Cost Accounting Notes

Costs in Relation to Manufacturing Departments or Other Segments 1. Direct Departmental Cost – traceable to a specific department 2. Indirect Departmental Cost – not traceable to a specific department & requires allocation Costs in Relation to an Accounting Period  Capital Expenditures – benefits future periods (capitalized) 2. Revenue Expenditure – benefits only the current period (expensed) 1.

Costs in Relation to a Decision, Action, or Evaluation 1. 2.

Standard Cost – predetermined estimate of cost on a unit basis Budgeted Cost – predetermined estimate of cost in total

ACCOUNTING FOR LABOR

Provisions of the Labor Code 1. 2. 3. 4. 5. 6. 7.

Weeks of labor   52 weeks (365/7) Overtime pay  Regular rate + 25% of regular pay Holiday and Sunday works  100% regular pay 13th month pay is mandatory Minimum vacation leave  5 days Minimum sick leave  5 days Working hours subject to differential/shift pay  10pm-4am & 2pm-10pm

Classifications of Labor  1. 2. 3. 4.

Direct Labor  Indirect Labor  Labor Losses Labor Overhead

Labor Overhead Accounting  1. Overtime Regular pay Overtime pay Hours worked Computation:

P80/hour   30% 45 hours (40, regular)

Regular pay  P80 x 40 = P3, 200 Overtime pay  P80 x 5 = P400 (P80 x 30%) x 5 = P120 Entry: Work in Process Factory Overhead Control Payroll

3, 600 120 3, 720

2. Bonus 2010, profit Bonus Weekly pay

P260, 000 1% P500

Computation: Bonus  P260, 000 x 1% = P2, 600 Weekly accrual for bonus  P2, 600/52 = P50 Entry: Work in Process Factory Overhead Control Payroll Liability for Bonus

500 50 500 50

3. Vacation/Sick Pay  Weekly pay P6, 000 The employees are entitled to 2 weeks vacation leave. Computation: Vacation Pay  P6, 000 x 2 = P12, 000 No. of weeks to accrue  52 – 2 = 50 Weekly accrual for vacation pay  P12, 000/50 = P240/week Entry: Work in Process Factory Overhead Control Payroll Liability for Vacation Pay

6, 000 240 6, 000 240

4. Differential (Shift) Pay  Regular rate Shift Premium

P50/hour   P10/hour  

Computation: P50 x 40 = P2, 000 P10 x 40 = P400 Entry: Work in Process Factory Overhead Control Payroll

2, 000 400 2, 400