Question

6:19 ilE 6 Chapter 15 Discussion Please discuss one of the following and respond to two of your classmates: Discuss cost systems and the flow of costs in a job order system • Discuss how to determine and use a predetermined overhead rate - include how to calculate the predetermined overhead rate • Discuss journal entries for assigning costs to jobs and what entries are needed when a jobs is completed and sold • Discuss under and overapplied manufacturing overhead Remember that initial posts must be at least 140 words and that references need to be cited. Cost Systems Start Thread

Answer 1

Discuss Costing System & Flow of Costs in Job Order System

A. Costing System

Costing system is a process used to estimate the cost of their products for profitability analysis, inventory valuation and cost control.

Estimating the accurate cost of products is important for profitable operations. One must know which products are profitable and which ones are not, and this can be ascertained only when it has estimated the correct cost of the product. Further, a product costing system helps in estimating the closing value of materials inventory, work-in-progress and finished goods inventory for the purpose of financial statement preparation.

There are two main cost accounting systems: the job order costing and the process costing.

Job order costing is a cost accounting system that accumulates manufacturing costs separately for each job. It is appropriate for business that are engaged in production of unique products and special orders. e.g. an event management company

Process costing is a cost accounting system that accumulates manufacturing costs separately for each process. It is appropriate for products whose production is a process involving different departments and costs flow from one department to another. e.g. oil refineries,

B. Flow of Costs in Job Order System

The basic flow of costs in a job-order system begins by recording the costs of material, labor, and manufacturing overhead.

a. Direct material and direct labor costs are debited to the Work In Process account. Any indirect material or indirect labor costs are debited to the Manufacturing Overhead control account, along with any other actual manufacturing overhead costs incurred during the period. Manufacturing overhead is applied to Work In Process using the predetermined rate. The offsetting credit entry is to the Manufacturing Overhead control account.

b. The cost of finished units is credited to Work In Process and debited to the Finished Goods inventory account.

c. When units are sold, their costs are credited to Finished Goods and debited to Cost of Good Sold.