Chapter 17 - Managerial Accounting Costing Systems Job Order and Process Costing Chapter 17 I Job order costing Vs Process Costing Product Costing

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Chapter 17 Author: Anna Rovira Beavers Needles 2008 8/6/07 1 Managerial Accounting Costing Systems: Job Order and Process Costing Chapter 17 I. Job order costing Vs. Process Costing Product Costing System: A set of procedures used to account for an organization’s product costs and provide with timely and accurate unit cost information for pricing, cost planning and control, inventory valuation, and financial statement preparation. There are two basic systems: 1. Job order costing system Used by: Manufacturers of large equipment Unique items Made to order Examples: Made to order furniture, made to order draperies, specialty cars etc. What is a job order ? A specific number given to the product order 2. Process costing System Used by Companies that produce large amounts of similar products in a continuous flow Example: Paint, bricks, milk, paper, etc. In-Class E2 II. Job Order Costing in a Manufacturing Company The costing process begins typically with a purchase order. Direct Materials are then move from Storeroom into the production process. Direct Labor is accumulated in the Work in Process Account using the data of the time cards Indirect Labor is charged to Manufacturing Overhead account Indirect Materials is charged to Manufacturing Overhead account Other Indirect Cost is charge to Manufacturing Overhead such as Electricity, Depreciation, and Insurance. The Manufacturing Overhead Account is debited as costs are incurred. As the product is being finish an applied overhead rate, previously calculated, is used to estimate Overhead. At the end of the year Actual manufacturing cost and applied cost are reconciled and the differences are recorded in the Cost of Good Sold.
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This note was uploaded on 03/10/2011 for the course BUS 1B taught by Professor Kite during the Spring '11 term at Laney College.

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Chapter 17 - Managerial Accounting Costing Systems Job Order and Process Costing Chapter 17 I Job order costing Vs Process Costing Product Costing

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