ACCO 330 - CHPT 4

ACCO 330 - CHPT 4 - Chapter Four Job Costing...

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Blocher,Stout,Cokins,Chen, Cost Management 4e Job Costing Chapter Four
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Blocher,Stout,Cokins,Chen, Cost Management 4e 2 Costing systems help management estimate costs and accurately charge customers An accurate costing system can provide a competitive advantage Cost system accuracy is critical to a firm’s success Costing Systems Benefits
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3 Blocher,Stout,Cokins,Chen, Cost Management 4e Product Costs Mapping Costs Electric Motor Materials Handling Supervision Packing Materials Cost Pools Assembly Assembly Packing Packing Cost Objects Dishwasher Washing Machine Final Inspection Cost Assignment Cost Drivers
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Blocher,Stout,Cokins,Chen, Cost Management 4e 4 Product Costing System Product costing is a general term that refers to the process of assigning both direct and indirect costs to products or services: Direct costs are traced to a cost object Indirect costs are allocated to a cost object A firm’s costing system depends on its strategy, industry, products or services and information requirements
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Blocher,Stout,Cokins,Chen, Cost Management 4e 5 Product Costing System Methodology A product-costing system is based on the following methodology Cost accumulation method (i.e., job or process costing) Cost measurement method (i.e., actual, normal, or standard costing) Overhead assignment method (i.e., volume- based or activity-based)
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Blocher,Stout,Cokins,Chen, Cost Management 4e 6 J ob costing system accumulates costs and assigns them to specific jobs, customers, projects, clients, or contracts Process costing is appropriate in large firms that produce one or a few homogeneous products through continuous mass production Product Costing System Methodology Cost accumulation
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Blocher,Stout,Cokins,Chen, Cost Management 4e 7 Product Costing System Methodology Cost accumulation Job Costing Construction, printing, special equipment manufacturing, shipbuilding, medical services, custom furniture manufacturers, advertising agencies, accounting firms, etc. Process Costing Chemical industry, bottling companies, plastics, food products, and paper products, cement manufacturing, brick production, etc.
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Blocher,Stout,Cokins,Chen, Cost Management 4e 8 An actual costing system uses actual costs incurred as the measure of “product cost” This type of cost measurement is rarely used because Unit costs fluctuate significantly Factory overhead costs are only known at or after the end of the period (thus, managerial information is not available on a timely basis) Product Costing System Methodology Cost measurement – Actual Costing
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Cost Management 4e 9 Product Costing System Methodology Cost measurement – Normal Costing A normal costing system uses actual costs for direct materials and direct labor but “normal” (or, “normalized”) costs for factory overhead: Normal costing involves estimating a portion of overhead to be assigned to each product An appropriate “denominator activity level” for allocating fixed overhead costs is a key consideration
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ACCO 330 - CHPT 4 - Chapter Four Job Costing...

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