Future CPA, I hope that you enjoy this free study guide and that it helps you to PASS the CPA Exam.

Transcription

1 BEC COST ACCOUNTING

2 Future CPA, I hope that you enjoy this free study guide and that it helps you to PASS the CPA Exam. If you would like the complete study guide, there is a link on the last page, as well as comments from people who were in your shoes and used these notes as part of their exam review. Feel free to forward this on to anyone else who could benefit from this information. I Wish You Success! Jeff Elliott, CPA PS are we Friends on FACEBOOK? We should be! Click here: 2

3 I. INTRODUCTION a. Cost Accounting is a component of GAAP that records Ending Inventory on the Balance Sheet for i. Direct Materials ii. Direct Labor iii. Work in Process iv. Finished Goods b. Cost Accounting also records for the Income Statement c. Cost Accounting vs. Managerial Accounting Cost Accounting Managerial Accounting External Focus GAAP Internal Focus Not GAAP 3

4 II. MANUFACTURING COSTS a. Product Costs (aka Inventory Costs) i. Prime Costs 1. Direct Materials Used a. Have become part of product b. Had a direct impact on product 2. Direct Labor Used ii. Conversion Costs a. Employees who worked on product and had direct impact 1. Direct Labor Used 2. Factory Overhead Applied Exam Trick Direct Labor Used Prime Cost AND Conversion Cost 4

5 b. Factory Overhead i. All factory costs except for DM and DL used in production, including Spoilage (except for abnormal spoilage, which is a period cost and not included in OH) ii. Fixed Factory Overhead 1. (Estimated Costs / Normal Capacity) 2. Uses Normal Activity 3. Examples of Fixed Factory OH a. Depreciation (Straight Line) b. Utilities c. Taxes 4. Under/Over Applied Fixed OH always goes to COGS iii. Variable Overhead 1. (Estimated Activity / Actual Activity) 2. Uses Actual activity 3. Examples of Variable Factory OH a. Depreciation (Units of Prod.) b. Indirect Materials i. Supplies 5

6 ii. Insignificant items c. Indirect Labor i. Factory Foreman ii. Janitors iii. Machine Maintenance 4. Under/Over Applied Variable OH a. If Immaterial Goes to COGS b. If Material Goes to WIP, Finished Goods, or COGS, based on their Ending Balance Fixed OH Under/Over Applied Variable OH Under/Over Applied Always goes to COGS Immaterial? COGS Material? Allocate based on WIP, FG, COGS Ending Balances 6

7 Actual Factory OH Factory Overhead Applied Factory OH (Goes to WIP) Dr. Balance = Under Applied OH (If Fixed OH, Under goes to COGS) (If Variable OH, Under goes to COGS if Immaterial. If Material, must be allocated to WIP, FG, or COGS based on ending balances). Under Applied (Dr Balance)? Credit Factory OH for the amount and Debit WIP, FG, COGS based on their ending balances (similar to a weighted average). Cr. Balance = Over Applied OH (If Fixed OH, Over goes to COGS) (If Variable OH, Over goes to COGS if Immaterial. If Material, must be allocated to WIP, FG, or COGS based on ending balances). Over Applied (Cr Balance)? Debit Factory OH for the amount and Credit WIP, FG, COGS based on their ending balances (similar to a weighted average). WIP xxx FG xxx COGS xxx V. FOH Under Applied xxx V. FOH Over Applied xxx WIP FG COGS xxx xxx xxx 7

8 MEMORIZE These T Accounts & Solve for any Variable: Direct Materials Beginning Balance Net Purchases (Plus Freight- In) Direct Materials Used = Ending Balance (Goes to BS) Work in Process (WIP) Beginning Balance (End Bal of Previous WIP) Direct Materials Used Direct Labor Used (Conversion Cost) COGM Factory OH Applied (Conversion Cost) = Ending Balance (Goes to BS) Factory OH Applied: On the exam, they will give you a rate like 80% to be applied to something like DL. Just take the rate x DL and plug it into the WIP calc. If you are given an amount of Indirect Materials put into production and also given an amount for Manufacturing OH, ignore the Indirect Materials amount because it is included in the Manufacturing OH number it is there to trick you into giving a wrong answer Memory Trick: Both WIP and Finished Goods have a COG credit one is COGM and one is COGS. You SELL Finished Goods, so it gets Cost of Goods SOLD (COGS). Beginning Balance COGM = COGAS = Ending Balance (Goes to BS) Finished Goods COGS (Goes to Income Stmt) 8

9 Studying for BEC? Get rest of the Study Guide. 62 Page PDF Covers: Financial Management Information Technology Economics Remainder of Cost Accounting Notes Includes: $44.90 in Bonuses Bonus 1: CPA Exam Survival Guide Bonus 2: CPA Exam Study Planner Instant Download: Exactly what I needed because I have been struggling with Cost Accounting for the past couple days. Thanks! Kristin Jeff: The BEC notes are awesome Myra They are really good notes especially if you are like me and just flat out lazy when it comes to note taking. There is not much more I dislike than taking notes! Financeguy I just purchased them about 2 minutes ago. I m doing a quick scan and wondering how I could have possibly made myself a set this thorough. Thank you Jeff!! kjwc4b Jeff does produce some pretty good notes, so I would recommend purchasing them. He has some items that you wouldn t think to put in your own notes but do pop up on the actual exam. Jarod87 9