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    cost

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    cost

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    8 views25 pages

    CH5

    Uploaded by

    sajjad
    cost

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 25
    An enterprise seeks to profit by providing customers with goods and ser- vices. To realize this profit, it is necessary to make decisions based upon appropriate and timely information provided by accounting reports. In fulfill- ing the needs of management, cost accounting consists of three basic phases: (J) cost determination and measurement, (2) cost planning and control through budgets and standards, and (3) cost analysis for decision-making pur- poses. The previous chapter presented an overall view of the flow of costs and expenses, generally known as the manufacturing cost accounting cycle for cost determination, The greater part of this chapter is devoted to the cost accumulation procedures utilized in job order costing. Before entering into this discussion, it seems advisable to differentiate briefly between cost sys- tems and cost accumulation procedures. COST SYSTEMS: ACTUAL OR Determination of a product's cost is a basic objective of cost accounting. After the cost unit has been selected (see discussion on page 93), the obvious question arises: How are these costs accumulated? A decision must be made whether to compile and allocate actual costs to the units of production or to assign costs on a standard cost basis. If the latter method is chosen, variance accounts will set off the difference between actual costs and standard costs. 91 STANDARD , ACCUMULATION PROCEOURe: SYSTEM: AC! $ FORMATION iW : st cost J cost system collects the costs as the * hy da actual Fy esalts wl manufacturing eresies x ‘ bay ETicesenete argered. While the job oF si an se sega of materi use a4 Hho exer tual quantities ° : a lg yc oe ten ase wer head rate Thus, even " ei ona peas gystem, unit costs are predetermined in ad, ina standard com She, and processes are costed using gt, 4 practi Oy ad sollar amounts. Accounts are designed to cole S = oe on actual costs and standard costs, called re 7 cos . accounts. These variances are analyzed, ants © ce ito move ee to check unfavorable trends ang Pe nt is Soon t vell as from the desired vera! rg ck

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