Types of Product-Costing Systems

Topics: Manufacturing, Industry, Costs Pages: 2 (405 words) Published: August 12, 2013
Types of Product-Costing Systems
There are two major types of costing systems that are used in manufacturing and many service companies: I. JOB-ORDER COSTING
II. PROCESS COSTING

I. JOB-ORDER COSTING
* Used for production of large, unique, high-cost items.
* Built to order rather than mass produced.
* Made to order
* Many costs can be directly traced to each job.
* Allocates costs to products that are identified by individual units or batches. * Job-cost records contain all costs for a particular product, service, or batch of products * In Job-order costing, each distinct batch of production is called a job or job order.

Two Types:
* Job-Shop Operations
Products manufactured in very low volumes or one at a time.
Examples: film production, custom house building, ship building, aircraft manufacture

* Batch-Production Operations
Multiple products in batches of relatively small quantity.
Examples: furniture manufacture, printing, agricultural equipment, pleasure boat production

The cost accounting procedures are designed to assign cost to each job. Then the costs assigned to each job are averaged over the units of production in the job to obtain an average cost per unit. * Example:

AccuPrint worked on two printing jobs during October, and the following costs were incurred. | JOB A27(1,000 Campaign Posters)| JOB B39(100 Wedding Invitations)| Direct Materials| $ 100| $36|

Direct Labor| 250| 40|
Manufacturing Overhead| 150| 24|
Total Manufacturing Cost| $500| $100|
Average Cost per Unit| $0.50 per Poster| $1.00 per Invitation|

The cost per campaign poster is $.50 per poster ($500 divided by 1000 posters) The cost per wedding invitation is $1.00 ($100 divided by invitations)

II. Process Costing
* Used for production of small, identical, low cost items. * Mass produced in automated continuous production process. * Costs cannot be directly traced to...
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