Discussion Question Chapter 4
Cost pool: A cost pool is a grouping of individual indirect cost items. Cost tracing: The assigning of direct costs to the chosen cost object. Cost allocation: a process of attributing cost to particular cost centers. Cost-allocation base: a systematic way to link an indirect cost or group of indirect costs. Job costing involves the detailed accumulation of production costs attributable to specific units or groups of units and process costing involves the accumulation of costs for lengthy production runs involving products that are indistinguishable from each other. Because advertising campaign for Pepsi is likely to be very specific to that individual client. Job costing enables all the specific aspects of each job to be identified. In contrast, the processing of checking account withdrawals is similar for many customers. The seven steps in job costing: identify the job, identify the direct costs, select the cost allocation bases, indirect costs to the job, identify the indirect costs associated with each cost allocation base, compute the rate per unit of each cost allocation base, compute the indirect costs, and compute the total cost of the job The two cost objects in companies using job costing are: products, and responsibility centers. The three major source documents used in job-costing systems are: Job cost sheet, a document that records and accumulates all costs assigned to a specific job, starting when work begins. Materials requisition record, a document that contains information about the cost of direct materials used on a specific job and in a specific department. And Labor time record, a document that contains information about the labor time used on a specific job and in a specific department. The advantage of using computerized source documents to prepare job-cost records is the accuracy of the records. Two reasons for using an annual budget period are: the numerator reason; the longer the time period, the...
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