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Chapter 3 - i Sunoco and Hershey can use it E Applied...

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A. Product-costing systems a. Necessary i. Helps with Financial Statements ii. Decision making (managerial) 1. Understanding the cost of your inventory iii. Cost management iv. Reporting to interested organizations (e.g. Medicare, IRS) B. Job-Order Costing Systems a. For batch or single job orders i. E.g. aircrafts, ship building, furniture manufacture, printing C. Process-Costing Systems a. For mass produced items i. E.g. Bottled water, Hershey D. Predetermined Overhead a. Budgeted Overhead / Volume Based Cost Driver (e.g. Direct Labor Hours) i. Or Direct Labor Cost, or Machine Hours b. Different Cost Drivers may work better for different departments c. # produced cannot be used in specialty areas
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Unformatted text preview: i. Sunoco and Hershey can use it E. Applied Overhead a. Predetermined Ovehead x Cost Driver i. Applies overhead to work-in-process inventory F. Actual Overhead a. Wait for period to end, and find actual b. Find out if you’re over or under predetermined (overapplied or underapplied) i. Neither is good ii. Want to be right on the money G. Departmental Rates a. More accurate when it comes to overhead costing i. Rather than applying to the whole plant b. More accurate means more expensive however H. Plantwide Overhead Rate a. Applied across the entire plant b. Not as accurate as departmental rates...
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