StudentShare solutions
Triangle menu

Product Costing - Essay Example

Nobody downloaded yet

Extract of sample
Product Costing

This implies that, the cost of a finished unit in inventory will include direct materials and labor, and both fixed and variable manufacturing overheads. It is notable that, absorption costing is the most preferred method for external reporting as per the Generally Accepted Accounting Principles (GAAP). Absorption costing is fundamental in tracing the variable costs of production and the fixed costs attributed to the production of the product (Riahi, 2001). It is imperative to note that, absorption costing is dissimilar from the other costing methods since it takes into account fixed manufacturing overhead (the counting expenses ) such as factory rent, utilities and amortization (Riahi, 2001). Absorption costing forms three different types of costing, which include job order costing, process and ABC costing. Job order costing Considering the job order costing, the costs are assigned to the product in Batches or lots (Avis & Killick, 2009). Job order method is used in companies that offer bespoke or distinctive products or services. It is common in service industries that, serve customers with inimitable needs. Such services may include tracing of the number of hours spent on each individual client’s account (Avis & Killick, 2009). Fundamentally, the manufacturing cost categories include direct materials, direct labor and manufacturing overhead. All these jobs are counted as inventory until the good or product is sold. It is essential to note that, the job order cost system requires the manufacturing costs recorded in a document called the job cost sheet. This sheet provides a detailed record of the cost incurred to complete a specific job. Consider the following illustrations that, indicates how three kinds of manufacturing costs are allotted in a job order cost system. Direct materials job cost sheet Direct Labor manufacturing overhead Fixed overhead rate It is noticeable that, direct materials and direct labor costs are allotted to jobs differently than manufacturing overhead costs. For instance, the direct costs, requires keeping of track of the costs of specific jobs with a set of records referred to as the source documents. Essentially a source document is a hard copy document similar to the receipt issued after payment (Horngren, Datar & Rajan, 2012). However most companies use paperless system where information is stored in electronic databases. On the other hand, manufacturing overhead comprises of the costs that cannot be directly traced to particular jobs. It is imperative to note that, on assigning these jobs, accountants should use a predetermined overhead rate based on some secondary allotment measure and cost driver. The material requisition form refers to the form that lists the quantity and cost of the direct materials used in a particular job. This is normally done before materials are used on a job. The fundamental purpose of this form is control the physical outflow of materials from inventory and into production. Similarly, a direct labor time tickets refers to a source document that shows how much time a laborer spends on a range of jobs per week. On the other hand, job cost sheet is a document that gives a summary of all the costs incurred on a specific job. Process costing Process costing refers to a costing method where all costs are ...Show more


Absorption Costing By [Name of Student] [Name of University] [Date] Table of contents Introduction………………………………………….3 Absorption costing……………………………………3 Job costing order……………………………4 Process costing………………………………5 ABC Approach………………………….……
Author : jzemlak
Product Costing essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Product Costing"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Management Accounting (performance indication, product and service costing, budgeting)
In this given paper we will mainly concentrate on the areas such as performance indication, product and service costing and budgeting of various kinds along with its disadvantages and process to overcome the same. Through performance indication of the organisation we will be judging the internal as well as external achievement of the institution at present and suggest the necessary tools that would help the organisation in overcoming the hurdles thus faced.
12 pages (3000 words) Essay
Report On Product Costing For Dumbellow Ltd
The financial controller proposed a termination of the production of the product while the marketing manager suggested a £1 per unit reduction in the price so as to increase the demand of the product. On the other hand, the managing director thought that a 10% increase in both sales and activity across the board would make a difference.
12 pages (3000 words) Essay
Contrast and Compare Absorption Costing with Marginal Costing
11 Conclusion 12 References 12 Introduction In today’s complex business environment, the management not only requires day-to-day and accurate information about the costs incurred in the business functioning, but also needs to understand which specific costing method will be more suitable to the financial system it follows.
8 pages (2000 words) Essay
Use the Theory of Constraints and Activity-Based Costing to Determine the Optimal Product Mix Decisions
Different theories and perspectives have been presented in this area of research. This article particularly highlights the development of optimal product mix by utilizing three major approaches such that the utility, strengths, weaknesses and their implications have been mainly analyzed.
6 pages (1500 words) Essay
Job Order Costing
It is a highly useful procedure, and allows for these various different occupations to do their work efficiently and at the costs that
9 pages (2250 words) Essay
Product Costing
It focuses attention on suppliers, customers and competitors. The information gathered in the course of management accounting may be qualitative or quantitative in nature, with some of it being non-financial in nature.
4 pages (1000 words) Essay
Product Costing - Traditional Methods and Activity Based Costing case assignment 5 accounting
A focus on the schematic relations of the centres as well as discussion of the allocation and criteria relating the same have also been
3 pages (750 words) Essay
Discuss how asmall UK education-sector organisation might use ABC (activity based costing) to (a) produce product costs for services, and to (b) evaluate the internal efficiency, quality and profitability per product or service line. Both benefits and d
ABC is based on the concept that every output needs certain activities, and each activity needs certain sources (Kaplan & Steven, 2013; Garrett, 2014; Bhimani & Bromwic, 2009). It follows a two-step process through which cost of resources is assigned to activities in the first
10 pages (2500 words) Essay
There are two vital financial basics necessary in arriving at the correct target cost. Target Profit Margin and the Target Selling Price are fundamental in computing a target cost. Mathematically, the
3 pages (750 words) Essay
Activity-Based Costing vs Traditional Costing
Conversely, the traditional method of costing allocates cost at an average rate to all product-based products. The traditional method brings together any price that are indirect in the production and equally implements the costs across the board through employing one applicable cost driver, for instance, the machine hours.
1 pages (250 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Let us find you another Essay on topic Product Costing for FREE!
Contact us:
Contact Us Now
  • About StudentShare

  • Testimonials

  • FAQ

  • Blog

  • Free Essays
  • New Essays
  • Essays

  • The Newest Essay Topics
Join us:
Contact Us