The design of costing system depends on cost-benefit trade-offs as assessed by managers.
The nature of systems design is also influenced by the nature of what is to be costed.
Absorption costing is a popular approach for determining COGS and the cost of inventories for
financial accounting and income taxes.
Job order costing requires more effort than process costing systems.
A production order is issued when an agreement has been reached with the customer concerning the
quantities, prices and shipment date for the order.
As discussed in Chapter 2, this latter category of labour costs is termed indirect labour and includes
tasks such as maintenance, supervision, and cleanup.
Calculating predetermined MFG over head
1. Manufacturing overhead is an indirect cost. This means that it is either impossible or difficult to
trace these costs directly to a particular product or job.
2. Manufacturing overhead consists of man