Cost Accounting - Planning and Control - 6th Edition - MATZ - USRY [PDF]

Zitiervorschau

COST ACCOUNT planning and control

Treat this book

It should

wUn

care unu

i'ehpet.^

become part of your personal

and professional

library. It will

serve you well at any

number

of points during your professional career.

COST ACCOUNTING planning and control

Sixth Edition

ADOLPH MATZ, PhD Professor Emeritus of Accounting

The Wharton School University of Pennsylvania

MILTON

F.

USRY, PhD, CPA

Regents Professor of Accounting College of Business Administration

Oklahoma

State University

Published by

A85

SOUTH-WESTERN PUBLISHING CO. CINCINNATI WEST CHICAGO, ILL. DALLAS PALO ALTO. CALIF. BRIGHTON, ENGLAND

PELHAM MANOR,

N.Y.

Copyright

©

1976

Philippine Copyright 1976

by South-Western Publishing Co. Cincinnati, Ohio

All Rights Reserved

The

text of this publication, or

be reproduced or transmitted

any part thereof, may not in

any form or by any

means, electronic or mechanical, including photocopying, recording, storage in

an information retrieval sys-

tem, or otherwise, without the prior written permission of the publisher.

ISBN: 0-538-01850-X Library of Congress Catalog Card Number: 74-84264

12345678K32 109876 Printed in the United States of America

Management's efforts to achieve company objectives rest upon the twin functions of planning and control. The planning function is essentially a decision-making process dealing with the establishment of a desired profit; the preparation and availability of materials, labor force, and plant and equipment for the anticipated volume; and the creation of a communication system that permits reporting and controlling actual results against predetermined plans. The control function deals with management's task of organizing and marshaling natural forces, human behavior, and material objects into a coordinated unit in order to attain the desired results. The connecting link between the originating planning function and the terminating control function is the cost accounting information system that permits effective communication, continuous feedback, responsibility accounting, and managerial flexibility. Modern cost accounting is rightly termed a tool of management, with emphasis on management. The processing and reporting of a firm's historical and projected microeconomicdata assist management in developing new potentials, improving present opportunities, establishing more aggressive yet flexible control of operations, and enhancing the management process through objective evaluation of the feedback data. The importance of cost accounting to the performance and success of any level of management in both problem identification and problem solving is emphasized throughout the Sixth Edition. While planning is essentially a decision-making activity, control intends to ensure realization of the planner's goals. Although the information and underlying data required for these two functions are often quite different, one expects the cost accounting system to provide the answers and respond to the needs of both functions. This dual responsibility of the cost accounting information system to both functions strongly influenced the authors in structuring the presentation followed in this textbook. iii

PREFACE

iV

of the textbook fuse planning and control into a harmonious presenting the cost data accumulation methods. The study of a job order or a process cost system might be considered a mechanical exercise by some accounting instructors; yet in any cost system they deserve primary attention if routine employee performance and computerized accounting are

Parts

I

whole by

and

II

first

to furnish reliable data for

management's

taslV

Vjvj.iu^ ,-jAi

-

-fWX

actual factory ovediead^was^less^Uian the-jQi^eiheadj^jiar^^

tion^^Tn

The Seabright Manufacturing Company's statemenTorcosTof shown the difference in this

j-^sAi^^'Cgoods sold the accountant might have

^-\2^ "^

manner: ,

J

urS^ J^


^

W^U

r-HW

^^^

.

.

clJU

M

,,-

-tt/^T^ \

l

fi^

p

''

f^^

^.. - f^n ^

ojh.

^«^),

tU^I^^

$3,915,900 '^^'^

.

rvc^+o iov^-V --H^ o,^ ^Vpii^ Finished goods inventories, beginning and ending. uj'^V u..rt cv. vuTT^vv. tcO^V rvu.5f -y^ 1^ u>»?^+

^^

:

COST ACCOUNTING — CONCEPTS AND OBJECTIVES

Vv^VA*-^

PARTI

v

iaa.

THE SEABRIGHT MANUFACTURING COMPANY,

INC.

Schedule 2

Marketing Expenses For Year Ended December 31, Sales salaries

19

and commissions

$330,500 43,000

Travel expenses Payroll taxes Advertising Telephone and telegraph Entertainment Donations and dues Depreciation furniture and fixtures. Stationery and office supplies Postage

16,850 125,000 11,800 21,000 4,000 7,500 13,500 6,850

—

Total

$580,000

THE SEABRIGHT MANUFACTURING COMPANY, Schedule

INC.

3

Administrative Expenses

For Year Ended December Salaries Salaries

31,

19

— and executives — general employees officers

office

Travel expenses Payroll taxes Depreciation furniture and fixtures Stationery and office supplies Telephone and telegraph Postage Subscriptions, dues, and association activities Legal and accounting fees

—

2-3

\YVi J

Donations

..

.

{si ^\A-^>^

^^' -UA3L1S5- rVa

v^if

xS-^^^Sl

^\^\., etMofLvV

-

\x^

if^(Virvax

estimated that for

each direct labor hour used in production, $2.20 of factory overhead ^ should be charged to production. The credit of $13,200, based on 6,000"k1-^' is the applied factory overhead charged to production month. The debit balance of $850 remaining in Factory during the Overhead Control represents the amount of underapplied factory over-

direct labor hours,

head.

The

applied,

is

Cost of

disposition of such a balance, be

discussed in Chapter all

it

either over- or under-

9.

production during the month consists of direct materials,

$31,000; direct labor, $27,000; and applied factory overhead, $13,200 a total production cost of $71,200.

Units completed during the period

cost $62,180 (direct materials, $26,000; direct labor, $24,300;

The

—

and apphed

goods completed, $62,180, is transferred from the work in process account to the finished goods account. Finally, cost of goods sold of $52,300 is transferred from Finished factory overhead, $11,880).

total cost of

Goods to Cost of Goods Sold. Cost of Goods Sold Summary at the end of each accounting period. Underlying Documents.

is

The ledger accounts with

closed to

Income

the transactions

posted therein should be looked upon as the storage space or data-bank

mentioned in computerized accounting systems. The flow of costs to these memories is based on originating documents that must be checked, verified, vouchered, journahzed, and posted. Documents may be for Materials:

purchase invoice, materials requisitions, materials returned

Labor:

time tickets or time sheets, clock cards, job tickets,

slips, etc. etc.

Factory vouchers prepared to set up depreciation or prepaid expenses; Overhead: vendors' invoices, utility bills, etc.

^"R-

COST ACCOUNTING INFORMATION SYSTEM: DESIGN & OPERATION

CH.%

(3JiAv^

69

THE FACTORY LEDGER The accounting system, and especially the cost accounting cycle problem based on the factory operations of the Shamrock Manufacturing Company, assumes that the entire business is undex_Qnej;oofjDiLthanittle distance separates the factory_ and the general offic es. It is not uncommon foF administrative, marketing, and accounting offices to be far removed from factory sites; and, of course, the same company may operate several factories or marketing offices in different parts of the country. If the J actory

is

many

some

distance from the officeS-OrJUlbfi manufacturing_rec[uires

accounts,

it is

practical to

do some accounting at th e

fact ory.

Transactions recorded at the factory should be posted to a factory ledger.

The

factory ledger includes a control account^entitled^^^pfir^l

^h

Ted^rjliaLshoAys-th e equity < e gen er al-officejnjhe factory. A recip- -\ rocal control account entitled Factory Ledger is maintained in the ac/ counting records kept at the general office. When General Ledger is _^ debited in the factory books, Factory Ledger is credited in the general ^ office books; when General Ledger is credited, Factory Ledger is debited. \ Just how much of the accounting may be done at the factory depends upon the organization and operation of a business. If sales are made, (

invoices prepared,

and statements rendered from the

factory, Cash,

Ac-

counts Receivable, Sales, and related accounts will appear in the factory

—

ledger. office,

If sales invoices, billings,

and collections are made

at the general

only a petty cash account along with the various manufacturing

L_ accounts would be needed on the factory books.

,

At one factory it may be advantageous to meet payrolls locally, thereby requiring a bank account and payroll accounts. In another factory, the payroll summary might be sent to the general office which would prepare the payroll checks or envelopes and mail or deliver them to the factory. The liability for payroll taxes and income taxes withheld from eniployees_is either kept injhe general ledger or transferred from the fa ctory ledger to the gener al ledg er. For efficient managemenTand co"ntroI^ one firm may keep detailed equipment accounts in the factory books, while another

\^ them with accumulated depreciation accounts

Illustrative

Company

Problem.

may keep

in the general office books.

With the data of the Shamrock Manufacturing

as the basis for the illustration (page 68), the following entries

would be recorded assuming

that (1) the materials account

is_kepLa^he

from the

general^office,

factory while all invoices are vouchered and paid (2) the payroll

with

its

deductions

is

prepared at the factory while pay

checks and tax liabihties are the treasurer's responsibility^l_the^ rnain

—office^^nd

(3) the finished

cos^f goods sold^ccount

goods account

is

ke£t at the factor y and_the

at iJie general office.

.a.

'^ (sort

. ..

COST INFORMATION SYSTEM; ACCUMULATION PROCEDURES

PART

FACTORY OFFICE

GENERAL OFFICE Entries for the purchase of the materials:

Subsidiary Dr.

Factory Ledger Accounts Payable

Cr.

Record

25,000

Materials

and

Work

NO ENTRY

Factory Control

in Process. Materials

— 0/u

(

25,000

indirect materials:

NO ENTRY

^JL^ r^ ^\ To. i

ccxr^

Y?va

method

process cost

"^"^

breweries, chemical industries, textile factories,

produced by the same

u-^ls

Sfi^ftv^oIIiV^JV^ S^WaSL-

it is

and many

others.

Becaij^e

A process

_

tation

prepared on a process cost sheet or a cost of production report.

product costing.

(x}}