ACC 252 Lecture Notes - Lecture 2: Direct Labor Cost, Cost Driver, Balance Sheet

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17 Aug 2016
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One of the primary questions in any manufacturing organization: what does my product cost? . Many different products are produced each period. The unique nature of each order requires tracing/allocating costs to each job and maintaining cost records for each job. Ex: boeing, levis strauss, walt disney studios. Absorption costing: assigning all manufacturing costs (fixed and variable) to units of a product. Each job cost sheet summarizes the product costs for the job. Direct material, direct labor = direct costs. Cost allocation: the process of assigning manufacturing overhead to specific products based on a predetermined rate. Predetermined overhead rate = total estimated manufacturing overhead. Total estimated cost driver = volume based measure that indicates manufacturing overhead is being incurred. Calculated by dividing a pool of dollars by measure of volume. Volume measure selected should have a direct relationship to the pool of dollars. Overhead $ = predetermined overhead rate * actual cost driver.

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