Cost and Valuation Method Alternatives
Unit 4 Discussion Topic 1: Job Order Costing and Process Costing | Topic 1: Product Costing Systems |
Discuss the two alternatives for product costing systems. Be sure to address the following:
Professor and class, * How do the two systems differ?
The two alternatives for product costing systems are job and process. The two differ in that with job costs these are specified for a particular job. Process costs go by each process that is done (Kinney & Raiborn, 2013, p 150). * What are the characteristics of the companies that would use each?
The characteristics of the companies that would use either a job-related system or a process system would be determining how many of the products would be made at the same time. For instance an apple factory would use a process system where a job-related system would be a company that does tax returns (Kinney & Raiborn, 2013, p 150). * Describe the three valuation method alternatives.
The three valuation method alternatives are: actual, normal, or standard. The Actual cost systems assign the actual costs of direct material (DM), direct labor (DL), and overhead (OH) to Work in Process (WIP) Inventory. A normal cost system that combines actual direct material and direct labor costs with predetermined overhead rates. Standard cost system a valuation method that uses predetermined norms for direct material, direct labor, and overhead to assign costs to the various inventory accounts and Cost of Goods Sold (Kinney & Raiborn, 2013, pp 151 & 816). * Explain why Washburn Guitar uses job-order costing and the costs Washburn tracks.
Washburn Guitar uses job-order costing because each guitar they make is custom ordered. The main costs track for these types of projects are associated with direct materials and direct labor.
Lisa Richardson
Reference:
Kinney, M. & Raiborn, C. (2013).Cost Accounting Foundations and Evolutions, 9th Ed. Mason, OH: South-Western Cengage Learning
Discuss the two alternatives for product costing systems. Be sure to address the following:
Professor and class, * How do the two systems differ?
The two alternatives for product costing systems are job and process. The two differ in that with job costs these are specified for a particular job. Process costs go by each process that is done (Kinney & Raiborn, 2013, p 150). * What are the characteristics of the companies that would use each?
The characteristics of the companies that would use either a job-related system or a process system would be determining how many of the products would be made at the same time. For instance an apple factory would use a process system where a job-related system would be a company that does tax returns (Kinney & Raiborn, 2013, p 150). * Describe the three valuation method alternatives.
The three valuation method alternatives are: actual, normal, or standard. The Actual cost systems assign the actual costs of direct material (DM), direct labor (DL), and overhead (OH) to Work in Process (WIP) Inventory. A normal cost system that combines actual direct material and direct labor costs with predetermined overhead rates. Standard cost system a valuation method that uses predetermined norms for direct material, direct labor, and overhead to assign costs to the various inventory accounts and Cost of Goods Sold (Kinney & Raiborn, 2013, pp 151 & 816). * Explain why Washburn Guitar uses job-order costing and the costs Washburn tracks.
Washburn Guitar uses job-order costing because each guitar they make is custom ordered. The main costs track for these types of projects are associated with direct materials and direct labor.
Lisa Richardson
Reference:
Kinney, M. & Raiborn, C. (2013).Cost Accounting Foundations and Evolutions, 9th Ed. Mason, OH: South-Western Cengage Learning