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CHAPTER 3 NOTES_10 - CHAPTER 3 NOTES Cost Accounting...

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CHAPTER 3 NOTES Cost Accounting Systems 1. Cost accounting involves the measuring, recording, and reporting of product costs. From the data accumulated, both the total cost and unit cost of each product is determined . 2. A cost accounting system consists of accounts for the various manufacturing costs. These accounts are fully integrated into the general ledger of a company. An important feature of a cost accounting system is the use of a perpetual inventory system. Such a system provides information immediately on the cost of a product. The two basic types of cost accounting systems are: (a) a job-order cost system; and (b) a process cost system. 3. Under a job-order cost system, costs are assigned to each job or to each batch of goods. 4. A process cost system is used when a large volume of similar products are manufactured. Process costing accumulates product-related costs for a period of time instead of assigning costs to specific products or job-orders. Job-Order Cost Flow 5. The flow of costs in job-order cost accounting parallels the physical flow of the materials as they are converted into finished goods. There are two major steps in the flow of costs: (a) accumulating the manufacturing costs incurred; and (b) assigning the accumulated costs to the work done. 6. No effort is made when costs are incurred to associate the costs with specific jobs. 7. The assignment of manufacturing costs involves entries to Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold.
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