ACCT 102 Lecture Notes Ch 15 SPR 2010

ACCT 102 Lecture Notes Ch 15 SPR 2010 - ACCT 102 Lecture...

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ACCT 102 Lecture Notes – Chapter 15 JOB ORDER COST ACCOUNTING AND ANALYSIS Schmidt JOB ORDER COST ACCOUNTING A cost accounting system records manufacturing activities using a perpetual inventory system. A perpetual inventory system continuously updates the accounting and production records for costs of materials, goods in process, and finished goods inventories. A properly designed cost accounting also gives management information about costs and inventory levels. This information is crucial in controlling costs and setting selling prices. The two types of cost accounting systems we will study are job order cost accounting and process cost accounting . We will study job order cost accounting in Chapter 15 and process cost accounting in Chapter 16. A job order cost accounting system is used when a company manufactures products customized to customer specifications. The production activities necessary to complete the customized product are called a job. Companies producing customized products usually obtain work by soliciting bids from customers. The bid is a quoted price for the work. A job order cost system tracks the cost per job. It is important to accurately track the cost for each job so that management can determine whether the actual costs incurred were reasonably close the estimated costs calculated when the bid was prepared. Significant cost overruns should prompt management to investigate the cause of the cost overruns and take corrective action.
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