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Complications of process costing
Number of units produced may include partially processed units (resolved by equivalent units), must use the same method of flow of costs (i.e. FIFO), spoilage, and prior department process costs
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Cost per unit
Manufacturing costs / number of units produced
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Characteristic of process costing
Used for manufacturing processes that produce a single type of product continuously for an extended period of time, includes cement production, flour processing, and oil refining
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Characteristic of job order costing
Used for manufacturing processes that produce products in batches where all units in the same batch are identical
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Process Cost System
A system of accounting for a production process that produces the same or similar products continously
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Job Order Cost System
A system of accounting for a production process that produces products in batches or dissimilar unitsClick to flip
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Equivalent Unit
A measure used in process cost systems to computer the number of units that would have been completed had the same production effort been devoted to starting and completing a smaller number of units
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Cost pool
A location for accumulating the costs associated with an activity or activity center
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Cost Object
Any item or activity for which management wants to determine the cost, such as products, services, or customers
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Cost driver or activity measure
A measure of activity selected for a cost center or activity because of the high correlation between the cost incurred by the cost center and the measure of activity.
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Activity or activity center
A repetitive task performed by a specialized group within a company as it executes business objectivesClick to flip
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Activity based costing (ABC)
A system of allocating both manufacturing and nonmanfacturing costs to objects of interest to management, such as products, services, or customers
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