Chap3gnposting - Chapter 3: Product Costing Questions: Why...

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Chapter 3: Systems Design: Job-Order Costing 11 Chapter 3: Product Costing Questions: Why would we want to know how much it costs to manufacture one unit of a product? Is sale price > cost? Do we want to manufacture or buy from outside? Etc. What costs do we include to determine the cost to manufacture one unit? DM + DL + MOH (only and always those three) How should we link costs with products? or How do we keep track of costs? It depends upon the type of product or process used to mfr. the product. Traditional Product Costing System: Process costing Homogeneous product Continuous production process all products go through the same process Unique operations or departments so we track costs by operation Job-order costing Different products Custom orders so we track costs by order (or “job”) Market determines price; however, need cost info to determine profit. This is a Ch. 4 topic and we are not covering Ch. 4. Students are responsible for only the Ch. 3 material on process costing. What costs? DM, DL, MOH
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Chapter 3: Systems Design: Job-Order Costing 12 Job-Order Product Costing Job cost sheet: Materials requisitioned DM Always these Direct labor incurred DL 3 items Manufacturing overhead applied MOH Job Cost Sheet (Attached to each job as it passes through the production process.) Direct materials : Documented by the materials requisition form Direct labor : Documented by employee time sheets or cards Manufacturing overhead : Applied at a predetermined manufacturing overhead rate We will cover this next.
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Chapter 3: Systems Design: Job-Order Costing 13 Manufacturing Overhead While we can “see” the direct materials and direct labor costs going into specific products and can assign costs to the appropriate products or jobs, how do we assign indirect costs or manufacturing overhead ? How are those costs incurred in the manufacturing process? When are the actual indirect costs recorded in the accounting records? Determining the manufacturing overhead rate at the beginning of the year: Estimate total manufacturing overhead for the year Choose a denominator activity that drives overhead costs - Budgeted direct labor hours - Budgeted direct labor dollars
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This note was uploaded on 05/28/2011 for the course ACC 272 taught by Professor Bird during the Spring '08 term at University of Michigan.

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Chap3gnposting - Chapter 3: Product Costing Questions: Why...

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