Summary: Fundamentals Of Cost Accounting | 9781526846266 | William N Lanen, et al

Read the summary and the most important questions on Fundamentals of Cost Accounting | 9781526846266 | William N. Lanen; Shannon W. Anderson; Michael W. Maher

• 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

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• 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

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• 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

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• 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.