COST Accounting

COST CONCEPT

I. Identify the type of Cost

1. These are costs that vary according to the amount of work done. They include
costs like packaging, shipping and processing costs.____________________
2. These are costs that do not vary according to the amount of work done. They
include expenses like depreciation and salaries.________________________
3. These are costs associated with the day-to-day running of the
business.________________________
4. These are the costs related to producing and acquiring the product. They include
things like labour costs and electricity costs.______________________
5. Cost used to produce an items such as the materials, salary and other cost to
enhance the product.________________________
6. Cost not related to production but essential to operate the working
area.___________________
7. These are not directly accountable to a cost object, such as a particular function
or product. _______________
8. The direct cost of a commodity in terms of the materials and labor involved in its
production,
9. a term used in cost accounting that represents the combination of direct labor costs and
manufacturing overhead costs
10. the aggregate amount of cost incurred by a business to produce goods in a reporting
period. This is composed of materials, labour cost and overhead.

II. Classification of cost

Variable or Fix

1. Paper to make a book

2. Machine Depreciation
3. Insurance of a building
4. Wiring for a radio
5. Sales Commission
6. Bottles used in making Coke
7. Operator’s hourly wages
8. Rent for the factory
9. President’s Salary
10. Travel expense of salesman

III. Classification of Cost

Identify if Product or Period Cost

1. Glue used to make a book

2. Office Building Depreciation
3. Insurance of a building
4. Magnet attached for a radio
5. Sales Commission
6. Dishwashing liquid used in making restaurant
7. Operator’s hourly wages
8. Rent for the factory
9. President’s Allowance
10. Travel expense of salesman
IV. Classification of Cost

Direct Material, Direct Labor Overhead

1. Metal used in making table

2. Insurance of the machines
3. Leather used in making sofa bed
4. Wages paid to machine operators
5. Depreciation of factory machine
6. Sandpaper, bolts, and nails
7. Plastic in bottles water
8. Advertising of the company
9. Freight in of materials purchased
10. Property tax

V. Product Cost Computation

Buns used for burger 4,500

Onions, tomatoes 500
Mayonnaise 340
Salary of Chef 2,400
Ketchup 120
Cellophane for packaging 500
Delivery fee to buyer 120
Sesame seeds 230
Salary of Delivery boy 4,500
Oil 120
Gas 780

Compute the total product cost and period cost for this production.
Compute the Variable Product Cost, Compute the fixed Product Cost

Months Cost Units Produced

January 450,000 5,000
February 1,000,000 6,000
March 340,000 2,500
April 120,000 3,000
May 8,200,000 90,000
June 860,000 9,000
July 500,000 8,800

Compute the Variable cost per unit

Compute the Monthly fix Cost
Compute the total cost if 9,500 will be produced

VI. Prepare the Journal Entries for the following transaction

1. Purchased 50,000 direct material.
2. Materials used 35,000
3. Salary paid to Operator 4,500
4. Salary paid to delivery man 500
5. Depreciation of machine 5,600
6. Utilities paid 3,900
7. Unpaid Electricity bills 3,000
8. Paints for finishing touches 500