ACCT2102 - Lecture 4 (6 slides per page) - Learning...

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1 ACCT ACCT 2102 2102 Topic Topic 3: Job Costing Product & Service Costing 1 Reading: Reading: Lecture notes & Horngren et al. Chapter 4 Learning Objectives y Describe the building blocks concept of costing system y Distinguish job costing from process costing y Cost products or services using Job Costing: Actual costing vs. normal costing Over/under allocated manufacturing overhead. 2 Product Costing y Product costing is the process of accumulating, classifying and assigning direct materials (DM), direct labour (DL) and manufacturing overhead (O/H) costs manufacturing overhead (O/H) costs to products or services. y Several types of product costing systems product costing systems are available depending on the nature of the product, and the method of overhead assignment chosen 3 Types of Costing Systems Used to Determine Product Costs Process Costing Job-order Costing 4 The cost object is a unit or multiple units of distinct (unique) product or service called a job . z Example of job order costing applications: ± Special-order printing ± Building construction z Also used in the service industry ± Security company (Olympics games) ± Law and audit firms Types of Costing Systems Used to Determine Product Costs Job-order Costing Process Costing Topic 7 5 ) Many units of a single, homogeneous product flow evenly through a continuous production process. ) One unit of product is indistinguishable from any other unit of product. . ) Each unit of product is assigned the same cost (average cost). Types of Costing Systems Used to Determine Product Costs Job-order Costing Process Costing 6 Typical process cost applications: ± Soft drink manufacturer ± Theater/Cinema ± ITM transactions
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2 Sequence of Events in a Job a Job-Order Order Costing System Receive orders from customers Begin production 7 Schedule jobs Order materials The job in this system is driven by the customer. For example: Job Job-Order Costing Order Costing We need to know three things: The cost components of the job/order The source documents to identify these components How to classify these costs in terms of direct and indirect costs 8 Job Costing Job Costing - Building Blocks Building Blocks Direct material Manufacturing overhead (OH) Applied to each job 9 THE JOB Direct labour Job Costing Document Flow Summary Document Flow Summary - Materials Job Cost Sheets Direct material s Materials used may be either direct or indirect. 10 Materials Requisition Indirect materials Manufacturing Overhead Account Direct Materials DMs are materials that become an integral part of the product and that can be conveniently traced directly to the product. DM cost = Cost of material + in-transit costs 11 •Acquisition (initial) cost; Freight; insurance; storage (before delivery); less discounts and allowances.
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ACCT2102 - Lecture 4 (6 slides per page) - Learning...

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