Mamagerial Accounting Chacpter 3 Ppt

Chapter 3
Product
Costing and
Cost
Accumulation

© 2010 McGraw-Hill Ryerson Ltd.

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Learning Objectives
1. Discuss the role of product and service costing in manufacturing and nonmanufacturing firms.
2. Diagram and explain the flow of costs through the manufacturing accounts used in product costing.
3. Distinguish between job-order costing and process costing.
© 2010 McGraw-Hill Ryerson Ltd.

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Learning Objectives (con’d)
4. Compute a predetermined overhead rate, and explain its use in job-order costing for job-shop and batch-production environments.
5. Prepare journal entries to record the costs of direct material, direct labor, and manufacturing overhead in a job-order costing system.
6. Prepare a schedule of cost of goods manufactured, a schedule of cost of goods sold, and an income statement for a manufacturer using a normal costing system.
© 2010 McGraw-Hill Ryerson Ltd.

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Learning Objectives (con’d)
7. Demonstrate the process of project costing used in service industry firms and nonprofit organizations.
8. Apply the two-stage allocation process used to compute departmental overhead rates (Appendix).

© 2010 McGraw-Hill Ryerson Ltd.

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Learning Objective 1
Product and Service Costing
Our focus ranges from financial statement costs to cost for operations.

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.
© 2010 McGraw-Hill Ryerson Ltd.

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Product and Service Costing
(con’d)
There is a growing need also for product costing information in relationships between firms and various outside organizations
e.g. utilities, hospitals.

LO-1
© 2010 McGraw-Hill Ryerson Ltd.

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Learning Objective 2
Flow of Costs in a Manufacturing Firm
W
ork-in-Process Inventory

Direct m aterial cost
Direct