L02-Job Order Costing_1

L02-Job Order Costing_1 - Topic 2: Job Order Costing...

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Unformatted text preview: Topic 2: Job Order Costing Introduction How much does it cost? Managers ask this question for many purposes, including formulating overall strategies, product and service-emphasis decisions, and pricing decisions. This chapter presents basic concepts of job costing. Structure of lecture Job costing vs Process costing The requirement for a pre-determined overhead rate (POHR) Accumulating costs in a job costing system Over- and under-applied overhead Why it happens How to deal with it Product and Service Costing Financial Accounting Product costs are used to value inventory and to compute cost of goods sold. Managerial Accounting and Cost Management Product costs are used for planning, control, directing, and management decision making. Job-Costing and Process- Costing Systems In a job-costing system, the cost object is an individual unit, batch, or lot of a distinct product or service called a job . In process costing, the cost object is masses of identical or similar units or a product or service. Process Costing Job-Order Costing Used for production of small, identical, low cost items. Mass produced in automated continuous production process. Costs cannot be directly traced to each unit of product. Types of Product-Costing Systems Typical process cost applications: Petrochemical refinery Paint manufacturer Paper mill Process Costing Job-Order Costing Types of Product-Costing Systems Used for production of large, unique, high-cost items. Built to order rather than mass produced. Many costs can be directly traced to each job. Process Costing Job-Order Costing Types of Product-Costing Systems Job-shop operations Products manufactured in very low volumes or one at a time. Batch-production operations Multiple products in batches of relatively small quantity. Process Costing Job-Order Costing Types of Product-Costing Systems Typical job-order cost applications: Special-order printing Building construction Also used in service industry Hospitals Law firms Process Costing Job-Order Costing Types of Product-Costing Systems Actual and Normal Costing Actual direct material and direct labor combined with actual overhead. Actual direct material and direct labor combined with predetermined overhead. Using a predetermined rate makes it Using a predetermined rate makes it possible to possible to estimate estimate total job costs sooner. total job costs sooner. Actual overhead for the period is not Actual overhead for the period is not known until the end of the period....
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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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L02-Job Order Costing_1 - Topic 2: Job Order Costing...

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