prdouct and job costing Flashcards
Product costing system definition
A system that accumulates product-related costs and uses a series of procedures to assign them to the organization’s final products
Why product costing:
- Pricing
- Performance evaluation
- Planning and controlling costs
For external reporting purpose:
Only manufacturing / production costs are included in product costs.
For managerial decisions:
Short-term decisions – variable manufacturing and downstream costs
Long-term decisions – total costs (both manufacturing and upstream & downstream costs) associated with the product
two types of MOH recorded in accounting system?
actual MOH
applied MOH
actual MOH?
- Manufacturing overhead costs incurred throughout the accounting period
- Debited to the manufacturing overhead account
- Credited to various accounts
applied MOH?
Estimate of the overhead resources used to manufacture a product based on budgeted rate (calculated as pre. OH rate × actual level of activity)
Credited to the manufacturing overhead account
Debited to the WIP account
when is MOH underapplied?
If Actual MOH > Applied MOH
when is MOH overapplied?
if Actual MOH < Applied MOH
Types of product costing systems
job costing
process costing
Job costing system
a costing system that assigns manufacturing (or product-related) costs to individual jobs.
process costing system
a costing system that assigns all production costs to processes or departments, and averages them across all units produced.
