COMM 305 Study Guide - Final Guide: Cost Accounting, Income Statement, Financial Statement

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Cost accounting is primarily concerned with allocating overhead. A job cost accounting system is appropriate for homogeneous products that are continuously mass produced. Companies generally use a variation of either a job-order cost system or a process cost system. Manufacturing costs are generally recorded and incurred in the same accounting period. When raw materials are purchased, the raw materials inventory account is credited. A predetermined overhead rate is used to allocate the actual costs of manufacturing overhead for the period. Actual manufacturing overhead costs should be added as a cost to the specific jobs as the costs are incurred. Total manufacturing costs for a period consists of the costs of direct material used, the cost of direct labour incurred, and the actual manufacturing overhead incurred during the period. If monthly financial statements are prepared, over-applied overhead is shown as an operating expense on the income statement.

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