Unit 2 Study Guide
Chapter 6: Fundamentals of Product Costing
This chapter introduced the basic principles of product and service costing systems. It illustrated simple
systems for both continuous processing and discrete manufacturing industries. For continuous process
products, the costing system focuses on the costs of relatively large production quantities, such as
monthly production, with each unit in the month being assigned the same unit costs.
For products in discrete manufacturing industries, costing at the individual unit level (or for small
numbers of identical units) is used. Manufacturing overhead is allocated to products using one or more
allocation bases to compute predetermined overhead rates.
Learning Objective 6-1: Explain the fundamental themes underlying the design of cost systems.
What is the objective of the cost management system?
What are the two primary reasons for calculating product or service costs?
Learning Objective 6-2:
Explain how cost allocation is used in a cost management system.
List and describe the fundamental themes for designing costs systems.