Costing Methods

Nota:

• Assigning costs and revenues to a process of products that are identical and mass-produced Ex: sodas

Nota:

• Assigning costs and revenues for each individual job rather than for an entire process. Ex: tracking costs and revenues for custom made furniture that is unique

1. Job

   Nota:

   • A job is an activity that produces a unique product that can be easily distinguished from other products. Ex: custom furniture
2. Assigning Direct Materials
   1. Begin with purchase of Raw Materials
      1. Materials are "requisitioned" for production using a "Materials Requisition Form"

         Nota:

         • WIP inv                         xxx      Raw materials inv.          xxx
         1. Materials Requisition Form

            Nota:

            • Matches the requisitioned materials to the corresponding job the materials will be used for
3. Assigning Direct Labor
   1. Use "Time Sheet" to assign Direct Labor

      Nota:

      • Each employee will indicate on their time sheet how much time they spent on a job WIP inv       Wages payable      
4. Job Cost Sheet

   Nota:

   • Used to track the Direct Materials, Direct Labor, and Manufacturing Overhead of each Job
5. Assigning Manufacturing Overhead
   1. Use Predetermined Overhead Rate(POR) to assign MOH
      1. Predetermined Overhead Rate

         Nota:

         • Uses an estimate of what the current year's total MOH will be, divided by the estimate of the Allocation base, which is chosen based on a common cost driver