Chapter Notes/Handouts

Chapter Notes/Handouts - CHAPTER 2 Notes Systems Design:...

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CHAPTER 2 Notes Systems Design: Job-Order Costing Edited by: Lei Wang, CPA, CFE Certain materials used with permission of Janice Fergusson or of McGraw-Hill Companies, Inc. Up to this point, all of this stuff about assigning costs to products and services has sounded pretty  straightforward, but accurately determining the manufacturing costs is not quite so simple.      Managers use  product costing systems to accumulate costs and assign them to the raw  material inventory account, the work-in-process inventory account and the finished goods  inventory account.  There are two commonly-used costing systems in manufacturing and many  service companies; these two systems are known as  process costing and  job-order costing . PROCESS COSTING This type of costing system is used when: A company produces many units of a __________________________. One unit is ___________________ from other units of the product. The __________________ nature of each unit of product enables  assigning the same average cost per unit.   Examples:   ________________________________________________ _________________________________________________________   
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ACCT 226 – Chapter 2 Page 2 of 17 JOB-ORDER COSTING This type of costing system is used when: ______________________________  are produced each period. Products are _______________________________. The __________________ nature of each order requires tracing or allocat- ing costs to each job, and maintaining cost record for each job. Examples:   ________________________________________________ _________________________________________________________     JOB-ORDER COSTING (Our focus in this chapter) job  may be a  single unit or a batch of units .  The key is that the unit(s) produced for  one job are not the same as the unit(s) produced for another job. It’s important that we have a through understanding of how the various costs (DM, DL, MOH)  are  incurred recorded , and  transferred within the system.  (Takes a look at the exhibit  in the next page.)
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ACCT 226 – Chapter 2 Page 3 of 17 Documents:  Bill of Materials Materials Requisition Form Job Cost Sheet (maintained for each job) Time Ticket Let’s start by reviewing how product costs flow through every job.  Then we will look at  the various journal entries that are recorded on each job. Manufacturing Overhead Job No. 1 Job No. 2 Job No. 3 Charge Charge direct direct material and material and direct labor direct labor costs to costs to each job as each job as work is work is performed. performed.
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Chapter Notes/Handouts - CHAPTER 2 Notes Systems Design:...

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