CO S A C C 1

✓ the process of measuring, analyzing, computing, and reporting

the cost, profitability and performance of operations.

✓ a subfield of accounting that records, measures, and reports

information about costs.
 Financial accounting focuses on external reporting that is
guided by generally accepted accounting principles.

Management accounting measures and reports financial

information as well as other types of information that assist
managers in fulfilling the goals of the organization.

Cost accounting measures and reports financial and other

information related to the organization’s acquisition or consumption
of resources.
✓ Formulating overall strategies and long-range plans.

✓ Resource allocation decisions such as product and customer

emphasis and pricing

✓ Cost planning and cost control of operations and activities

✓ Performance measurement and evaluation of people

✓ Meeting external regulatory and legal reporting requirements

Planning – Involves choosing goals
– Includes budget planning

Controlling – Covers both the action that implements the planning

decision and the performance evaluation of the personnel and
operations.

Evaluating – Part of the control process wherein we evaluate the

past performance.
 Value Chain is the sequence of business functions in which
utility (or usefulness) is added to the products or services of an
organization.

1. Research and Development (R&D)

2. Design of products, services, or processes
3. Production – the coordination and assembly of resources to
produce a product or deliver a service.
4. Marketing
5. Distribution
6. Customer service
• Cost – the amount measured in money, of cash expended or other
property transferred, capital stock issued, services performed, or a
liability incurred, in consideration of goods or services received or to be
received.

• Expense – all expired costs that are deductible from revenues

• Loss – the excess of expenses, in the broad sense of that word, over
revenues for a period. It is also the excess of all or the appropriate
portion of the cost of assets over related proceeds, if any, when the
items are sold, abandoned, or either wholly or partially destroyed by
casualty or otherwise written off
• Cost Object – anything for which a separate measurement of costs
is desired

• Cost Accumulation - the collection of cost data in some organized

way through an accounting system.

• Cost Assignment – a general term that encompasses both tracing

accumulated costs to a cost object and allocating accumulated
costs to a cost object
• Time of charges against revenue
Product (DM, DL and OH) vs Period (GAE, SME)

• Ease of traceability
Direct vs Indirect

• Management function
a. Manufacturing – applied to producing a product
b. Marketing – costs in selling the product
c. Administrative – costs in policy–making activities
d. Financial – costs related to financial activities
• Degree of averaging
Total vs Unit

• Time when computed

Historical vs Predicted

• Relation to product
Prime vs Conversion

• Behavior in relation to fluctuations in volume or activity or

level of production
Variable, Fixed and Mix
Kristine Industries electricity costs and machine hours over a nine-month period follow:

1. What would be the total cost if the company utilized 42,000 hours?
2. If the relevant range is from 20,000 to 50,000 machine hours, what would be the total
cost if the company utilized 43,000 hours?
• The following information summarized total production costs and number of units of
product produced by Rosalyn Company over the last 6 months:

1. Determine the cost formula.

2. What would be the total cost if the company plans to produce 35,000 units?
3. What would be the total cost if the company plans to produce 25,000 units?