horngren1eim_ch04.docVIP

CHAPTER 4 JOB COSTING I. LEARNING OBJECTIVES Describe the building-block concepts of costing systems Distinguish job costing from process costing Outline the seven-step approach to job costing Distinguish actual costing from normal costing Track the flow of costs in a job-costing system Dispose of under- or overallocated manufacturing overhead costs at the end of the fiscal year using alternative methods Apply variations from normal costing II. CHAPTER SYNOPSIS Chapter 4 outlines the basics of costing systems by illustrating the accounting for costs in a typical job-costing system. Two more key terms, cost pool and cost-allocation base, are introduced in this chapter. A cost pool is any grouping of cost items. A cost-allocation base is the allocation basis used to allocate the costs in the cost pool to the cost object. For example, machine hours might be the cost-allocation base used to allocate equipment maintenance costs to the products produced since there is usually a cause-and-effect relationship between the number of machine hours and the level of maintenance required. The chapter distinguishes job-costing systems from process-costing systems. Job-costing systems track costs to distinct jobs, while process-costing systems apply the average cost to each unit of a large batch of identical or similar products. The seven-step process to job-costing is outlined, and normal-costing systems using standard costs are compared to actual-costing systems which use actual costs. The total of actual indirect costs often differs from the total of indirect costs applied in standard-costing systems and the chapter illustrates how to account for any underallocation or overallocation of indirect costs at the end of the fiscal period. Three common methods for allocating any indirect costs allocation variances are the adjusted allocation-rate approach, the proration approach, and the write-off to cost-of-goods-sold approach. III. CHAPTER OUTLIN