Fundamentals of Product and Service Costing Flashcards
Two principles to follow in product and service costing
Cost system should be oriented to the needxs of the decision makers
Cost system should be designed so its benefits exceed its cost
Cost management system
Provides information about the costs of process, products, and services used and produced by an organization
Why calculate individual product cost?
Accountant has to have the costs of the inventory values … but also to the various product managers so they can make decisions regarding pricing, production, promotion, and so forth
Basic cost flow model (basic inventory equation)
Beginning balance (BB) + Transfers in (TI) - Transfers Out (TO = Ending Balance (EB)
Predetermined overhead rate
cost per unit of the allocation base used to charge overhead to products.
two-stage cost allocation
process of first allocating costs to intermediate cost pools and then to the individual cost objects using different allocation bases.
job (in cost accounting)
unit of a product that is easily distinguishable from other units)
Job costing
Accounting system that traces costs to individual units or to specific jobs, contracts, or batches of goods.
Process costing
Used when identical units are produced through a series of uniform production steps. Does not separate and record costs for each unit. Good for homogeneous production
Operation costing
Good for batch production. Hybrid costing system often used in manufacturing goods that have some common characteristics plus some individual characteristics.
operation
standardized method of making a product that is performed repeatedly in production
