Job Order & Process Costing Handout

Job Order & Process Costing Handout - aircraft,...

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Accounting 230 Chapter 4 Job order/Process Costing Ostrosky Product costing—process of assigning manufacturing costs to manufacturing goods. Absorption costing (full costing)—all manufacturing costs are absorbed or included in the product cost (DM + DL + Fixed OH + Variable OH) Product costing used for: 1. valuing inventory on the I/S and determining NI 2. valuing inventory on the B/S 3. various decision making areas 4. control Two types of Product Costing Systems 1. Job Order Costing—system of cost accounting by individual jobs or orders Characteristics: Heterogeneous, small quantities, small batch production, different products or batches or jobs Calculation: Distinct Average Total Manufacturing Costs for a Specific Job = Unit Cost (different Total Units Produced for the Specific Job jobs have different Average unit costs) Examples: special order furniture, special order printing, special tool manufacturing,
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Unformatted text preview: aircraft, construction 2. Process Costingcost accumulation for products undergoing a continuous production process---costs accumulated by cost centers or processes rather than by jobs Characteristics: homogeneous, large quantities, mass production, produced for long periods of time, generally on a continuous basis Calculation: Total Manufacturing Costs for a period of time = Average unit cost (same Total Units Produced for same period of time for all units) Examples: cement, flour, bricks, paint, textiles, oil NOTE: all units get same inputs, same technology, and same efforts Nature of Demand: Job Order Costingproduction initiated by specific customer order Process Costingproduction initiated by future market demand...
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