ACCT1022 Chapter 3: Product Costing
Document Summary
Product-costing system accumulates the costs incurred in a production process and assigns those costs to the organization"s final products. Uses in financial accounting: value inventory on the balance sheet and to compute cost of goods sold expense on the income statement. Use in managerial accounting: to help managers with planning and to provide them with data for decision making. Use in cost management: product costs provide crucial data for a variety of purposes. Use in reporting to interested organizations: between firms and outside organizations to justify rate increases that must be approved by state regulatory agencies. Merchandising companies include the costs of transporting and buying merchandise in their product costs. Services that are consumed as they are produced. Manufacturing costs consist of direct material, direct labor, manufacturing overhead. As production takes place, all manufacturing costs are added to work in process account. As soon as products are completed, their product costs are transferred to finished.
