Accounting 2020, Week 3 Notes
Accounting 2020, Week 3 Notes ACCT 2020-001
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This 1 page Class Notes was uploaded by Johanna Glaser on Wednesday September 14, 2016. The Class Notes belongs to ACCT 2020-001 at University of Nebraska at Omaha taught by Steven Nath in Fall 2016. Since its upload, it has received 35 views. For similar materials see Principles of Accounting 2 in Accounting at University of Nebraska at Omaha.
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Date Created: 09/14/16
Chapter 2 Costing Systems Process Costing o Used for standardized products Each unit is identical-no need to track costs separately for each unit Ex. Manufacturing companies that make multiple units of 1 product (milk) o Calculates average cost per unit based on total costs & total units produced Job Order Costing o Used for customized products Each unit is unique & incurs different costs Ex. Manufacturing companies that create custom products for customers (building houses); Service Industries (law office, accounting firm) o Costs are tracked for each individual unit o Each Customer or Order is considered a “job” o Manufacturing costs associated with each job are recorded & tracked on a “job cost sheet” Can be done manually, but usually done electronically o Job Cost sheets verify totals in the different inventory accounts Work-in Process Finished Goods Cost of Goods Sold Manufacturing Costs o Direct Materials- supplies needed to develop end product o Direct Labor- labor needed to turn supplies into end product o Manufacturing Overhead- all other costs of production that can’t be specifically traced back to a specific job Must be assigned to jobs based on overhead rate Assigning Overhead Since overhead can’t be traced back to a single job, companies must allocate/assign overhead to each job o Must choose an allocation base o Calculate a pre-determined overhead rate Allocation base (cost driver) *allocation=estimate o Should have “cause & effect” relationship with cost The greater the cost driver the greater the cost Ex. Direct Labor hours, labor cost, machine hours, etc.
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