Cost accounting CH 5

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  1. What are the Costing Systems?
    Job order costing is a system for allocating costs to groups of unique products made to customer specifications. House constuction often relies on job order costing because they are each different.

    Process costing is a system for allocating costs to homogeneous units of a massproduced product. Method would be used in producing running shoes that are all basically the same.

    • Activity-based costing (ABC) is a cost system that focuses on activities, determines their costs, and then uses appropriate cost drivers to trace costs to the products based on the activities. It is most
    • commonly used when overhead is a significant part of an item's cost because various types of
    • overhead are driven by different things.
  2. Prime Vs. Conversion cost
    Prime cost = Direct Labor + Direct Material

    Conversion Cost = Direct Labor +Manufacturing Overhead
  3. Overhead application rate
    Overhead application rate = Estimated Factory overhead costs/ Estimated activity base
Card Set:
Cost accounting CH 5

BISk CPA Review
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