Accounting Ed07 – Cost Accounting and Control

10. Carriage expenses

Other Important Material Concepts - incurred in the course of movement of materials or goods
- differ with the kind of materials/good transported
1. Valuation of Work in Progress - those relating to raw materials are treated as part of direct
- always valued at cost materials cost
- 3 ways of valuing: - those relating to distribution of materials or finished goods
a) at prime cost are treated as distribution overhead
b) prime cost + variable overhead 11. Tools
c) at total/full cost - classification:
2. Abnormal and normal wastage of materials a) large tools – normally capitalized with depreciation
 normal wastage charged to factory overhead
- arises on account of evaporation, shrinkage or on account of b) small tools – may be capitalized, revaluated or written
typical manufacturing process involved off
- recovered through good production 12. Discounts
- recovered as production overhead and apportioned on the - types:
number of units produced a) cash discount
 abnormal wastage - usually allowed for prompt payment
- does not arise in ordinary course of manufacturing but b) quantity and trade discount
results form factors such as power failure, machinery - granted for heavy or bulk purchases
breakdown or non-availability of raw materials - usually credited in the invoice and the net landed cost of the
- charged off to profit and loss account material exclusive of discount is considered as material cost
3. Material requisition 13. Variances detected at stock taking
- document requesting for an issue of certain materials to a - due to normal causes – charged to overhead
job - due to abnormal causes – written off to profit and loss
4. Material transfer account
- document for transferring materials from one department to
another, one site to another or one job to another
5. Bill of material
- a complete schedule of parts and materials required for a
particular order and issued with necessary blueprints or
drawings
6. Waste
- residue which arises in the course of manufacturing process
with no measurable sale of utility value
- actual waste is observed against standards and periodically
reported to management
7. Scrap
- incidental material residue coming out of certain
manufacturing processes
- usually in small amounts and has low measurable utility or
market value
- may be sold or reused in some process
- recoverable without further processing
- accounting treatment:
a) sales credited to revenue
b) credit to overhead
c) credit to jobs
d) transfer to other jobs
8. Spoilage
- when production does not come up to the standard
specifications or quality
- manufactured goods are rejected outright
- components of materials are so damaged they cannot be
brought back to normal specifications by repairs or
reconditioning
9. Packing materials
- types:

a) Primary
- essential to put goods in saleable condition (ink bottle, jar,
etc.)
- charged as overhead
b) Secondary
- required for delivery or transportation
- apportioned as a selling cost
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