Process and Job-Order Costing

Process and Job-Order Costing - McGraw-Hill's Connect...

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9/11/09 7:20 PM McGraw-Hill's Connect - Ebook Page 1 of 3 http://connect.mcgraw-hill.com/connect/hmEBook.do?setTab=sectionTabs Managerial Accounting EBook 13/e Content Chapter3: Systems Design: Job-Order Costing Process and Job-Order Costing Under absorption costing, product costs include all manufacturing costs. Some manufacturing costs, such as direct materials, can be directly traced to particular products. For example, the cost of the airbags installed in a Toyota Camry can be easily traced to that particular auto. But what about manufacturing costs like factory rent? Such costs do not change from month to month, whereas the number and variety of products made in the factory may vary dramatically from one month to the next. Since these costs remain unchanged from month to month regardless of what products are made, they are clearly not caused by—and cannot be directly traced to—any particular product. Therefore, these types of costs are assigned to products and services by averaging across time and across products. The type of production process influences how this averaging is done. We discuss two different costing systems in the sections that follow— process costing and job-order costing. Learning Objective 1 Distinguish between process costing and job-order costing and identify companies that would use each costing method. Process Costing Process costing is used in companies that produce many units of a single product for long periods. Examples include producing paper at
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Process and Job-Order Costing - McGraw-Hill's Connect...

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