Ch 05 Summary - CHAPTER 5 PRODUCT AND SERVICE COSTING:...

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CHAPTER 5 PRODUCT AND SERVICE COSTING: JOB-ORDER SYSTEM Product costing plays a critical role in the new manufacturing environment and is also a significant factor in service industries. This chapter introduces you to job-order costing. This costing system can be used in either manufacturing or service environments. In this chapter we learn how costs are accumulated, measured, and assigned. Overhead application and the use of single versus multiple overhead rates are discussed along with accounting for spoilage. LEARNING OBJECTIVES After studying Chapter 5, you should be able to: 1. Differentiate the cost accounting systems of service and manufacturing firms and of unique and standardized products. 2. Discuss the interrelationship of cost accumulation, cost measurement, and cost assignment. 3. Explain the difference between job-order and process costing, and identify the source documents used in job-order costing. 4. Describe the cost flows associated with job-order costing, and prepare the journal entries. 5. Explain why multiple overhead rates may be preferred to a single, plantwide rate. 6. Explain how spoilage is treated in a job-order costing system. KEY TOPICS The following major topics are covered in this chapter (related learning objectives are listed for each topic): 1. Characteristics of the Production Process (LO 1) 2. Setting Up the Cost Accounting System (LO 2) 3. The Job-Order Costing System: General Description (LO 3) 4. The Job-Order Costing System: Specific Cost Flow Description (LO 4) 5. Single versus Multiple Overhead Rates (LO 5) 6. Accounting for Spoilage in a Traditional Job Order System (LO 6) I. CHARACTERISTICS OF THE PRODUCTION PROCESS Manufacturing involves putting together materials, labor, and overhead to produce a new product. The good produced is tangible and can be inventoried and transported from the plant to the customer. A service is characterized by its intangible nature. It is not separable from the customer and cannot be inventoried. The four dimensions that differentiate service from tangible products are intangibility, perishability,
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This note was uploaded on 02/08/2010 for the course ACTG 3000 taught by Professor C during the Spring '10 term at Oregon State.

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Ch 05 Summary - CHAPTER 5 PRODUCT AND SERVICE COSTING:...

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