Product and service costing
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Product and Service Costing. Managerial Accounting and Cost Management Product costs are used for planning, control, directing, and management decision making. Financial Accounting Product costs are used to value inventory and to compute cost of goods sold. Manufacturing overhead (OH)

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Product and Service Costing

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Product and service costing

Product and Service Costing

Managerial Accounting and Cost Management

Product costs are used for planning, control, directing, and management decision making.

Financial Accounting

Product costs are used to value inventory and to compute cost ofgoods sold.


Accumulating costs in a job order costing system

Manufacturingoverhead (OH)

Applied to eachjob using apredeterminedrate

Accumulating Costs in aJob-Order Costing System

Directmaterials

Traced directly to each job

THE JOB

Traced directly to each job

Direct labor


Manufacturing overhead costs

Budgeted manufacturing overhead cost

POHR =

Budgeted amount of cost driver (or activity base)

Manufacturing Overhead Costs

Overhead is applied to jobs using a predetermined overhead rate (POHR) based on estimates made at the beginning of the accounting period.

Overhead applied = POHR Ă— Actual activity

Based on estimates, anddetermined before the period begins

Actual amount of the allocation base, such as direct labor hours, incurred during the period


Job order costing document flow summary

Job Cost Sheets

Job Cost Sheets

Job Cost Sheets

Job-Cost Records

Manufacturing Overhead Account

Job-Order CostingDocument Flow Summary

The materials requisition indicates the cost of direct materialto charge tojobsand the cost of indirect materialto charge to overhead.

Direct materials

Materials Ledger Cards

Materials Ledger Cards

Materials Ledger Cards

MaterialsRequisition

Indirect materials


Job order costing document flow summary1

Job Cost Sheets

Job Cost Sheets

Job Cost Sheets

Job-Cost Records

Manufacturing Overhead Account

Job-Order CostingDocument Flow Summary

Direct Labor

Employee time tickets indicate the cost of direct laborto charge tojobsand the costofindirect laborto charge to overhead.

Employee Time Ticket

Employee Time Ticket

Employee Time Ticket

Employee Time Ticket

Indirect Labor


Job order costing document flow summary2

Job-Order CostingDocument Flow Summary

IndirectLabor

EmployeeTime Ticket

Overhead

AppliedwithPOHR

OtherActual OHCharges

Manufacturing Overhead Account

Job-Cost Records

MaterialsRequisition

IndirectMaterial


The concept of activity based costing abc

The Concept of Activity-Based Costing (ABC)

Activity-Based

Costing

Departmental

Overhead

Rates

Level of Complexity

Plantwide

Overhead

Rate

Overhead Allocation


Activity based costing

Activity-Based Costing

In the ABC method,

we recognize that many

activities within a

department drive

overhead costs.


Assigning costs to activity centers

Assigning Costs to Activity Centers

Assign costs to the activity centers where they are accumulated while waiting to be applied to products.


Selecting cost drivers

Assign costs from the activity center to the product using appropriate cost drivers.

When selecting a cost driver consider:

The ease of obtaining data.

The degree to which the cost driver measures actual consumption by products.

Selecting Cost Drivers


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