Strategic Cost Management ACCT90009 Seminar 2 Job Costing
Seminar 2 Job Costing • Learning Objectives • To understand the nature of costing systems • To be able to distinguish between job costing and process costing • To distinguish actual costing from normal costing • To understand the purpose and design issues in both service and manufacturing contexts • To understand how the steps in the production process are tracked in a job costing system • To understand the alternative methods of disposing of under or over allocated overhead.
Seminar 2 • Reading: • Chapter 3 • Questions and problems: • Review Questions: 3.1, 3.3, 3.4, 3.5, 3.9. • Exercises: 3.13, 3.14, 3.21.
Product Costing Systems • The aim of a costing system is to report the organisational resources consumed by a particular cost object • Costing system considerations: – Cost-benefit-context – Underlying operations – One source of information 4
Building Blocks of Cost Systems
Indirect Cost Flows • Corporate Headquarters • Salaries of executives • Occupancy costs • Travel & entertainment • Supporting staff & operating costs Indirect Cost Flows • Division or Group • Allocated corporate headquarter cost • Occupancy costs • Divisional management and functional staff salaries • Marketing staff salaries and costs Indirect Cost Flows • Allocated Costs • corporate headquarters and division overhead • Plant Costs • Materials and labour (Seperable and Joint) • Factory indirect (Utilities, Maintenance, Depreciation, Plant Management, Materials Handling etc.) The Product 1. Direct Materials 2. Direct Labour 3. Fair share of allocated indirect costs
Job costing vs. Process costing Job costing system Distinct unit of a product or service Process costing system Masses of identical or similar units of a product or a service
• In a job-costing system, the cost object is an individual unit, batch or lot of a distinct product or service called a job . • In process costing, the cost object is masses of identical or similar units or a product or service. • Process costing allocates costs among all the products manufactured during that period Job-Costing and Process-Costing Systems (Continued)
Job costing vs. Process costing SERVICE SECTOR MERCHANDISING SECTOR MANUFACTURING SECTOR Job costing used • Accounting firm audits • Advertising agency campaigns • Individual legal cases by a law firm • A special promotion by Myer of a new product • Sending a catalogue to a mailing list • Aircraft assembly • House construction • Bespoke shoe maker (made-to- order) Process costing used • Postal delivery (standard items) • Deposit processing by banks • Grain dealing • Processing new magazine subscriptions by magshop • Oil refining • Beverage production
General Approach to Job Costing
You've reached the end of your free preview.
Want to read all 67 pages?
- Three '19
- Job costing, Finished Goods