Chapter 3 - Product costing and cost accumulation in a batch production environment. After completing this chapter, you should be able to: Discuss the role of product and service costing in manufacturing and nonmanufacturing firms, diagram and explain the flow of costs through the manufacturing accounts used in product costing, distinguish between job-order costing and process costing,. | Product Costing and Cost Accumulation in a Batch Production Environment Chapter 3 Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 3: Product Costing and Cost Accumulation in a Batch Production Environment Product and Service Costing Financial Accounting Product costs are used to value inventory and to compute cost of goods sold. Managerial Accounting and Cost Management Product costs are used for planning, control, directing, and management decision making. Our focus changes from financial statement costs to operations 3- Our focus changes from financial statement costs to operations: Financial Accounting – Products costs are used to value inventory and to compute cost of goods sold. Managerial Accounting and Cost Management – Product costs are used for planning, control, directing, and management decision making. (LO1) Flow of Costs in Manufacturing Firm 3- . | Product Costing and Cost Accumulation in a Batch Production Environment Chapter 3 Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 3: Product Costing and Cost Accumulation in a Batch Production Environment Product and Service Costing Financial Accounting Product costs are used to value inventory and to compute cost of goods sold. Managerial Accounting and Cost Management Product costs are used for planning, control, directing, and management decision making. Our focus changes from financial statement costs to operations 3- Our focus changes from financial statement costs to operations: Financial Accounting – Products costs are used to value inventory and to compute cost of goods sold. Managerial Accounting and Cost Management – Product costs are used for planning, control, directing, and management decision making. (LO1) Flow of Costs in Manufacturing Firm 3- Manufacturing costs consist of direct material, direct labor, and manufacturing overhead. As production takes place, all manufacturing costs are added to the Work-in-Process Inventory account with a debit. As soon as products are completed, their product costs are transferred from Work-in-Process Inventory to Finished-Goods Inventory with a credit to Work in Process and a debit to Finished Goods. During the time period when products are sold, the product cost of the inventory sold is removed from Finished Goods and added to Cost of Goods Sold, which is an expense of the period in which the sale occurred. A credit to Finished Goods and a debit to Cost of Goods Sold completes this step. Cost of Goods Sold is closed into the Income Summary account at the end of the accounting period, along with all other expenses and revenues of the period. (LO2) Used for production of large, unique, high-cost items. Built to order rather than mass produced. Many costs can be directly traced to each job. TWO .
