AFM102 Lecture Notes - Lecture 5: Systems Design, Activity-Based Costing, Cost Driver

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azureturtle555

7 Apr 2017

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM102

Professor

Catherine Wong

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Document Summary

Process costing system is used in situations where the company produces many units of a single product for a long period of time. (ex. All of these industries are characterized by an homogenous product that flows evenly through the production process on a continuous basis. Unit product cost = total manufacturing cost/total units produced. Job order costing system used in situations where many different products or services are produced each period. Levi clothing factory makes different types of jeans for men and women. An order of 1000 jeans is called a job. In a job order costing system, costs are traced and allocated to jobs, then the costs of the job are divided by the number of units in the job to arrive at an average cost per unit. Job order costing is used in service industries, non for profit organizations etc.

Related Questions

Identify each statement as true or false. If false, indicate howto correct the statement.

1. Process cost systems are used to apply costs to similarproducts that are mass-produced in a continuous fashion.
2. A process cost system is used when each finished unit isindistinguishable from another.
3. Companies that produce soft drinks, motion pictures, andcomputers chips would all use process cost accounting.
4. In a process cost system, costs are tracked by individualjobs.
5. Job order costing and process costing track differentmanufacturing costs elements.
6. Both job order costing and process costing account for directmaterials, direct labor, and manufacturing overhead.
7. Costs flow through the accounts in the same basic way for bothjob order costing and process costing.
8. In a process cost system, only one work in process account isused.
9. In a process cost system, costs are summarized in a job costsheet.
10. In a process cost system, the unit cost is total manufacturingcosts for the period divided by the units produced during theperiod.

byzantiumpanda529

Process costing differs from job order costing in the way costsare accounted for. Share your thoughts about the accountingdifferences in process costing versus job order costing, andexplain how manufacturing costs are accounted for in processcosting. Further explain why the cost per equivalent unit aredetermined separately for direct materials and for conversion costsunder different methods of determining the cost of completed andtransferred out units and the cost of ending work in processinventory. Additionally, discuss the type of production mostsuitable to employ a process costing system by providing anexample.

amaranthworm158

Process Cost Accounting & Cost-Volume-Profit Analysis

This module focuses on measuring costs in process production companies. We explain process production, describe how to assign costs to processes, and compute and analyze cost per equivalent unit. Discuss two of the three topics:

What is meant by equivalent units of production, and why are they important when a process costing system is used?

What are the four steps in accounting for production activity in a period?

Job order costing and process costing are two major costing systems used in manufacturing. Briefly contrast the characteristics of these two systems.

AFM102 Lecture Notes - Lecture 5: Systems Design, Activity-Based Costing, Cost Driver

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