There are no prerequisites.

Course Description

Cost Accounting Fundamentals describes the key cost accounting concepts that concern the practicing cost accountant, illustrating these concepts with numerous examples. The course is designed for both professional accountants and students, since both can benefit from its detailed descriptions of inventory valuation methods, product pricing techniques, cost analysis methods, and more. Several major cost accounting topics are discussed in depth:

  • The nature of cost accounting
  • Details of the cost accountant job description
  • Methods used to value inventory, including job costing, process costing, standard costing, joint and by-product costing, and accounting for waste products
  • The contribution of cost accounting to product pricing, including a lengthy discussion of how much a product costs for pricing purposes, how target costing works, and the mechanics of transfer pricing
  • Cost analysis methods, including direct costing, activity-based costing, constraint analysis, and capital budgeting analysis
  • How to collect cost-related information
  • The variability of costs under various circumstances
  • The cost of quality


Steven M. Bragg, CPA

Steven M. Bragg, CPA, is a full-time book and course author who has written more than 70 business books. He provides Western CPE with self-study courses in the areas of accounting and finance, with an emphasis on the practical application of accounting standards and management techniques. A sampling of his courses include the The New Controller Guidebook, The GAAP Guidebook, Accountants’ Guidebook, and Closing the Books: An Accountant’s Guide. He also manages the Accounting Best Practices podcast.

Steven has been the CFO or controller of both public and private companies and has been a consulting manager with Ernst & Young and an auditor with Deloitte & Touche. He holds an MBA from Babson College, a Master of Finance from Bentley College, and a BA from the University of Maine (summa cum laude).

Course Specifics

Dec 18, 2017
There are no prerequisites.

Compliance Information

Qualifies for CA Fraud: No

Learning Objectives

Upon successful completion of this course, participants will be able to:

Chapter 1

  • Identify the situations in which we use cost accounting.

Chapter 2

  • List and recognize the responsibilities and necessary qualifications of the cost accountant.

Chapter 3

  • Cite the types of costs involved in the study of cost accounting.

Chapter 4

  • Recognize the methods available for deriving inventory costs and the cost of goods sold.

Chapter 5

  • Identify when you should use job costing, and compile the cost of a job.

Chapter 6

  • Recognize when you should use process costing, and use the various methods for compiling process costs.

Chapter 7

  • Recognize when to use standard costing, create standard costs, and calculate variances from the standards.

Chapter 8

  • Identify the various methods for allocating joint costs, as well as the effects of allocations on profitability.

Chapter 9

  • Identify the proper accounting for various types of spoilage, rework, and scrap.

Chapter 10

  • Recognize the types of costs to include in the formulation of a product price, and the circumstances under which these costs may be included or excluded.

Chapter 11

  • Identify the process by which target costs are derived and how that target can be met.

Chapter 12

  • Recognize the process by which target costs are derived and how that target can be met.

Chapter 13

  • Identify the circumstances under which direct costing can be used as an analysis tool.

Chapter 14

  • Recognize the process for compiling activity-based costs, as well as how allocation bases, cost pools, and activity drivers are used.

Chapter 15

  • Recognize the components of constraint analysis and how to use this analysis to improve profits.

Chapter 16

  • Recall the various methods for reviewing a capital budgeting proposal.

Chapter 17

  • Cite the methods used to accumulate costs and the circumstances in which they are most useful.

Chapter 18

  • Identify the extent to which costs can change in reaction to different circumstances.

Chapter 19

  • Identify the types of costs associated with the quality concept.

Table of Contents

Chapter 1—Overview of Cost Accounting

Learning Objectives


Financial Reporting

Management Reporting

Problem Resolution

Price Setting

Cost Investigation

Budget Formulation

Constraint Analysis

Cost Accumulation Systems


Chapter 1 Review Questions

Chapter 2—The Cost Accountant Job Description

Learning Objectives


To Whom Does the Cost Accountant Report?

What Are the Principal Accountabilities of the Cost Accountant?

What Are the Qualifications of a Cost Accountant?

Who Does the Cost Accountant Supervise?


Chapter 2 Review Questions

Chapter 3—Types of Costs

Learning Objectives


Actual Costs

Avoidable Costs

Committed Costs

Conversion Costs

Deferred Costs

Differential Costs

Direct Costs

Discretionary Costs

Expired Costs

Fixed Costs

Historical Costs

Indirect Costs

Irrelevant Costs

Marginal Costs

Normal Costs

Period Costs

Replacement Costs

Semi-Fixed Costs

Step Costs

Sunk Costs

Traceable Costs

Variable Costs


Chapter 3 Review Questions

Chapter 4—Inventory Valuation

Learning Objectives


Valuation Step 1: The Quantity of Inventory on Hand

The Periodic Inventory System

The Perpetual Inventory System

The Gross Profit Method

Valuation Step 2a: Inventory Costing (Typical Inventory)

The First In, First Out Method

The Last In, First Out Method

The Dollar-Value LIFO Method

The Link-Chain Method

The Weighted Average Method

Standard Costing

The Retail Inventory Method

Valuation Step 2b: Inventory Costing (Special Situations)

Job Costing

Process Costing

By-Product and Joint Product Costing

Valuation Step 3: Overhead Allocation

Valuation Step 4: Inventory Valuation

The Lower of Cost or Market Rule

Obsolete Inventory Accounting


Chapter 4 Review Questions

Chapter 5—Job Costing

Learning Objectives


Overview of Job Costing

When Not to Use Job Costing

Accounting for Direct Materials in Job Costing


Accounting for Labor in Job Costing

Accounting for Actual Overhead Costs in Job Costing

Accounting for Standard Overhead Costs in Job Costing

The Importance of Closing a Job

The Role of the Subsidiary Ledger in Job Costing

Job Costing Controls


Chapter 5 Review Questions

Chapter 6—Process Costing

Learning Objectives


Overview of Process Costing

The Weighted Average Method

The Standard Costing Method

The First In, First Out Method

The Hybrid Accounting System

Process Costing Journal Entries

Problems with Process Costing


Chapter 6 Review Questions

Chapter 7—Standard Costing

Learning Objectives


Overview of Standard Costing

Advantages of Standard Costing

Disadvantages of Standard Costing

How to Create a Standard Cost

Historical, Attainable, and Theoretical Standards

How to Account for Standard Costs

Overview of Variances

The Purchase Price Variance

Material Yield Variance

Labor Rate Variance

Labor Efficiency Variance

Variable Overhead Spending Variance

Variable Overhead Efficiency Variance

Fixed Overhead Spending Variance

Selling Price Variance

Sales Volume Variance

Problems with Variance Analysis

The Controllable Variance

The Favorable or Unfavorable Variance

Where to Record a Variance

Which Variances to Report

How to Report Variances


Chapter 7 Review Questions

Chapter 8—Joint and By-Product Costing

Learning Objectives


Split-Off Points and By-Products

Why We Allocate Joint Costs

How to Allocate Joint Costs

How to Determine Prices for Joint Products and By-Products

Special Concerns with By-Product Costing


Chapter 8 Review Questions

Chapter 9—Waste Accounting

Learning Objectives


Definition of Spoilage

Accounting for Normal Spoilage

Accounting for Abnormal Spoilage

Accounting for the Sale of Spoilage

Cost Allocation to Spoilage

Definition of Rework

Reporting Rework

Accounting for Rework

Definition of Scrap

Accounting for Scrap

Impact of Waste on Manufacturing Systems


Chapter 9 Review Questions

Chapter 10—Product Pricing: What Does This Cost?

Learning Objectives


What Does This Cost?

The Issue of Pricing Duration

The Issue of Overhead Costs

The Issue of Overhead Application

Corporate Overhead Costs

What Does This Cost? Part Two

The Issue of the Bottleneck

What Does This Cost? Part Three


Chapter 10 Review Questions

Chapter 11—Target Costing

Learning Objectives


The Basic Steps of Target Costing

Value Engineering Considerations

The Cost Reduction Program

The Milestone Review Process

Problems with Target Costing

The Members of a Design Team

The Role of the Cost Accountant in Target Costing

Data Sources for Target Costing

The Product Life Cycle and Target Costing


Chapter 11 Review Questions

Chapter 12—Transfer Pricing

Learning Objectives


Overview of Transfer Pricing

Market Price Basis for Transfer Pricing

Adjusted Market Price Basis for Transfer Pricing

Negotiated Basis for Transfer Pricing

Contribution Margin Basis for Transfer Pricing

Cost Plus Basis for Transfer Pricing

Cost Anomalies in a Cost-Based Transfer Price

Pricing Problems Caused by Transfer Pricing

The Tax Impact of Transfer Prices


Chapter 12 Review Questions

Chapter 13—Direct Costing

Learning Objectives


Overview of Direct Costing

Contribution Margin versus Gross Margin

Direct Costing as an Analysis Tool

Direct Costing Pitfalls


Chapter 13 Review Questions

Chapter 14—Activity-Based Costing

Learning Objectives


The Problem with Overhead Allocation

Overview of Activity-Based Costing

Activity-Based Management

Advantages of Activity-Based Costing

Problems with Activity-Based Costing

The Incremental Cost Reduction Fallacy

The Bill of Activities

System Scope Issues

System Integration Issues


Chapter 14 Review Questions

Chapter 15—Constraint Analysis

Learning Objectives


Constraint Analysis Operational Terminology

Overview of Constraint Analysis

The Cost of the Bottleneck

Local Optimization

Constraint Analysis Financial Terminology

Constraint Analysis from a Financial Perspective

The Constraint Analysis Model

The Decision to Sell at a Lower Price

The Decision to Outsource Production

The Capital Investment Decision

The Decision to Cancel a Product

Comparison of Activity-Based Costing to Constraint Analysis


Chapter 15 Review Questions

Chapter 16—Capital Budgeting Analysis

Learning Objectives


Overview of Capital Budgeting

Bottleneck Analysis

Net Present Value Analysis

The Payback Method

Accounting Rate of Return

Capital Budget Proposal Analysis

The Outsourcing Decision

The Capital Budgeting Application Form

Capital Rationing

Capital Budgeting with Minimal Cash

The Post Installation Review

The Lease vs. Buy Decision


Chapter 16 Review Questions

Chapter 17—Cost Collection Systems

Learning Objectives


Data Entry Accuracy

Data Entry with Bar Codes

Data Entry with Radio Frequency Identification (RFID)

Document Imaging

Special Considerations for Labor Tracking

The Duration of Cost Collection

The Chart of Accounts

The Account Code Structure

The Account Code Format

Accounts for the Cost Accountant


Other Sources of Cost Information


Chapter 17 Review Questions

Chapter 18—Cost Variability

Learning Objectives


Mixed Costs

Labor-Based Fixed Costs

Costs Based on Purchase Quantities

Costs Based on Production Batch Sizing

Cost Based on Step Costs

Time-Based Costs

Experience-Based Costs

Incorporating Cost Variability into Cost Reports


Chapter 18 Review Questions

Chapter 19—Cost of Quality

Learning Objectives


Types of Quality

Costs Impacted by Quality

Reporting on the Cost of Quality


Chapter 19 Review Questions

Review Question Answers and Rationales



Final Examination

Answer Sheet

Course Evaluation


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