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Lecture Managerial accounting - Chapter 3: Systems design: Job-order costing

Managers need to assign costs to products to facilitate external financial reporting and internal decision making. This chapter illustrates an absorption costing approach to calculating product costs known as job-order costing. | Systems Design: Job-Order Costing Chapter 3 Chapter 3: Systems Design: Job-Order Costing. Managers need to assign costs to products to facilitate external financial reporting and internal decision making. This chapter illustrates an absorption costing approach to calculating product costs known as job-order costing. Learning Objective 1 Distinguish between process costing and job-order costing and identify companies that would use each costing method. Learning objective number 1 is to distinguish between process costing and job-order costing and identify companies that would use each costing method. Types of Product Costing Systems Process Costing Job-order Costing A company produces many units of a single product. One unit of product is indistinguishable from other units of product. The identical nature of each unit of product enables assigning the same average cost per unit. A process costing system is best used by companies that produce many units of a single product . | Systems Design: Job-Order Costing Chapter 3 Chapter 3: Systems Design: Job-Order Costing. Managers need to assign costs to products to facilitate external financial reporting and internal decision making. This chapter illustrates an absorption costing approach to calculating product costs known as job-order costing. Learning Objective 1 Distinguish between process costing and job-order costing and identify companies that would use each costing method. Learning objective number 1 is to distinguish between process costing and job-order costing and identify companies that would use each costing method. Types of Product Costing Systems Process Costing Job-order Costing A company produces many units of a single product. One unit of product is indistinguishable from other units of product. The identical nature of each unit of product enables assigning the same average cost per unit. A process costing system is best used by companies that produce many units of a single product and when one unit of output is indistinguishable from any other unit of output. Because the units of output are identical, the company will probably use an average cost system to determine product cost. Types of Product Costing Systems Process Costing Job-order Costing A company produces many units of a single product. One unit of product is indistinguishable from other units of product. The identical nature of each unit of product enables assigning the same average cost per unit. Example companies: 1. Weyerhaeuser (paper manufacturing) 2. Reynolds Aluminum (refining aluminum ingots) 3. Coca-Cola (mixing and bottling beverages) An example of a company that may consider a process costing system is Weyerhaeuser, a manufacturer of paper products. When we think of paper manufacturing, we generally think about continuous production of a single roll of paper that may eventually be cut into sizes needed by customers. Other companies that would benefit from process costing are Reynolds .