Chapter 3 - Chapter 3 Product Costing Cost Classification...

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Chapter 3 Product Costing
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Cost Classification Costs may be classified as: Direct / Indirect, and Variable / Fixed These multiple classifications give rise to important cost combinations: Indirect & Fixed
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Multiple Classification of Costs, Visualized
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Flow of Costs in Manufacturing Firm Direct material cost Product cost transferred Direct labor cost Manufacturing overhead when product is finished Expense closed into Income Summary at end of accounting period Work-in-Process Inventory Finished Goods Inventory Cost of Goods Sold Income Summary
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Types of Product-Costing Systems Job-Order Costing Process Costing
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Job-Order Costing 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. TWO TYPES: 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.
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Examples Typical job-order cost applications: Special-order printing Building construction Also used in service industry Hospitals Law firms
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Process 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.
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Examples Typical process cost applications: Petrochemical refinery Paint manufacturer Paper mill
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Costing Systems Illustrated Service Merchandising Manufacturing Job Order Costing Process Costing
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Job-Order Cost Accounting Job Number F16 Description Date Started Nov. 1, 20x1 Date Completed Number of Units Completed 80 Date Quantity Cost Date Quantity Cost Date Quantity Cost Date Cost Balance JOB-COST RECORD Direct Material Requisition Number Unit Price Direct Labor Requisition Number Unit Price 80 deluxe alum. fishing boats Nov. 22, 20x1 Manufacturing Overhead Requisition Number Unit Price Cost Item Total direct material Amount Cost Summary Total direct labor Total manufacturing overhead Total cost Unit cost Shipping Summary Units Shipped Units Remaining in Inventory
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ACCUMULATING COSTS IN A JOB- ORDER COSTING SYSTEM Material requisition forms authorize the transfer of direct materials from the warehouse to production. In many firms, the requisitions are based on a bill of materials that lists all of the materials (e.g., parts) needed.
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Timothy Williams Job-Order Cost Accounting Requisition No. 352 Date 11/1/x1 Job Number to Be Charged F16 Dept. Painting Department Supervisor Timothy Williams Item Quantity Unit Cost Amount Aluminum 7,200 sq ft 2.50 $ 18,000.00 $ Authorized Signature
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This note was uploaded on 02/12/2012 for the course ECON 101 taught by Professor Xx during the Spring '11 term at Boston Architectural.

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Chapter 3 - Chapter 3 Product Costing Cost Classification...

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