170,000
Work in process Inventory 160,000 60,000
Finished goods, Inventory 180,000 220,000
Freight In 2,500
Purchase Returns and Allowances 1,000
Purchase Discounts 900
Total manufacturing costs charged to production
during the year (including raw materials, direct labor
1,372,000
and factory overhead applied at the rate of 50% of
480,000 direct labor cost)
What is the cost of raw materials purchased?
a. 631,400 b. 651,400 c. 671,400 d. 802,000
 Let’s Analyze!
1. Last month, Mare company placed P60,000 of materials into production. The
Printing Department used 8,000 labor hours at P5.60 per hour and the Binding
Department used 4,600 hours at P6.00 per hour. Factory overhead is applied
at a rate of P6.00 per labor hour in the Printing Department and P8.00 per labor
hour in the Binding Department. Mare’s inventory accounts show the following
balances:
Beginning Ending
Finished goods P22,000 P17,000
Work in process 15,000 17,600
Materials 20,000 18,000
What is the total cost of goods sold?

2. Melchora Incosar Corporation provides the following transactions for the month of
May.
A. Purchase materials for cash, 350,000.
B. The production department incur a 157,000 cost for the various expenses.
C. The payroll is 500,000 accrued and paid, where, 10% is indirect labor, 7% of
this is Selling expenses and 3% of this is Administrative expenses. The
payroll deductions are the following; Withholding Taxes at 11,650, SSS
Premium, 14,500, HDMF Premium, 2,300 and PHIC Premium, 5,750
D. Material used in the production, 325,000, 10% is indirect materials.
E. Employer share in payroll deductions: where 80% is factory overhead, 10% is
selling expense and the remaining 10% is administrative expenses. The SSS
Premium is 29,000, HDMF Premium is 2,300 and PHIC Premium is 5,750.
F. Production department paid 254,000 worth of factory expenses.
G. Factory overhead applied to the production at 125% of the direct labor cost.
H. The goods completed is 1,200,000 and sold on account at 150% based on
costs.
I. Collected 80% of the accounts.

Required:
1. Journalized the following transactions and prepare T-Accounts.
2. Prepare Statement of Comprehensive Income for the year, Statement of
Changes in Equity and Statement of Financial Position.
 In a Nutshell
PROBLEM 1:
Princess Precious Jewel Company had the following information on December 31, 2020.
Merchandise Inventory, Beginning 1,100,000.00
Purchases 5,600,000.00
Sales 8,750,000.00
Sales Salaries 600,000.00
Purchase Discounts 45,000.00
Store Supplies 150,000.00
Office Salaries 950,000.00
Interest Revenue 20,000.00
Retained Earnings, Beginning 550,000.00
Freight In 145,000.00
Sales Returns and Allowances 150,000.00
Income Tax Expense 280,000.00
Loss on Sale of Trading Securities 50,000.00
Doubtful Accounts 30,000.00
Depreciation – Store Equipment 25,000.00
Dividend Revenue 50,000.00
Depreciation – Delivery Truck 60,000.00
Depreciation – Office 35,000.00
Gain on Sale of Equipment 10,000.00
Dividends Paid 450,000.00
Loss from Inventory writedown 150,000.00
Contribution (70% factory worker) 125,000.00
Delivery Expense 425,000.00
Merchandise Inventory, Ending 850,000.00
Required: Prepare Income Statement.

PROBLEM 2:
Kim Brilliant Company provides the following information for 2020:
Increase in Raw Materials Inventory 280,000.00
Decrease in Goods in Process Inventory 170,000.00
Increase in Finished Goods Inventory 300,000.00
Decrease in Factory supplies Inventory 95,000.00
Taxes and depreciation of factory building 150,000.00
Raw Material Purchases 3,500,000.00
Direct Labor 1,800,000.00
Indirect Labor 450,000.00
Supervisory 235,000.00
Indirect Materials 260,000.00
Repair and Maintenance-Machinery 145,000.00
Utilities (75% for Factory) 300,000.00
Purchase Returns and Allowances 95,000.00
Freight Out 75,000.00
Sales commissions 80,000.00
Rent Factory Building 250,000.00
Required: Prepare Statement of Cost of Goods Sold.
 Q&A List
Do you have any question for clarification?
Questions/Issues Answers
1.
2.
3.
4.
5.

Keywords index
Merchandising Raw Materials Inventory
Manufacturing Work in Process Inventory
Direct Materials Finished Goods Inventory
Direct Labor Merchandise Inventory
Factory Overhead Cost of Goods Sold
Cost of Goods Available for sale Manufacturing Costs

Self-Help: You can also refer to the sources below to help you
further understand the lesson.

You can also refer to the sources below to help you further understand the
lesson:
De Leon, N. D., De Leon, E. D. and De Leon, G. Jr. M. (2019). Cost accounting and
control. Manila: GIC Enterprise & Co., Inc.
Garrison, R.H., & Noreen, E.W. (2003). Managerial accounting (10th ed.). McGraw-
Hill Company, Inc.
Cabrera, E. B. (2014). Management accounting: concepts and application. Manila:
GIC Enterprise & Co., Inc.

Note:

The content of this manual is based on the textbook for ACC 123 titled “Cost
Accounting and Control” by De Leon, Norma D., De Leon, Ellery D. and De Leon,
Guillermo Jr. M.
Big Picture in Focus: ULOc. Identify the uses of cost accounting data;

Metalanguage

For you to demonstrate ULOc, you will need operational understanding of the terms
enumerated below.

Product Cost refers to the costs incurred to create a product and

these costs include direct labor, direct materials, consumable production supplies,
and factory overhead.

Planning is the process of thinking about the activities required to achieve a desired
goal. It is the first and foremost activity to achieve desired results. It involves the
creation and maintenance of a plan.

Controlling is to exercise restraining or directing influence over or to regulate

Essential Knowledge

To perform the aforesaid big picture (unit learning outcomes), you need to fully
understand the following essential knowledge laid down in the succeeding pages.
Please note that you are not limited to exclusively refer to these resources. Thus, you
are expected to utilize other books, research articles and other resources that are
available in the university’s library e.g. ebrary, search.proquest.com etc., and even
online tutorial websites.

The Uses of Cost Accounting Data

Product cost is important for managing the company’s production costs thus
management needs the information that is provided by cost accounting to help the
manager to gather information for planning and controlling the company’s operation.
The cost accounting provides information that will determine the product cost and
generate properly costed product and meaningful financial statement and other
reports to management.

The information from cost accounting will be used for analysis of the trend of the
manufacturing costs incurred in the production process for management purposes.
The cost determination will help the company to make a variety of important marketing
decision.

1. Determining the selling price of a product. The product cost information is

necessary for management to come up with a reasonable product selling price
that will cover the total cost and expenditures that the company incurred in
manufacturing, storing, selling of product and rendering services to customers.
2. Meeting competition. The reasonable price must be determine by the managers
to meet the price acceptable by the customers means that the price is lower than
other companies that produces the same products. This would be achieve only if
the detailed information about the product cost is appropriately determine and
provided by the company to maintain the cost at a lowest as possible so that the
price will also reduce compare to other company.

3. Bidding on contracts. To be rewarded a manufacturing contract by the

government, private firms submits contract to bid order. The contract price must
be the lowest as possible from other bids so that you will be the one to get the
contract but to come up with the contract price the unit costs of the particular
products relating to the manufacturing contracts. The bid price must cover all the
necessary costs and expenditure to be incurred by the company and at the same
time the company will realized a reasonable profit from the contract.

4. Analyzing profitability. The information of the unit product cost are used by the
management to determine the amount of profit they earned from the products and
if the profit can be maximized by eliminating some unnecessary cost incurred by
the company and concentrating their efforts in creating a highest possible profit
for the company.

Costs are in evitable in a company thus this are said to be used by management
purposes to evaluate the managers for their performance, to evaluate also the
company’s personnel efficiency or sued for decision making purposes. This are the
uses of costs internally but externally to evaluate the top management performance in
the result of the stewardship challenge given to them and decide about the
organization.

Planning and Control

This are main purpose of cost accounting to the management.

Planning is the process of establishing objectives and determining the strategies to

achieve them. This will provide good management and coordinate all the departments
in the operation of the firm. This can be done by the management with the help of the
cost accounting information by providing historical costa that are basis for projecting
the data in the planning process. The cost accounting information can be also analyze
to consider the relationship among costs and use as aid in estimating cost in the future
and create a decision that will give advantage to the company’s operation by some
changes that can be implemented for the success of the organization such as change
in marketing strategies, obtaining additional capital and acquisition of new and
additional facilities.

Planning are divided in 3 components

1. Strategic planning – concerned in creating long-range goals and objective for
the organization as a whole.
2. Tactical planning – concerned in a shorter range plans, this are done to achieved
the strategic goals and objectives of the firm.
3. Operational planning – this are plans for day-to-day operation of the business in
achieving the tactical plans thus, emphasizing the coordination of the major factors
of production (materials, labor and overhead).
Controlling is the process of monitoring and evaluating the company’s operation and
determining whether the set of objectives based on the plans are achieve or not.

Let’s Check!
I. Questions:

1. What is product costs?

________________________________________________________
________________________________________________________
________________________________________________________

2. What are the uses of cost accounting data?

________________________________________________________
________________________________________________________
________________________________________________________

3. What is planning?
________________________________________________________
________________________________________________________
________________________________________________________

4. What is controlling?
________________________________________________________
________________________________________________________
________________________________________________________

5. What are the 3 components of planning and explain each component?

________________________________________________________
________________________________________________________
________________________________________________________
\

II. True or False

1. Controlling is the process of determining whether plans are being met.
2. Control includes deciding what feedback to provide that will help with
future decision making.
3. Tactical planning is concerned with the day-to-day operation of the firm.
4. Analyzing profitability is one of the uses of cost accounting data.
5. Cost accounting information is needed by management in directing and
planning.

III. Multiple choice

1. Which of the following is not a management function?
a. Planning b. Constraining c. Motivating d. Directing
2. Jose Joanne Reyes is a manager JJMC Corporation, she is establishing
objectives and goals by performing what function?
a. Constraining b. Planning c. Motivating d. Directing
 3. Which of the following is not a practical use of unit cost?
a. Meeting competition c. Analyzing profitability
b. SWOT analysis d. Bidding on contracts

4. Which of the following is correct?

a. Planning is the process of monitoring the company’s operation
b. Controlling is the coordination of all the operations of the firm.
c. Tactical planning is the plan to achieve the operational plan.
d. Controlling and Planning are the things that a management can do
from the information presented in the cost accounting reports.
5. Which of the following helps the management in gathering the data
needed to determine the product cost?
a. Accounting c. Management Accounting
b. Cost Accounting d. Financial Accounting

Q&A List
Do you have any question for clarification?
Questions/Issues Answers
1.
2.
3.
4.
5.

Keywords index
Product Cost Controlling
Selling Price Planning

Self-Help: You can also refer to the sources below to help you
further understand the lesson.
You can also refer to the sources below to help you further understand the
lesson:
De Leon, N. D., De Leon, E. D. and De Leon, G. Jr. M. (2019). Cost accounting and
control. Manila: GIC Enterprise & Co., Inc.
Garrison, R.H., & Noreen, E.W. (2003). Managerial accounting (10th ed.). McGraw-
Hill Company, Inc.
Cabrera, E. B. (2014). Management accounting: concepts and application. Manila:
GIC Enterprise & Co., Inc.
Big Picture in Focus: ULOd. Distinguish the differences of Process
costing system and Job order costing system;

Metalanguage

For you to demonstrate ULOd, you will need operational understanding of the terms
enumerated below.

Job Order Costing System a system for allocating costs to groups of unique
products.

Process Costing System a system applicable to a continuous process of production

of the same and similar goods.

Essential Knowledge

To perform the aforesaid big picture (unit learning outcomes), you need to fully
understand the following essential knowledge laid down in the succeeding pages.
Please note that you are not limited to exclusively refer to these resources. Thus, you
are expected to utilize other books, research articles and other resources that are
available in the university’s library e.g. ebrary, search.proquest.com etc., and even
online tutorial websites.

Job Order Costing System

It is one of the traditional approaches of product cost accounting system for those
company that make one-of-a-kind or special-order product. In this system, direct
material, direct labor and factory overhead are assigned to specific jobs orders or
batches of production. This system measures cost for each job, rather than for set
time periods. The company that uses this system are company that make ships,
airplanes, large machines and special orders. This are also used in service industry
firms such as in public accounting firms that are cost assigned to the audit
engagements, the consulting and architectural firms that assigned cost to contracts,
while for universities it may assign cost to every research projects. The unit cost are
computed by dividing the total manufacturing cost per job to the number good units
produced for that order. It uses one Work in Process Inventory Control account in the
general ledger and supported by job order cost cards or sheets for each job in process
at any point of time.

Process Costing System

It is the other traditional approaches of product cost accounting system for those
company that make a large number of similar products or maintain a continuous
production. In this system the manufacturing costs are group per department or per
work center. It emphasizes a time period rather than the time taken to complete an
order. This uses several Work in Process(WIP) account as this system provides one
WIP account each work center or department or process. The cost are determined by
dividing total manufacturing cost assigned to each department or work center during
the period to the equivalent unit of production. If production process is consists of four
department process then the cost of the four department will be added together to
determine the costs of the product. This system is used by the company that produces
paints, gas and oils, automobiles, bricks, or soft drinks.

Table d.1. Summary of characteristics of job order costing system and job order
costing system.

Basis of Job Order Costing System Process Costing System

distinction
1. Nature of Each job is manufactured Production is continuous flow,
Production against specific requirement without any reference to
specific order or job.
2. Cost unit Each job is taken as a cost unit Each unit is taken as a cost unit
3. Cost Cost are collected and Cost are allocated for each
accumulation accumulated against each job process
4. Cost Costs of a job is calculated Cost are calculated at the end
ascertainment when job is completed of the accounting period
5. Work In WIP may or may not exist At the end of accounting period
Process (WIP) WIP will always exists.
6. Types of Unique jobs are worked on Homogeneous product units
product and during a time period. pass through a similar process.
process.
7. Unit cost Total cost on the cost sheet Individual department costs
determination divided by the number of units divided by equivalent unit
in the job. production

Hybrid Costing
It is the combination of job order costing system and process costing system. When
the ideas and characteristics are blended from the two traditional cost accounting
system. The relationships are presented below to understand the concept of this
costing system.

Job Order Hybrid Process

Product Product Product
Costing Costing Costing
System System System

Operation Costing
It is a hybrid product costing system that are used in a repetitive manufacturing where
finished product have common as well as distinguishing characteristics. The
manufacture of clothing this can be assembled in one operation but these can be move
to other operation and have a deluxe lining added.

In the general rule, job order product costing system is more costly than process
costing system. Job order costing system is more detailed in record keeping than
process costing system. The managers should compare the additional benefits that
will be derive from knowing the actual cost of each unit. Thus, if the record keeping
costs is equal from job order costing and process costing then it is better to use job
order costing system but in order have a better decision then they need to get all the
data needed to consider the process costing system.

Let’s Check!
I. Questions:

1. What is process product costing system?

________________________________________________________
________________________________________________________

2. What is job order product costing system?

________________________________________________________
________________________________________________________

3. What is hybrid product costing system?

________________________________________________________
________________________________________________________

4. What is operation product costing system?

________________________________________________________
________________________________________________________

5. What is/are differences between job order costing system and process
costing system?
________________________________________________________
________________________________________________________

II. True or False

1. Process costing is used by companies making one-of-a-kind products.

2. Job order costing system for allocating costs to group of unique product
and is applicable to the production of customer specified products such
as the manufacture of special machine.
3. Operation costing is a hybrid costing system have common as well as
distinguishing characteristics.
4. Job order costing system accumulates costs by individual jobs.
5. The unit costs are determined by dividing total manufacturing costs to the
total number of units produce in each process in the job order costing
system.

III. Multiple choice

1. What is the best cost accumulation procedure to use when many batches,
each differing as to product specification, are produced?
a. Job order costing system c. Process costing system
b. Hybrid costing system d. Standard costing
 2. Play Labs develops 35mm film using a four-step process that moves
progressively through four departments. The company specializes in
overnight service and has the largest drug store chain as its primary
customer. Currently, direct labor, direct materials and overhead are
accumulated by department. The cost accumulation system that best
describes the system Play Labs is using is
a. Operation costing c. Hybrid costing system
b. Job-order costing system d. Process costing system
3. Which one of the following alternatives correctly classifies the business
application to the appropriate costing system?
Job Order Costing System Process Costing System
a. Wallpaper manufacturer Oil refinery
b. Aircraft assembly Public accounting firm
c. Paint manufacturer Retail banking
d. Print shop Beverage drink manufacturer
4. Which of the following production operations would be most likely to
employ a job order system of cost accounting?
a. Toy Manufacturing c. Shipbuilding
b. Crude Oil Refining d. Candy Manufacturing
5. Which of the following products would most likely be accounted for with a
process costing system?
a. A public accounting firm c. Airplane manufacture
b. A retailer d. Gasoline refinery

Q&A List
Do you have any question for clarification?
Questions/Issues Answers
1.
2.
3.
4.
5.

Keywords index
Process Costing Job Cost Sheets
Job Order Costing Work In Process
Self-Help: You can also refer to the sources below to help you
further understand the lesson.

You can also refer to the sources below to help you further understand the
lesson:
De Leon, N. D., De Leon, E. D. and De Leon, G. Jr. M. (2019). Cost accounting and
control. Manila: GIC Enterprise & Co., Inc.
Garrison, R.H., & Noreen, E.W. (2003). Managerial accounting (10th ed.). McGraw-
Hill Company, Inc.
Cabrera, E. B. (2014). Management accounting: concepts and application. Manila:
GIC Enterprise & Co., Inc.

Note:

The content of this manual is based on the textbook for ACC 123 titled “Cost
Accounting and Control” by De Leon, Norma D., De Leon, Ellery D. and De Leon,
Guillermo Jr. M.

Big Picture in Focus: ULOe. Distinguish the differences between Cost,

Expenses and Losses;

Metalanguage

For you to demonstrate ULOe, you will need operational understanding of the terms
enumerated below.

Cost is the value of money that has been used up to produce something or deliver a
service.

Expenses is the cost of operations that a company incurs to generate revenue.

Losses is the fact of no longer having something or having less of it than before.

Essential Knowledge

To perform the aforesaid big picture (unit learning outcomes), you need to fully
understand the following essential knowledge laid down in the succeeding pages.
Please note that you are not limited to exclusively refer to these resources. Thus, you
are expected to utilize other books, research articles and other resources that are
available in the university’s library e.g. ebrary, search.proquest.com etc., and even
online tutorial websites.
Cost
This is associated to all kind and all types of business organization. Generally, the cost
incurred are categorized or classified by the organization dependent to its type of
organization involved.

It is the equivalent(cash equivalent) sacrificed for goods and services that are
expected to bring benefits to the organization. This will produce future benefits that
are usually means revenue.

Expenses
This is the expired costs that are deducted from the revenue in the income statement
to get the profit of the company as the cost are used up in producing or selling products
and rendering of service.

Losses
This is cost that are not used in the production or selling products and rendering of
services but they expire without producing any benefit.

Figure e.1 The relationship between Costs, Expenses and Losses

Let’s Check!
I. Questions:
1. What is cost?
________________________________________________________
________________________________________________________
________________________________________________________

2. What is expense?
________________________________________________________
________________________________________________________
________________________________________________________

3. What is loss?
________________________________________________________
________________________________________________________
________________________________________________________

4. What is/are differences between cost, expense and loss? And how they
relates to each other?
________________________________________________________
________________________________________________________
________________________________________________________

II. True or False

1. Costs are incurred for future benefits.
2. Expenses are the cost that are expired.
3. Loss is the cost that will still be used.
4. Expenses are all cost but not all cost are expenses.
5. Losses and expenses are cost that are still beneficial to the company.

Q&A List
Do you have any question for clarification?
Questions/Issues Answers
1.
2.
3.
4.
5.

Keywords index
Cost Losses
Expenses
 Self-Help: You can also refer to the sources below to help you
further understand the lesson.

You can also refer to the sources below to help you further understand the
lesson:
De Leon, N. D., De Leon, E. D. and De Leon, G. Jr. M. (2019). Cost accounting and
control. Manila: GIC Enterprise & Co., Inc.
Garrison, R.H., & Noreen, E.W. (2003). Managerial accounting (10th ed.). McGraw-
Hill Company, Inc.
Cabrera, E. B. (2014). Management accounting: concepts and application. Manila:
GIC Enterprise & Co., Inc.

Big Picture in Focus: ULOf. Define and distinguish the different types
of costs and expenditures that are useful in planning, control and
analytical processes; the cost are not limited to the following:

Metalanguage

For you to demonstrate ULOf, you will need operational understanding of the terms
enumerated below.

Product Costs is the cost from the supplier plus all costs necessary to get the item
into inventory and ready for sale.

Period Costs is the cost that are nescessarily be reported to the income statement
as deduction to the revenue.

Prime Cost is the direct cost of a commodity in terms of the materials and labor
involved in its production, excluding fixed costs

Conversion Cost is a term used in cost accounting that represents the combination
of direct labor costs and manufacturing overhead costs.

Direct Cost is a price that can be directly tied to the production of specific goods or
services.

Indirect Cost is cost that are not directly accountable to a cost object (such as a
particular project, facility, function or product).

Variable Cost a cost that varies with the level of output.

Fixed Cost is a cost that does not change with an increase or decrease in the amount
of goods or services.

Mixed Cost is a cost that contains both a fixed cost component and a
variable cost component.

Common Cost is a cost that is not attributable to a specific cost object, such as a
product or process.
Joint Cost is a cost incurred in a joint process. Joint costs may include direct
material, direct labor, and overhead costs incurred during a joint production process.

Capital Expenditure are funds used by a company to acquire, upgrade, and maintain
physical assets such as property, buildings, an industrial plant, technology, or
equipment.
Revenue Expenditure is a cost that is charged to expense as soon as the cost is
incurred.

Standard cost is an estimated or predetermined cost of performing an operation or

producing a good or service, under normal conditions.

Opportunity costs is the benefit that is missed or given up when an investor,

individual or business chooses one alternative over another.

Differential costs is the difference between the cost of two alternative decisions, or
of a change in output levels.

Relevant costs is a managerial accounting term that describes avoidable costs that
are incurred only when making specific business decisions.

Out-of-pocket costs is the direct payment of money that may or may not be later
reimbursed from a third-party source.

Sunk costs is a cost that has already been incurred and cannot be recovered.
Controllable costs re those costs that can be altered in the short term. More
specifically, a cost is considered to be controllable if the decision to incur it resides
with one person.

Non-controllable costs is an expense that is not within the sphere of control of a

manager.

Essential Knowledge

To perform the aforesaid big picture (unit learning outcomes), you need to fully
understand the following essential knowledge laid down in the succeeding pages.
Please note that you are not limited to exclusively refer to these resources. Thus, you
are expected to utilize other books, research articles and other resources that are
available in the university’s library e.g. ebrary, search.proquest.com etc., and even
online tutorial websites.
PRODUCT COST AND PERIOD COST

Product Cost
This is consist of the 3 major components namely: Direct Material, Direct Labor and
Factory Overhead. This are cost nescessary to produce a finish product.

Direct Materials are basic inggredients that are transformed to a finished product
aligned with the use of direct labor anf factory overhead. This are materials that are
directly, conveniently and economically traceable to the product example: flour is for
bread, steel sheet for automobiles, wood for tables and chairs and others

Directly traceable means that materials can be seen immediately to the product.
Conveniently tarceable means that the materials can be recognized without undue
cost.
Economically treaceable means that the cost of the materials can be measureable
immediately without undue effort and cost.

If the material cost are not economically, directly and conveniently traceable they are
recorded as part of the factory overhead in the form of indirect materials. The example
of this cost are nails and paints in the furnitures, rivets in airplanes and bolts in
automobiles.

Direct Labor are amount of peso paid as wages to the people who works directly to
the product. This direct labor costs that are directly relates to the product of the
company includes the amount paid to machine operators, maintenance workers and
other workers directly involved in molding the products, while those amount paid to
the people not directly shaping the products are part of the indirect labor costs reported
to the factory overhead. This cost includes wages and salaries given to supervisors,
machine helpers and other support personnel. Payroll taxes, group insurance, sick
pay, vacation and holiday pay and other fringe benefits are usually included in the
factory overhead even it is part of the direct labor cost.

Factory Overhead the element that are considered as the indirect cost of all the
product cost. All cost that are not classified as direct material and direct labor costs
are recognized in this section. This are cost that are not practically, economically and
conveniently traced to the product. This is also called as manufacturing overhead,
factory burden and indirect manufacturing costs.

Indirect materials and supplies: nails, rivets, lubricants and small tools

Indirect labor costs: wages of lift-truck driver, maintenance and inspecton labor,
engineering labor, machine helpers and supervisors.

Other indirect factory costs: building, machinery and tool maintenance, propery taxes,
property insurance, pension costs, factory rent and utility.

Period Costs
This are cost that are reported as expense in the period it is incurred. This costs are
group into marketing or selling expenses and administrative or general expense.
Marketing or selling expense is the costs that are inccurred in connectionwith
securing the customer orders until the delivery the product or services to the hands of
the customers. This cost are referred to as order-getting and order-filling costs.
Example of this costs are advertising, shipping, sales travel, sales commission, sales
salaries, and expenses relates to the finished goods warehouse.

Administrative or general expenses is the costs that are spent to all executive,
organizational and clerical expenses that are not included in production and
marketing. This expenses are executive compensation, general accounting, general
administration and all expenses that are incurred by the company in the administrative
and general as a whole in the organization.

PRIME COSTS AND CONVERSION COSTS

Prime costs are costs that are direct cost to the product as this is the combination of
the direct material cost and direct labor costs.

Conversion costs are the costs combined from the direct labor and factory overhead
that are use to transform the raw materials to finished products.

DIRECT COSTS AND INDIRECT COSTS

Direct costs are costs that are immediately traceable to the product if it is product
costs and costs that are charged to the particular manufacturing department that
incurred the costs that are conveniently identified with the departments that benefited
from said costs are called direct departmental charges if the cost is the cost from the
department..

Indirect costs are costs that are not conveniently and economically traceable to the
product and if indirect costs that is charge to other departments that are later
transferred to other department are called indirect departmental charges.
VARIABLE COSTS, FIXED COSTS AND MIXED COSTS
Variable costs are costs that will vary directly to the change in total in relation to the
volume of production. In essence, the total costs will vary as the volume changes but
the cost per unit will not change even if there are changes in volume.

Figure f.1. Plotted graph for variable costs.

Illustration 1
The labor cost of the company is P/ 4 pesos per volume produce
Volume Labor cost Cost per Unit(volume)
May 8,000 32,000 4
June 9,500 38,000 4
July 7,800 31,200 4
August 6,500 26,000 4
September 9,900 39,600 4
October 6,700 26,800 4
November 8,800 35,200 4

Therefore, the labor cost per unit will not change but the total costs will increase if the
volume will increase but if the volume will decrease then the total costs will also
decrease.

Fixed costs are costs that will remain constant in total even if there are changes in
volume of production but as to per unit it will vary inversely to the change in volume.

Examples are salaries of production executives, depreciation of the equipment and

building using straight-line basis of depreciation rental payments and insurance.

This costs are categorized into committed fixed costs and managed fixed costs.

Committed fixed costs are costs that are relatively committed on the management
as a result of past decision in a long-term basis. Example; depreciation.

Managed fixed costs are costs that are incurred in a short term basis and can be
easily modified and changed in respond to management objectives. Example;
advertising, research and development and training of employees.

Figure f.2
Illustration 2
The rental cost of the company is P/ 100,000 pesos yearly.
Volume Rental cost Cost per Unit(volume)
May 8,000 100,000 12.5
June 9,090 100,000 11.0
July 8,333 100,000 12.0
August 8,695 100,000 11.5
September 7,692 100,000 13.0
October 6,400 100,000 15.625
November 7,142 100,000 14.00

Therefore, the total cost will not change as volume change as even if no produce the
cost will still be incurred by the company but the cost per unit is changing inversely as
the volume increase the cost per unit decreases and the cost per unit will increase if
the volume will decrease.

Mixed Costs are costs that has both the characteristics of fixed and variable cost or
this are cost that are partly fixed and partly variable. This cost has two types; semi-
variable costs and step costs.

Semi-variable costs are costs that definitely has fixed portion of the minimum fee
required and the variable portion is charge of using the service. Examples; utilities,
cost of cellphone or telephone plan. In the figure f.3 the line where it start is the fixed
portion and as the volume increase the cost will increase accordingly and that is the
variable portion of the costs.

Figure f.3 Semi-variable cost graphical illustration.

Illustration 3
The company renting a building for P/ 250,000 and in addition the company also will
pay 2% of the total sales of the company per year. The company earned a P/
2,500,000 total sales for the current year.

Fixed rent 250,000

Variable rent (P/ 2,500,000*2%) 50,000
Total rent expense 300,000
Step Costs are costs changes abruptly in a various activity levels. This are similar to
fixed cost in a very small relevant range. In other words the fixed costs will change in
a various level of production of the company as presented in the figure f.4.

Figure f.4 The graphical illustration of the step costs.

Separating the Fixed cost portion and the Variable cost portion in the mixed
costs

The problem of the manager is to ascertain as to how much is the fixed portion of the
mixed costs thus, separating the variable and fixed in a mixed cost is necessary. Then,
the manager will now have to use either of the three (3) methods of separating fixed
and variable costs to analyze and evaluate the cost incurred by the company.

This course will only discuss two of the methods namely the High-Low Method and
the Least Square Method, while the scatter graph method will be discuss in other
accounting related subject.

High-Low Method is the method of separating fixed and variable components of the
mixed cost by getting the highest volume and their corresponding cost and the lowest
volume and also their corresponding cost. Then follow the formula below
Cost of the Highest Volume minus(-) Cost of the Lowest
Volume
Variable Costs/unit = ------------------------------------------------------------------------------------
----
Highest Volume minus(–) Lowest Volume
or
CHV – CLV
VCU = ------------------
HV - LV

Fixed Cost = Cost of the highest volume – (Highest volume * Variable cost per unit)
or
FC = CHV – (HV * VCU)
or
Fixed Cost = Cost of the lowest volume – (Lowest volume * Variable cost per unit)
or
FC = CLV – (LV * VCU)

Total costs = Fixed cost + Variable costs or TC = FC + VC

Whereas;

Variable costs = volume produced * Variable cost per unit or V * VCU

Legends:
TC – Total Costs VC – Variable Costs
FC – Fixed Costs VCU – Variable Cost per Unit
FCU – Fixed Cost per Unit TCU – Total Cost per Unit
V – Volume LV – Lowest Volume
HV – Highest Volume CLV – Costs of the Lowest Volume
CHV – Costs of the Highest Volume

Illustration 4

Magpakailanman Mo Kaya Company has the following information in the operation

of the company’s processing facilities at various levels of activity:

Month Units Processed Total Costs

January 8,000 14,000
February 4,500 10,000
March 7,000 12,500
April 9,000 15,500
May 3,750 10,000
June 6,000 12,500
July 3,000 8,500
August 5,000 11,500

Required: Using High-Low Method

1. Compute:
a. the variable cost per unit
b. the total fixed costs

2. Compute for the total costs if the production is 7,800 units will be produced
Solution:

1.A
CHV – CLV 15,500 – 8,500
VCU = ------------------------- VCU = ------------------------
HV – LV 9,000 – 3,000

7,000
VCU = ---------- VCU = 1.1666…
6,000

1.B
FC = 15,500 – (9,000 * 1.1666…) FC = 8,500 – (3,000 *
1.1666…)
FC = 15,500 – 10,500 FC = 8,500 – 3,500
FC = 5,000 FC = 5,000

2.
TC = FC + VC
TC = FC + (V * VCU)
TC = 5,000 + (7,800 * 1.1666…)
TC = 5,000 + 9,100
TC = 14,100
Least Square Method

The formulas that are to be use in this solution are the linear equation formula.

Equation 1: Y = a + bx
Equation 2: ∑y = na + b∑x
Equation 3: ∑xy = ∑xa + b∑x2

Where:
Y = Total costs
n = number of given data
a = Fixed costs
b = Variable costs per unit
x = Level of activity
y = costs per level of activity
Illustration 5

Magpakailanman Mo Kaya Company has the following information in the operation

of the company’s processing facilities at various levels of activity:
Month Units Processed Total Costs
January 8,000 14,000
February 4,500 10,000
March 7,000 12,500
April 9,000 15,500
May 3,750 10,000
June 6,000 12,500
July 3,000 8,500
August 5,000 11,500

Required: Using Least Square Method

1. Compute:
a. the variable cost per unit
b. the total fixed costs
2. Compute for the total costs if the production is 7,800 units will be
produced
Solution: X*Y X*X
Month X Y XY X2
January 8,000 14,000 112,000,000 64,000,000
February 4,500 10,000 45,000,000 20,250,000
March 7,000 12,500 87,500,000 49,000,000
April 9,000 15,500 139,500,000 81,000,000
May 3,750 10,000 37,500,000 14,062,500
June 6,000 12,500 75,000,000 36,000,000
July 3,000 8,500 25,500,000 9,000,000
August 5,000 11,500 57,500,000 25,000,000
∑ = TOTAL 46,250 94,500 579,500,000 298,312,500

1. a
Equation 2: ∑y = na + b∑x
Equation 3: ∑xy = ∑xa + b∑x2

Equation 2: 94,500 = 8a + b(46,250)

Equation 3: 579,500,000 = 46,250a + b(298,312,500)

Multiply the least common multiple to eliminate “a” on both sides

Equation 2: 94,500 = 8a + b(46,250)
(5,781.25)
Equation 3: 579,500,000 = 46,250a + b(298,312,500)

Proceed to subtraction of the equation 2 and equation 3

546,328,125 = 46,250a + b(267,382,812.50)
- 579,500,000 = 46,250a + b(298,312,500)
33,171,872 = + b(30,929,687.5)
 33,171,872
b = ---------------------------
30,929,687.50

b = 1.0725

1.b
Using Equation 2:
94,500 = 8a + 1.0725(46,250)

8a = 94,500 - 49,602.80

8a = 44,897.20

44,897.20
a = --------------------
8

a = 5,612.15

Using Equation 3:
579,500,000 = 46,250a + 1.0725(298,312,500)

46,250a = 579,500,000 - 319,938,055.18

46,250a = 259,561,944.82

259,561,944.82
a = --------------------------------
46,250

a = 5,612.15
3. Using the Equation: Y = a +bx
Y = 5,612.15 + 7,800(1.0725)
Y = 5,612.15 + 8,365.50
Y = 13,977.65

Common Costs and Joint Costs

Common costs are costs that are employed in two or more department, operation,
accounting periods, services or commodities. This are cost that need allocation.

Example: Cost of depreciation of a building that are needed to be allocated to the

departments based on floor area that are used by that department accordingly.

Joint costs are costs that are apportioned to the products as these are product cost
of a process that produces more than one product and that the costs of the direct
materials, direct labor and factory overhead are incurred that are allocated to the
product at split-off point, which the product are already separable to each other. This
cost are not directly identifiable to any of the products, thus allocation is needed for
the products that are produced to absorb the cost of the production.

Capital Expenditure and Revenue Expenditures

Capital expenditures are expenditures of the company that will give benefits to more
than one(1) accounting periods. These costs are allocated to the different accounting
periods (e.g. depreciation, amortization and depletion)

Revenue expenditures are expenses that are charge directly to the current period
this is also the same with the term period costs.

Controllable Costs and Non-controllable Costs

Controllable costs are costs that can be manage by the managers that has power to
authorize the costs. E.g. Sales expenses and advertising costs are controllable costs

Non-controllable costs are those cost that cannot be managed or controlled by the
managers. E.g. Depreciation, amortization and depletion.

Cost Necessary for Planning, Control and Analytical Processes

Standard Costs are costs of direct materials, direct labor and factory overhead that
are predetermined and established by the organization for a product from the
accumulated past experiences and date from research studies. This is the benchmark
of management by accountant for budgetary cotrol system.

Opportunity Costs are costs of the alternative that are given up. Example beow:
Alternative 1. You are going to buy fone and load a prepaid worth P/ 15,000 and P/
600 load per month.
Alternative 2. You are going to get a plan from a telecom company P/ 500.00 per
month for 2 years.

Therefore, if you chose to Alternative 2 then the benefit of the Alternative 1 is

considered as opportunity costs.
Differential Costs are cost that are called incremental or decremental costs that are
present in both alternatives. Changes of the costs are employs the revenue and cost
that are called marginal cost and marginal revenue. This maybe variable or fixed.

Example:

PARTICULARS Proposed Actual DIFFERENCE

Revenue 1,350,000 980,000 370,000
Cost of Goods Sold 650,000 420,000 230,000
Advertising 60,000 90,000 (30,000)
Commission 10,000 45,000 (35,000)
Warehouse Depreciation 100,000 85,000 15,000
Other Expenses 90,000 90,000 -
Total Expenses 910,000 730,000 180,000
Net Income 440,000 250,000 190,000

Relevant Costs are future costs that are changing across the alternatives. All the cost
in the table above except other expenses are considered relevant costs.
Out-of-Pocket Costs are cost that require payment of money or this are cost that are
petty in nature.

Example: The employee will pay fare for the taxi P/ 90.00, then, this cost is considered
as pocket cost as this cost should be paid in cash.

Sunk Costs are costs that are historical and cannot be change anymore.

Example: The company purchase machine P/ 200,000 for special purpose. The P/
200,000 is the outlay and cannot be change therefore this is sunk costs.

Let’s Check!
I. Questions:
1. What are the differences between product costs and period costs?
________________________________________________________
________________________________________________________
________________________________________________________

2. What is the difference between direct costs and indirect costs?

________________________________________________________
________________________________________________________
________________________________________________________

3. What is the difference between common cost and joint cost?

________________________________________________________
________________________________________________________
________________________________________________________
4. What is/are differences between controllable and non-controllable
costs?
________________________________________________________
________________________________________________________
________________________________________________________

II. True or False

1. Factory rent is a variable cost.
2. Commission of salesmen is variable cost.
3. President’s salary is a manufacturing cost.
4. Variable cost will vary as to total but constant as to per unit.
5. In a manufacturing concern, prime costs are direct costs.
6. Fixed cost per unit will increase as the volume of production increases.
7. Product costs are consist of prime costs and factory overhead.
8. A cost that is present in alternative 1 but absent in whole or part under other
alternative is known as differential costs.
9. The salary of factory foreman is a factory overhead.
10. Prime cost is always variable.
III. Multiple choice
1. Wages for factory machine operator of a manufacturing firm are an element
of
a. Prime cost only c. Both prime cost and conversion cost
b. Conversion cost only d. Neither prime cost nor conversion cost
2. Indirect costs are also known as:
a. Differential costs c. Common costs
b. Opportunity costs d. Relevant costs
3. Fixed cost
a. Increases on per unit basis as the number of units produce increases
b. Is constant if expressed on a per unit basis
c. Remains the same as to per unit even the production decreases
d. Not affected by the change in activity.
4. In general, which of the following costs could usually be most reliably
predicted is:
a. Variable cost per unit c. Fixed cost per unit
b. Total variable cost d. Total fixed cost
5. In a job cost system, factory overhead is
a. An indirect cost that are necessary element of the production
b. A direct costs that are necessary element of the production
c. A direct costs but not necessary element of the production
d. An indirect cost but not necessary element of the production
6. During the month of June, Julrald Company produced a product the will be
sold for P 20.00 per unit. The fixed cost of the company is P 154,000.00,
while the operating profit is P 26,000.00 and the company produced 12,000
units of this products then what is the variable cost per unit?
a. P 5.00 b. P 4.50 c. P 6.00 d. 7.17
7. Jovani Company produce a 5,500 outdoor chairs for Job Order No. 250.
Each of the chair require 2.2 hours of direct labor for 8.90 per hour. The
total material cost is P 51,700 and the total factory overhead is P 53,845
was traced to Order 250. How much is the prime cost per unit?
a. 38.77 b. 29.77 c. 28.98 d. 19.58
8. Based on the above information, what is the total cost per unit cost of this
order?
a. 38.77 b. 37.88 c. 36.99 d. 28.09
9. Nealshen company incurs a total selling and administrative expenses of P
30,000 to produce 1,000 units of product which will be sold for P 95.00. The
company spend P 25.00 per unit for direct materials, whereas, P 16.00 per
unit for direct labor and the factory overhead per unit 76% of the cost of
direct material. What is the conversion costs per unit?
a. P 41.00 b. 44.00 c. 35.00 d. 45.00
10. Based on the above information, what is the Cost of goods sold per unit?
a. P 60.00 b. 44.00 c. 41.00 d. 35.00
 Let’s Analyze!

Ethyl Company incurred the following costs last year

Direct materials P 150,000
Direct labor 220,000
Selling expenses 136,000
Factory overhead 250,000
Administrative expenses 112,000
Units produced is 10,000 and sold 9,800 at P 91.00 each.

Compute for the following:

a. Prime cost per unit
b. Conversion cost per unit
c. Cost of goods sold
d. Gross profit per unit
e. Operating income is

In a Nutshell
Zombania Corporation produces and sells strawberry flavoured fitness drink. Over
the last five months the company had the following production costs and production
volume
Month Costs Volume in boxes
July P 6,000 12
August 6,659 14
September 8,370 18
October 8,800 19
November 8,050 17

Requirement:
1. Using high-low method, what is the fixed cost per month for fitness drink
production?
2. Using high-low method, what is the total cost if the company will produce
25 boxes of strawberry flavoured fitness drink?
3. Using least square method, what is the variable cost per box of fitness
drink?
Q&A List
Do you have any question for clarification?
Questions/Issues Answers
1.
2.
3.
4.
5.
Keywords index
Inventoriable Cost Mixed Cost
Prime Cost Prime Cost
Conversion Cost Common Cost
Direct Cost Joint Cost
Indirect Cost Capital Expenditure
Prime Cost Revenue Expenditure
Variable Cost Product Cost
Fixed Cost

Self-Help: You can also refer to the sources below to help you
further understand the lesson.
You can also refer to the sources below to help you further understand the
lesson:
De Leon, N. D., De Leon, E. D. and De Leon, G. Jr. M. (2019). Cost accounting and
control. Manila: GIC Enterprise & Co., Inc.
Garrison, R.H., & Noreen, E.W. (2003). Managerial accounting (10th ed.). McGraw-
Hill Company, Inc.
Cabrera, E. B. (2014). Management accounting: concepts and application. Manila:
GIC Enterprise & Co., Inc.