MALNBREWERCH4 - PRODUCT COSTING The type of costing system...

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PRODUCT COSTING The type of costing system used in an organization depends upon the nature of production. Job costing is used where the production is for job shops, custom orders, small batch production/ Process costing is used where the production is a continuous flow. Hybrid systems are used where production has both job and process components. All systems do the same thing—that is, find the cost of a unit produced by accounting for direct materials, direct labour, and manufacturing overhead. In job order systems, the job is the cost object. In process systems, a time period is the cost object. JOB ORDER COSTING In job order costing a JOB COST SHEET is created for each job. This job cost sheet will be used to accumulate the direct materials, direct labour and manufacturing overhead related to the particular job.
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MEASURING DIRECT MATERIALS COST. The production department will prepare a materials requisition detailing the type and quantity of materials put into production for a specific job. This form authorizes the release of materials for the storeroom. The materials are costed and a copy of the requisition goes to the accounting department. The same system will be used to account for indirect materials which are part of manufacturing overhead. MEASURING DIRECT LABOUR COSTS In a production system, employees are required to keep track of their time on a time ticket which records the time spent on each job and task. Time tickets are usually integrated into the payroll system. Time tickets can also be used to account for indirect labour. APPLICATION OF MANUFACTURING OVERHEAD The system illustrated in the text uses a PREDETERMINED OVERHEAD RATE rather than Actual Overhead Costs to allocate manufacturing overhead to jobs. The predetermined rate means that
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MALNBREWERCH4 - PRODUCT COSTING The type of costing system...

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