Cost Accumulation
The use of an accounting system to collect and maintain a database of the expenses incurred by a business in the course of its operation.
The two main forms of cost accumulation are:
A job Order System
A Process Costing System
In process costing, materials, labor, and factory overhead costs are accumulated in the usual accounts, using normal cost accounting procedures. Costs are then analyzed by departments or processes and charged to departments by appropriate journal entries. The details involved in process costing are usually fewer than those in the job order costing, where accumulation of costs for many orders can become unwieldy.
Materials, Labor, and Factory Overhead Costs Accumulations
Procedures for Manufacture Cost Accumulation
The procedure for cost accumulation in job order costing.
Materials costs: In job order costing, materials requisitions are used and changes are made to order.
Labor costs: Time tickets sheet are used in job order costing to accumulate costs by jobs.
Factory overhead: Job cost requires the use of predetermined rates for charging overhead to orders.
Summarizing costs: Job order costs sheet is used to accumulate the cost of an order in job order costing.
Procedures for Manufacture Cost Accumulation
A job order system where direct materials , staffing and over heads are collected under assigned job number.
Job costing involves the calculation of cost involved in construction “job”or the manufacturing of goods done in discrete batches .These costs are recorded in ledger accounts throughout the life of the job or batch and are then summarized in the final trial balance before the preparing of the job cost or batch manufacturing statement.
Job Order System
Job order costingUseful for
Managing the costs of current jobs
Determining inventory costs
Providing data to predict future costs
Identifying likely profitable or unprofitable jobs
Process Costing(in journal entry form)
GENERAL JOURNAL Page 4
Date Description
Post.
Ref. Debit Credit
Work in Process - Department A XXXXX
Work in Process - Department B XXXXX
Salaries and Wages Payable XXXXX
To record direct labor costs.
Process costing is an accounting methodology that traces and accumulates direct costs, and allocates indirect costs of a manufacturing process. Costs are assigned to products, usually in a large batch, which might include an entire month's production. Eventually, costs have to be allocated to individual units of product.
It assigns average costs to each unit, and is the opposite extreme of Job costing which attempts to measure individual costs of production of each unit.
Process Costing
8-10
DirectMaterials
Type of Product Cost
Do
llar
Am
ou
nt
DirectLabor
ManufacturingOverhead
Direct labor costs
are usually small
in comparison to
other product
costs in process
cost systems.
(high level of
automation)
Process Costing – The Cost Inputs
8-11
Job costing
Costs accumulated by thejob.
Work in process has a job cost record for each job.
Many unique, high cost jobs.
Jobs built to customerorder.
Process costing
Costs accumulated by department or process.
Work in process has a production report for each batch of products.
A few identical, low cost products.
Units continuouslyproduced for inventory in automated process.
Comparing Job Costing and Process Costing
8-12
Work in process contains
individual jobs in a
job cost system.Direct Materials
Finished
Goods
Cost of
Goods
Sold
Direct Labor
ManufacturingOver
head
Jobs
Comparing Job Costing and Process Costing
8-13
Finished
Goods
Cost of
Goods
Sold
Products
Work in process contains
homogenous products in a
process cost system.
Direct Labor
& Overhead
(Conversion)
Direct Materials
Comparing Job Costingand Process Costing
8-14
Same objective: determine
the cost of products
Same Inventory accounts: raw materials,
work in process, and finished goods
Same overhead assignment method:
predetermined rate times actual activity
Same objective: determine
the cost of products
Same Inventory accounts: raw materials,
work in process, and finished goods
Same overhead assignment method:
predetermined rate times actual activity
Comparing Job Costing and Process Costing
Similarities Between Job-Order and Process Costing
Both systems assign material, labor and overhead costs to products and they provide a mechanism for computing unit product cost.
Both systems use the same manufacturing accounts, including Manufacturing Overhead, Raw Materials, Work in Process, and Finished Goods.
The flow of costs through the manufacturing accounts is basically the same in both systems.
Procter & Gamble
Vision
Mission
Nestle origins date back to 1866, when two seperate Swiss enterprises were founded that would later form the core of Nestle.Nestle has been serving this world for over one hundred and thirty years.Nestle started its operations in Pakistan back in 1988
To be recognizededas,thebestconsumerproductsandServicesCompanyintheworld
•Mission:Wewillprovidebrandedproductsandservicesofsuperiorqualityandvaluethatimprovethelivesoftheworld'sconsumers.Asaresult,consumerswillrewarduswithleadershipsales,profit,andvaluecreation,allowingourpeople,ourshareholders,andthecommunitiesinwhichweliveandworktoprosper.KEYPEOPLE•A.GLafley(CurrentCEO,Chairman,President)•RobertA.McDonald(CEOtillMAY2013)BoardOfDirectors(Total11):oNormanAugustineoLynnmmartinoJohnfmartinjroErnestozedillooScottCook
Ambient Diary (Milk Pak) Chilled Diary (Nestle Yougart) Beverages (Fruita vitals) Bottled Water (Pure life) Culinary and food (Maggi noodles) Baby food (Cerelac) Breakfask cereals (Koko crunch) Confectionary (Polo) Juices
Nestle Pakistan
Products
SWOT Analysis
Strengths
Well developed strategy
Good marketing skills and services
Parent support
Company image
Products innovation
Good financial position
Weeknesses
Limited distribution channels
No outlet in Pakistan
More concerned about profit
Support from foreign investors
Enhance distribution channels
Changing social trends
Market growth
Opportunities
Threats
Govt. regulations
Increase in competitions
No Entry barrier
Un favourable changes in customers demand
By analyzing the cash flow chart , for three years of Nestle Pakistan , we come to conclusion that although the organization is improving in terms of increase in sales , but there are also some grey areas which need to be tackaled by method and proper strategy to boost up the sales
Analysis
Overall profit margin showed a slight increase but a slight decline in gross profit margin was witnessed, this was mainly due to cost pressure on some products.
Nestle can be made more profitable by making it more proactive
It is recommended that they should icrease their outlets in Pakistan
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