Chapter 5 - Job costing. In this chapter students will be able to: Explain product costs and cost flows through the manufacturing process, describe how costs are assigned to customized goods and services, allocate overhead costs to individual jobs, . | Lecture Cost management Measuring monitoring and motivating performance 3rd edition Chapter 5 COST MANAGEMENT Measuring Monitoring and Motivating Performance Third Canadian Edition ELDENBURG WOLCOTT CHEN COOK Chapter 5 Job Costing Learning Objectives LO1 Explain product costs and cost flows through the manufacturing process LO2 Describe how costs are assigned to customized goods and services LO3 Allocate overhead costs to individual jobs LO4 Discuss how job costing information affects managers incentives and decisions LO5 Explain how spoilage rework and scrap are handled in job costing LO6 Appreciate the quality and behavioural implications of spoilage LO1 Explain product costs and cost flows through the manufacturing process Product vs. Period Costs Product costs are involved in the purchasing or making of a product and are the direct and indirect costs of producing goods or services These costs are accumulated on balance sheet as inventory until product is sold Examples direct materials direct labour Period costs are operating costs that are not related to the purchasing or making of a product These costs are expensed as incurred Examples selling and admin expenses Merchandising Companies Merchandising companies purchase inventory from suppliers and calculate cost of goods sold as follows Cost of Goods Sold Beginning Merchandise Inventory Purchases - Ending Merchandise Inventory Purchases include the cost of the products themselves plus costs such as freight duty taxes that are incurred in bringing the inventory to the seller s location Manufacturing Companies Manufacturing companies produce inventory in-house and calculate cost of goods sold as follows Cost of Goods Sold Beginning Finished Goods Inventory Cost of Goods Manufactured - Ending Finished Goods Inventory Cost of Goods Manufactured includes three components Direct materials used Direct labour Manufacturing overhead indirect expenses such as indirect labour and materials utilities and rent for the .
