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ACC221ch03sp08 - ACC221 Chapter 3 Systems Design Job-Order...

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1 ACC221 Chapter 3 Systems Design: Job-Order Costing 2 Objectives 1. Distinguish between process costing and job-order costing and identify companies that would use each costing method. 2. Identify the documents used in a job-order costing system. 3. Compute predetermined overhead rates and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process. 4. Apply overhead cost to Work in Process using a predetermined overhead rate.
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3 Objectives 5. Understand the flow of costs in a job-order costing system and prepare journal entries to record costs. 6. Use T-accounts to show the flow of costs in a job-order costing system. 7. Compute under- or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing overhead to the appropriate accounts. 4 Objective 1 Distinguish between process costing and job-order costing and identify companies that would use each costing method.
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5 Absorption Costing Costing approach that provides for the absorption of all manufacturing costs, fixed and variable into units of production. Also known as full cost approach. 6 Reasons for Unit Product Costs Value inventory and determine Cost of Goods Sold for financial statements. Make decisions regarding products.
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7 Process Costing Employed in those situations where manufacturing involves a single homogeneous product that is produced for long periods of time. Accumulate costs in a particular operation or department for an entire period, then divide this total by the number of units produced during the period. Total manufacturing costs/total units produced = Unit cost 8 Job-order costing Used in those situations where many different products, jobs or batches of production are produced each period. Extensively used in service industries. Costs can be accumulated by job and in which distinct unit costs can be determined for each completed job. Involves dividing total costs of a job, by the units in the job. Certain problems of record keeping and cost assignment are involved in job-order costing that is not involved in process costing.
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9 Difference Between Process Costing and Job-Order Costing The way in which the averaging is used to determine the unit costs. 10 Objective 2 Identify the documents used in a job- order costing system.
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11 Bill of Materials A document that lists the type and quantity of each item of materials needed to complete a unit of product.
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