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Summary Fundamentals of Cost Accounting

- William N Lanen, et al
ISBN-10 1526846268 ISBN-13 9781526846266
207 Flashcards & Notes
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A snapshot of the summary - Fundamentals of Cost Accounting Author: William N Lanen Shannon W Anderson Michael W Maher ISBN: 9781526846266

  • 6 Fundamentals of Products and Service Costing

  • 6.1 Explain the fundamental themes underlying the design of cost systems

  • Cost management system
    System to provide information about costs of process, products and services used and produced by an organization.
  • Objective cost management system
    The object of this is to provide information about costs relevant to the decisions that managers make.
  • Reasons to calculate product or service costs:
    • Decision making
    • Deciding what to sell
    • Setting prices
    • Knowing the cost of goods sold
    • Knowing the cost of inventory
  • 6.2 Explain how cost allocation is used in a cost management system

  • Design of a new cost system:
    • Cost system should have a decision focus that meets the needs of decisions makers (the customers).
    • Different cost information is used for different purposes. 
    • Cost information for managerial purpose must meet the cost-benefit test.
  • 6.3 Explain how a basic product costing system works

  • Transfer in (work in proces)
    Direct labor + indirect labor + manufacturing overhead + transferred % of the materials purchased to work in process * purchased direct materials
  • Cost of goods sold with work-in-process inventories
    1. Finished goods inventory (transfer out) + work in process inventory (transfer in)
    2. (direct materials + direct labor + overhead) / stap 1
    3. Finished goods * stap 2
  • 6.5 Explain the operation of a two-stage allocation system for product costing

  • Product costing - two-stage allocation
    1. Predetermind overhead rate = total cost allocation base manufacturing overhead / total allocation base
    2. Manufacturing overhead = allocation base * predetermind overhead rate
    3. Total costs = direct materials costs + direct labor costs + manufacturing overhead
    4. Unit costs = total costs / units produced
  • 6.6 Describe the three basic types of product costing system: job, process and operations

  • Continuous flow processing
    System that generally mass-produces a single, homogeneous output in a continuing process.
  • 7 Job Costing

  • 7.1 Explain what job and job shop mean

  • Job cost sheet
    Record of the cost of the job kept in the accouting system.
  • Subsidiary ledger account
    Account that records financial transactions for a specific customer, vendor, or job. Provides detail for the control account.
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