Unit 2 Exam Study Guide.docx - Unit 2 Study Guide Chapter 6...

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Unit 2 Study Guide Chapter 6: Fundamentals of Product Costing Summary: 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.
Unit 2 Study Guide Learning Objective 6-3: Explain how a basic product costing system works. Basic Cost Flow Model: Display the basic cost flow model in T-account form: Account BB TO TI EB Complete the following problems (Double-click to access Excel): Graham Petroleum produces oil. On May 1, it had no work-in-process inventory. It started production of 244 million barrels of oil in May and shipped 216 million barrels in the pipeline. The costs of the resources used by Graham in May consist of the following: Required The production supervisor estimates that the ending work in process is 60 percent complete on May 31.

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