Acc530_m02 - Module 2: Job order costing Introduction How...

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Module 2: Job order costing © Curtin Business School 1/6 Introduction How much does it cost? Managers generally ask this question for various reasons – for example, to help them formulate strategies, to decide product emphasis and also for deciding pricing strategies. In this module, you will learn some basic costing concepts that will be used throughout this unit. We will identify how cost flows through a job order system. We will also look at how manufacturing overhead is applied to products and the adjustment of over- and under- applied overhead. Topics Learning outcomes When you have finished studying this module, you should be able to: Job order costing system apply the concept of cost flow through a job order system. Before you begin… You should familiarise yourself with the relevant sections of your textbook before working through these module notes: pages 82 to 109 on the job order costing system. If you have any questions regarding the content of these module notes, refer to the textbook for further explanations. If you need to seek clarification from your tutor , make sure that you have carefully read the relevant sections of the textbook and the module notes beforehand. Job Costing vs. Process Costing Before we proceed to discussing the different types of costing systems, you need to understand that costing is used differently for financial and management accounting purposes. For financial accounting purposes , product costing enables us to value inventory and to work out the cost of goods sold. This is necessary for the preparation of financial reports, both for the statement of financial performance and for the statement of financial position. For management accounting , product costing is used for management control. This includes planning, control, directing and decision-making. There are two main types of costing, job (or job order) costing and process costing. In a job costing system, the cost object, the item for which costs is accumulated, is normally a job. It can also be a product or service. For process costing, the cost object is a mass of identical products or services.
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Accounting (Managerial) 530 Module 2 – Job order costing © Curtin Business School 2/6 Process costing is normally used when an organisation is producing small, identical, low-cost items. These items are generally mass produced in an automated continuous process. When this happens, it becomes very difficult to trace costs directly to each unit of product. Examples of organisations that use a process costing system include a petrochemical refinery, a paint manufacturer or a paper mill. Job costing
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This note was uploaded on 09/19/2011 for the course ACCOUNTING 211 taught by Professor Min during the Three '11 term at Curtin.

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Acc530_m02 - Module 2: Job order costing Introduction How...

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