Chapter 3 - Job Costing--students

Chapter 3 - Job Costing--students - Chapter 3 Job Costing...

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Chapter 3 Copyright © 2011 School of Accountancy, Arizona State University Job Costing Please pick up handout
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Imagine the following scenario. You go out to dinner with a group of friends. You are on a limited budget, so you order the cheapest dish on the menu and a glass of ice water. Meanwhile, your friends indulge in a full-course meal, with drinks, appetizers, entrees, and dessert. When it is time to pay the bill, would you prefer to split the check or get a separate tab for each person at the table? Which method do you prefer? Why? When does it make sense to “split the check” Job Order Vs. Process Costing Product Cross Subsidization
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Reasons Why Management Needs Product Cost 1. Control costs 2. Assess profitability of products 3. Pricing decisions 4. Discounts on high-volume sales 5. Bids on contracts 6. Financial statement preparation 3
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How Do Manufacturers Treat Non- Manufacturing Costs? GAAP – only inventoriable product costs added to the cost of assets (inventory) Internal decision-making – management wants to know the total cost of the product across the value chain 4
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Copyright © 2010 School of Accountancy, Arizona State When developing a product-costing system, there are three choices that must be made: Cost accumulation method (i.e., job or process costing) Cost measurement method (i.e., actual, normal, or standard costing) Overhead assignment method (i.e., volume-based or activity-based) Each product-costing system will reflect these three choices For example, an organization’s cost system may be characterized by: job costing with normalized costs, and activity-based costing used to allocate indirect costs Developing a Costing System
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Job Order versus Process Costing Description Job Order Costing Process Costing Type of product Unique products and services, such as a custom-built ship. Homogeneous products and
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This note was uploaded on 01/12/2012 for the course ACC 241 taught by Professor Karengeiger during the Spring '08 term at ASU.

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Chapter 3 - Job Costing--students - Chapter 3 Job Costing...

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