Cost Accounting I

Materials

For practical purposes, warehouse controls are carried out through

of the complete method, that is to say through the inventory method
perpetual

The accounting control of the different stages and through which they go
materials are carried through the following accounts:

Materials warehouse
Work in progress
Finished goods warehouse
Warehouse of semi-finished products

Material warehouse
Loading: It is charged.
1. From the amount of the Del import of the
acquisitions of delivery of materials
materials to the departments
2. Of the expenses of productive or service
purchase that originates the 2. From the returns of
acquisitions materials a the
3. Part value of the suppliers
returns of 3. Of the adjustments for
materials, made by loss o decrease
the departments duly authorized.
productive
4. From the replacements of
goods for
returns made to
the suppliers.
Your balance will be negative, and it will indicate the amount of the

inventories of the materials

.

Work in progress
Loading: It is paid
1. From the inventory amount Of the value of the
initial production. in production completed
process. 2. From the amount of the
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 Cost Accounting I

2. Del importe de las materials returned to

deliveries of materials warehouse
received for your 3. Part import of
transformation final inventory of
The value of the work production in process
direct (this last no
4. Of the amount of expenses always
indirect
5. Of the returns that
make the item warehouse
finished by production
subject to correction.
Your balance will be negative, and it will indicate the amount of the inventories.
of the materials

Finished goods warehouse

It loads: It is credited

1. Del value of the 1. Of cost of

production received from the production of the articles
departments sold
respective 2. From the returns of
[Link] the amount of the finished products.
returns of the 3. From the articles
clients, at cost finished, losses and
3. Of the amount of the losses
purchase of items
finished.
Your balance will be negative, it represents the amount of the
existence of finished items, at cost.

Semi-finished products warehouse

It loads: It is credited

1. From the initial inventory For the amount of the

of the same parts o articles
2. Of the value of the intermediate, requested by
parts o articles the departments
intermediates productive.

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 Cost Accounting I

Your balance will be negative, representing the amount of inventory.

semi-finished products.

Valuation of warehouse exits

The most important or suitable techniques for our environment, to

the valuation of warehouse outputs is:

FIFO (first in first out)

LIFO (last in, first out)
Average price.

To assess the final inventory. During the first year of operations

the following fertilizer purchases were made:

Date Precio Costo Fecha Cantidad

of Cantid X Total shipment
buy ad united Prod.
d in
process
so
January 50 200.00 10,000. January 30 bags
10 bags 215.00 00 15,210 bags
April 20 200 210.00 43,000. Abril 170 sacos
July 15 bags 218.00 00 25 30 bags
Sep. 5 200 42,000. Julio
bags 00 15
50 10,900. Sep.
bags 00 10
500 105,900.
bags 00

PEPS

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 Cost Accounting I

This method identified as 'FIFO' is based on the assumption

that the first materials to enter production are the
first to leave it.

This method has been deemed appropriate because it leads to a

inventory valuation consistent with price trends;
since it is assumed that the inventory is made up of the
most recent purchases are valued at costs that are also higher
recently, the valuation then follows the market trend.

oanichteW
siher Unit: Iamin M áx i m um
Supplier:
quantities unit value total amount
fec has comp. inputoutput ex is. inputoutput must news s adlo
Ene-10c or pra 50 50 200 10,000.00 10,000.0
Sale on January 15 30 20 200 6,000.00 4,000.0
Apr-20 with for 200 220 215 43,000.00 47,000.0
20 200 200 4,000.0043,000.0
Apr-25 sale
190 10 215 40,850.00 2,150.0
Jul-15 with for 200 210 210 42,000.00 44,150.0
10 200 215 2,150.0042,000.0
Jul-15 sale
160 40 210 33,600.00 8,400.0
Sep-05c buy 50 90 218 10,900.00 19,300.0
Sep-10 sale 30 60 210 6,300.0013,000.0

UEPS

This method is based on the assumption that the last entries to the
production process, they are the first materials to come out.

The U.E.P.S. method assigns costs to inventories under the assumption

that the materials acquired last are the first to
be used, therefore the cost of the materials will be valued at the
last purchase prices at which the materials were acquired; and
Conversely, the final inventory is valued at prices of
purchase of each material at the moment it was made.

Date Precio Costo Fecha Cantidad

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 Cost Accounting I

of Cantid X Total shipment

buy united Prod.
a d in
process
so
January 50 200.00 10,000. Enero 30 sacos
10 bags 215.00 00 15,210 bags
April 200 210.00 43,000. Abril 170 sacos
20 bags 218.00 00 25 30 bags
July 15200 42,000. Julio
Sep. 5 bags 00 15
50 10,900. Sep.
bags 00 10
500 105,900.
bags 00

Loanicotdnait Unit: Minímo Máx im o

Provider:
quantities unit value total amount
fec ha c om p. inputoutput ex is . inputoutput must news balance
Ene-10c is here 50 50 200 10,000.00 10,000.0
Ene-15 sale 30 20 200 6,000.00 4,000.0
Apr-20 with for 200 220 215 43,000.00 47,000.0
200 20 215 43,000.00 4,000.0
Apr-25 sale
10 10 200 2,000.00 2,000.0
Jul-15com for 200 210 210 42,000.00 44,000.0
170 40 210 35,700.00 8,300.0
Jul-15 sale
40 210 0 . 0 0 8,300.0
Sep-05c com pra 50 90 218 10,900.00 19,200.0
Sep-10 sale 30 60 218 6,540.0012,660.0

Average

As its name indicates, the way to determine it is based on

to divide the accumulated amount of the applicable expenditures by the
number of materials acquired or produced.

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 Cost Accounting I

Date Precio Costo Fecha Cantidad

of Cantid X Total shipment
buy ad united Prod.
d in
process
so
January 50 200.00 10,000. January 30 bags
10 bags 215.00 00 15,210 bags
April 20, 200 210.00 43,000. Abril 170 sacos
July 15 bags 218.00 00 25 30 bags
Sep. 5 200 42,000. Julio
bags 00 15
50 10,900. Sep.
bags 00 10
500 105,900.
bags 00

oLanioctcdnait Unit: Mminimo Maximum

Provider:
quantities valor unitario total amount
fec has com p. inputoutput ex is . inputoutput must news s adlo
Ene-10c or pra 50 50 200 10,000.00 10,000.0
Ene-15 sale 30 20 200 6,000.00 4,000.0
Apr-20 with to 200 220 215 43,000.00 47,000.0
April 25 sale 210 10 213.64 44,863.64 2,136.3
Jul-15 with for 200 210 210 42,000.00 44,136.3
Jul-15sale 170 40 210.17 35,729.44 8,406.9
Sep-05c of pra 50 90 218 10,900.00 19,306.9
Sep-10 sale 30 60 214.52 6,435.6412,871.2

Comparison of valuation methods

A summary of the results obtained is presented below.

application of the three methods of inventory valuation. The
the results are as follows:

PEPS FIFO Average

Weighted
Sales costs 92,900.00 93,240.00 93,028.72
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 Cost Accounting I

Final inventory 13,000.00 12,660.00 12,871.28

105,900.00 105,900.00 105,900.00

The comparison of the three valuation methods yields evidence of

that the last in first out (LIFO) method is more
convenient in times when prices show a trend towards
rise. In these circumstances, the LIFO method reports the cost of
sales at the most recent values, resulting as a consequence
a minor utility. Any of the four proposed methods
they constitute acceptable accounting practices.

Accounting for materials

Materials

The president of the company Papeles Pabla provides the following

information concerning the company's pulp inventories
for the month of July. (The company Valora its final inventory under the
FIFO method

July 1 Initial inventory 1,000 Kg. of paper pulp whose cost is

5.00/Kg.
10 Purchase of 300 Kg. at 5.50/Kg.
Usage: 300 Kg.
Usage: 750 Kg.
28 Buy 400 Kg. at 6.00/Kg.
31 Use: 350 Kg.

All purchases are made in cash, it is requested:

to account for the previous transactions under the system of
perpetual inventory
Calculate the cost of the materials used and the final inventory of
materials.

a
DATE DESCRIPTION MUST NEWS

Jul. 10 Material warehouse (300 x 1,650.00

5.50 1,650.00
Banks
To register the purchase of
materials
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 Cost Accounting I

FEECH DESCRIPTION MUST NEWS

Jul. 16 Work inventory in 1,500.00

process 1,500.00
Material warehouse
(300 x 5.00)
To record the cost of
materials used

DATE DESCRIPTION THERE MUST BE

July. Work in process inventory 3,775.00

26 Materials warehouse (700 x 5.00)+ 3,775.0
(50x 5.50)= 0
To register the cost of materials
used

DATE DESCRIPCIÓN MUST NEWS

Jul. 28 Materials warehouse (400 x 2,400.00

6.00) 2,400.00
Banks
To register the purchase of
materials

DATE DESCRIPTION THERE MUST BE

Jul. Work in process inventory 1,975.00

31 Material warehouse (250 x 5.50) + 1,975.0
(100x 6.00)= 0
To record the cost of materials
used

Material Warehouse Work inventory in

process
Jul 1 5,000.0 Jul 16 1,500.00 Jul 16 1,500.0
Jul 10 0 Jul 26 3,775.00 Jul 26 0
Jul 28 1,650.0 Jul 31 1,975.00 Jul 31 3,775.0
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 Cost Accounting I

0 0
2,400.0 1,975.0
0 0
9,050.0 7,250.00 7,250.0
0 0
1,800.0
0

Cost of materials used 7,250.0

Final inventory of materials 0
Cost of the materials available for your 1,800.0
use 0
9,050.0
0

2. Waste material

The waste material is the damage that the material suffers during
its transformation. Waste is considered within the cost of
production., in case it is sold, the value of your product is
you can solve it as follows:

a. As cost recovery

In case it is considered as a recovery of the cost, the seat

the accounting would be as follows:

Let's assume that a waste material is sold for 1,000.00.

DATE DESCRIPTION MUST NEWS

Jul. 28 Clients 1,000.00

Waste sales 1,000.00
To record the sale of material from
waste

DATE DESCRIPCIÓN MUST NEWS

Jul. 28 Indirect production costs 1,000.0

Waste sales 0 1,000.00

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 Cost Accounting I

To record the recovery of the

cost

b. As diverse use
DATE DESCRIPTION MUST NEWS

Jul. 28 Clients 1,000.00

Waste sales 1,000.00
To register the sale of material from
waste

3. Defective material

Defective material is that which suffers during its transformation.

some anomaly that lowers the quality and that
it is usually considered as second production, due to the fact that
the error is not suitable to be corrected or cannot be corrected.

Defective material has various accounting treatments, among

which exist the following:

a. The production order or respective process

support the loss due to the difference between the cost and the
selling price.

For practical purposes, the provided data will be used in all

the procedures.

Datos: Producción 20 unidades Costo unitario 20.00

Costs incurred:
Direct material 250.00
Salaries and wages 80.00
Indirect production costs 70.00 400.00

5 defective units are obtained with a market price of

15.00 each.

Solution
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 Contabilidad de costos I

Cost value of 5 defective units (5 x 20.00) 100.00

Recovery value of the 5 units at 15.00 75.00
Loss 25.00

Where from:
Cost value of 15 units at 20.00 each 300.00
More
Loss of 5 defective units 25.00
COST OF GOOD PRODUCTION 325.00

DATE DESCRIPTION MUST NEWS

Jul. 28 Store of Articles 75.00

defective 75.00
Production in process
To register the amount of 5
Defective at 15.00 each

FECH DESCRIPTION MUST NEWS

Jul. 28 Warehouse of Items 325.00

finished 325.00
Work in progress
To record the amount of 15
First class art

b. That the decrease in value is controlled as expenses

indirect production costs in process, in which case the
loss will be incurred in the production cost of the
next period.

DATE DESCRIPCIÓN MUST NEWS

Jul. 28 Articles Store 75.00

defective 25.00
Indirect costs of 100.00
production
Work in progress
To register the amount of 5
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 Cost Accounting I

Art. Defective

DATE DESCRIPTION MUST NEWS

Jul. 28 Warehouse of Items 300.00

finished 300.00
Work in progress
To record the amount of 15
First-rate art

c. That the difference is a loss not attributable to the

the same production, but rather that it was originated by
an unforeseen event, in that case it must be taken
directly to profits and losses.

DATE DESCRIPTION MUST NEWS

Jul. 28 Warehouse of Items 75.00

defective 25.00
Profits and losses 100.00
Production in progress
To record the amount of 5
Defective at 15.00 each

d. How fortunate that the breakdown was caused by negligence or

inability of any worker, in which case the loss
It must be sent to a personal account in charge
of said employee.

DATE DESCRIPTION MUST NEWS

Jul. 28 Articles Warehouse 75.00

defective 25.00
Officials and employees 100.00
Production in process
To record the amount of 5
Defective at 15.00 each

4. Damaged material

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 Cost Accounting I

The defective material (faulty that can be fixed), that can

to be corrected o conviene corregirlos, mediante una operación
additional, to be considered first-rate. To register the
complementary cost can be recorded in accounting following
any of the procedures outlined below:

a. That the additional cost is involved in the order cost

in question or process.
Example

Data:
Production Order No. 1
100 units are produced, 10 break down.

Costos:
Direct material 5,000.00
Salaries and wages 3,000.00
Indirect production costs 2,500.00 10,500.00

Additional costs for the repair of the breakdown:

Salaries and wages 300.00

Indirect production costs 250.00 550,00
TOTAL PRODUCTION COST 11,050.00

Materials warehouse Work in progress

5,000.00 (1 5,000.00 11,050.00
3,000.00 (6
3) 2,500.00
4) 300.00
5) 250.00

Salaries and wages by Several accounts

to apply
3,000.00 (2 2,500.00 (3
300.00 (4 250.00 (5

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 Cost Accounting I

Item warehouse
finished
11,0500.0
0

Costo unitario = 11,050.00 = 110.50

100

b. That the additional cost, plus the original cost of production

a damaged item may be the reason for a specific order with process
specifically for the damaged units.

Material warehouse Work in progress

5,000.00 (1 5,000.00 10,500.00
2) 3,000.00 (4
2,500.00 1,600.00
5) 1,050.00 (7
6) 550.00

Salaries and wages for Several accounts

to apply
3,000.00 (2 2,500.00 (3
300.00 (6 250.00 (6

Warehouse of items
finished
10,500.00 1,050. (5
1,600.00

To determine the unit production cost for this

the following procedure is carried out:

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 Cost Accounting I

PRODUCTION ORDER No. 1

100 UNITS

Costos:
Direct material 5,000.00
Salaries and wages 3,000.00
Indirect production costs 2,500.00 10,500.00

Costo unitario= 10,500.00 = 105.00

100

PRODUCTION ORDER No. 1 BIS

10 UNITS

Initial costs:
Direct material 500.00
Salaries and wages 300.00
Indirect production costs 250.00 1,050.00

Salaries and wages 300.00

Indirect production costs 250.00 550.00
TOTAL ORDER COST 1,600.00

Costo unitario= 1,600.00 = 160.00

10

c. That the additional costs of the damaged material are charged

to indirect expenses

Task

Materials

The manager of the chemical products company provides the following

information concerning the inventories of chemical compounds of
the company for the month of July. (the company values its inventory
final under the FIFO method
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 Cost Accounting I

July 1 Initial inventory of 2,000 Kg. of chemical compound whose cost

It is 14.00/Kg.
12 Purchase of 600 Kg. at 15.00/Kg.
18 Usage: 1600 Kg.
26 Use: 650 Kg.
28 Purchase 200 Kg. at 16.00/Kg.
31 Use: 400 Kg.

The first purchase is made in cash and the second on credit, the request is:
c Record the previous transactions under the system of
perpetual inventory
Calculate the cost of the materials used and the final inventory of
materials.

Defective material

That the production order or respective process

support for loss due to the difference between the cost and the
selling price.

Datos: Producción 40 unidades Costo unitario 40.00

Costs incurred:
Direct material 1,000.00
Salaries and wages 320.00
Indirect production costs 280.00 1,600.00

10 defective units are obtained at a market price of

30.00 each.

It is requested:

a. Determine the loss due to defective materials and the cost

of good production
[Link] entries for defective production and of the
finished articles.

Damaged material

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 Cost Accounting I

That the additional cost is included in the order cost in

issue or process.

Data:
Production Order No. 1
200 units are produced, 20 break down.

Costs:
Direct material 10,000.00
Salaries and wages 6,000.00
Indirect production costs 5,000.00
21,000.00

Additional costs for repair of the breakdown:

Salaries and wages 600.00

Indirect production costs 500.00 1,100,00
TOTAL PRODUCTION COST 22,100.00

It is requested to account in ledger formats and determine the cost

unitary

Valuation of warehouse outflows

Suppose that the Agricultural Chemicals Manager of the tropics, S.A. de C.V.
he wants to know what the production cost of your company would be, by
each of the three existing inventory valuation methods,
therefore hires our services to do the calculation and to him
let's make a comparison of these methods. The manager gives us
provide the following historical information,

Date Precio Costo Fecha Cantidad

of Cantid X Total shipment
purchase ad united Prod.
d in
procedure
so
January100 100.00 10,000. Feb. 80 bags
12 bags 125.00 00 15
Mar. 27 200 130.00 25,000. 180 bags
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 Cost Accounting I

April 03 bags 150.00 00 April 200 bags

May 22100 140.00 13,000. 21 200 sacos
Jul.. 10 bags 00 Jun. 15
150 22,500. Ago.
bags 00 10
150 21,000.
bags 00
700 91,500.
bags 00

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