2.1 Cost Accounting Systems

2 Major steps in the flow of costs

1. accumulating the manufacturing costs incurred 2. assigning the accumulated costs to the work done

perpetual inventory system

A detailed inventory system in which a company maintains the cost of each inventory item, and the records continuously show the inventory that should be on hand.

Cost accounting system

Consists of accounts for the various manufacturing costs. These accounts are fully integrated into the general ledger of a company.

In a job order cost system, factory labor costs incurred are debited to which account?

FACTORY LABOR

Cost of Factory labor

Gross earnings of factory workers Employer payroll taxes on such earnings Fringe benefits incurred by the employer

Cost accounting

Involves the measuring, recording, and reporting of product costs

A cost system that identifies costs by batch rather than a set time period

JOB ORDER COST SYSTEM

A cost system that is best for producing items with unique, distinguishing features

JOB ORDER COST SYSTEM

In a job order cost system, indirect materials used are debited to which account?

MANUFACTURING OVERHEAD

A cost system that identifies costs with a set time period is a

PROCESS SYSTEM

In a job order cost system, raw materials purchased are debited to which account?

Raw Materials Inventory

Job Order Cost System

Under a job order cost system, costs are assigned to each job or to each batch of goods. (Objective is to calculate the cost per job)

Process Cost System

Used when a series of connected manufacturing processes or departments produce a large volume of similar products. -Process accounting for and accumulates product-related costs for a period of time.