Chapter 14 Section 14 Essay

FRAME 14 CONTINUED...

The toral costs to be assigned to the various products manufactured are usually measured in accordance with the principles of financial accounting. The accrual concept, the distinction between costs that are to be capitalized and those that are to be expensed, the various methods of depreciation, and similar topics apply equally here. Product cost information is used for purposes other than the preparation of financial statements, however, and for these other purposes, the principles of financial accounting do not necessarily apply. Job costing and process costing. Essentially. A job cost system collect cost for each physically identifiable job or batch of work as it moves through the palnt, regardless of the accounting period in which the work is done, while a process cost system collects costs for all products worked on in an accounting period. Job costing. The “job” in a job cost system may consist of a single unit, or it may consist of all units of identical or similar products covered by a single production order. Usually costs are collected on a separate job cost record that is set up for each job. The sum of all the costs charged to all the jobs worked on in the factory during an accounting period is the basis for the entries debiting foods in process and crediting raw

In a process cost system, all the costs for s time perod, such as a month, are collected, with no attempt to attach these costs to specific units of product. This system is used in a factory making only one product, or in a factory where the differentce between various types of products is not substantial. The total cost incurred and the total number of units of products worked on during the period are collected. By dividing total costs by total units, one derives the cost per unit; and this cost per unit is used as the basis of valuing the units transfemed to finished goods inventory and later on, from finished doods inventory to cost of goods