chapter 4 product and service costing time dependant (normal/interim/actual), (equivalence for process costing, and joint/byproduct for process costing) Flashcards
normal costing is from when?
before start of a job or before order is placed
interim costing is from when?
after job completion and aims at ongoing cost and performance monitoring
actual costing is from when to when?
after accounting period
whats the points of normal costing
plan production program , negotiation, price policy planning
whats the point of interim costing
cost and profit control, learn to respond to customer requests/needs
point of actual costing
inventory valuation cost control profit control (but interim does control too)
what is inventory valuation
monetarily find out how much your inventory is worth
what does inventory valuation have to do with cost of goods sold (hence profit etc.)
you need to accurately find the value of inventory bc you can find cost of goods sold by the change in inventory (less inventory means you sold stuff)
actual costing is normal job costing that’s where you have the cost of stuff and the inventory valuation is also worth something
normal costing future/past/current?
take past info only to predict planned costs
interim costing, what type of direct cost added to what type of overhead
current actual direct cost
+
normal overhead (previous overhead rate(normal overhead rate) x actual real production time)
what is actual overhead rate
actual overhead costs/ actual production time
what is normal overhead rate
average overhead cost/ average production time
what is planned overhead rates
planned overhead costs/ planned production time
how would you do product costing using normal overhead rates
take average of overhead costs and average of production timme over last couple years and get a rate using those averages, then you have the production overhead (by doing the rate x the amount of produciton time it took)
explain schematic flow of manufacturing costs
new inventory account is opened in general ledger recording DM, DL and overhead costs (based on normal overhead rates), then used as manufacturing costs, posted to finished gods inventory accounts, thenw hen its sold those costs transfer to COGS (part of P and L statement)
when is equivalence number method used
related products produced using similair manufacturing equipment using similair raw materials (beer, screws)
what is an assumption for equivalence number method
fixed relationship between related products, man cost of x/ man. cost of basic = equivalence number x / equivalence number basic
how to find equivalence method
variant/basic type
how do you get equivalent quanitty
multiply normal production quantity by the equivalence numer
why do you need the equivalent quantities ?
you sum them up and use that number and divide by the total incurred cost to yout the manufacuring cost per unit for the basic type
how do you find the total cost of the basic series ?
man. cost per unit by production quantity
how do you find total cost of of other series type
take man.cost per unit of basic type and mulitpy by equivalence number to get man.cost per unit fo that series type
explain the main product method
profits of byproducts are deducted form the total costs incurred before the decoupling point
so one main product and the rest are byproducts. profits of byproducts are deducted from the total costs incurred before decoupling point. remaining costs incurred before the decoupling point are then fully allocated to the main product
explain the distribution method based on production times
allocation of cost incurred before decoupling point according to produced quantities or weight
explain distribution method based on market values
allocation of costs incurred before decoupling point according to market value
is interim costing the only one thats doesn’t always use the same type of direct cost and type of overhead?
yes
normal costing = only use planned DC and planned OH
actual costing = only use actual DC and actual OH
interim uses real DC and normal overhead (which is past normal oH rate x real production quantity) to get a feel for overhead, but since we don’t have overhead rate because we are still in the middle of the accounting year , we use the rate from previous things
