Cost and Management Accounting N6

Transcript:Cost and Management Accounting N6:
Cost and Management Accounting N6 www.futuremanagers.com INTRODUCTION Cost systems provide management with useful information to help with decision making. Managers are then able to more efficiently allocate resources and measure and control operations. With good cost management systems in place, a company can become more profitable. Module 1 – Job costing www.futuremanagers.com Module 1 – Job costing (continued) UNIT COST Importance of unit cost: To calculate a selling price after mark up. To help management make decisions e.g. stop producing a certain line, initiate new products, accept or reject special orders. To calculate the value of the unsold stock. www.futuremanagers.com Module 1 – Job costing (continued) COSTING SYSTEMS A cost system is a specific method whereby costs for a product or a process are collected, edited and disclosed. Companies use either: A process costing system; A product costing system which is also called job-order costing; or A combination of the two (called operation costing). www.futuremanagers.com Module 1 – Job costing (continued) RECORDING TRANSACTIONS All costs related to a job must be recorded on a job cost sheet, which can be on paper or in electronic form. On the job cost sheet the direct material, labour costs and the overhead costs will be recorded. The job cost sheets may differ from business to business, to suit their own requirements. www.futuremanagers.com Module 1 – Job costing (continued) JOB COSTING STATEMENT A job costing statement is a summary of all the production costs of a job (it can also show an amount for sales and marketing costs.) If the job is completed it includes the selling price and the profit on the job. www.futuremanagers.com Module 1 – Job costing (continued) JOB ORDER COSTING IN SERVICE BUSINESSES Job order costing can be used in both manufacturing and service businesses. In service businesses where jobs differ from one another and there is a need for cost information for separate jobs, several varieties of job order costing are used. These could be in industries such as laundries, tailors, garden services, repairs as well as professional services such as legal, accounting, architectural and consulting services. www.futuremanagers.com Module 1 – Job costing (continued) COMPARING PRODUCT AND PROCESS COSTING – SIMILARITIES Both systems use the same ledger accounts for recording transactions regarding manufacturing, material control, production control, finished goods control and so forth. Costs flow through these accounts in the same way in both systems. The purpose of both