1. (a) Joe Delong is not sure about the difference between cost accouting and a cost accounting system. Explain the difference to Joe.
Cost accounting involves the measuring, recording, and reporting of product costs. A cost accounting system consists of manufacturing cost accounts that are fully integrated into the general ledger of a company.
(b) What is an important feature of a cost accounting system?
An important feature of a cost accounting system is the use of a perpetual inventory system that provides immediate, up-to-date information on the cost of a product.
2. (a) Distinguish between the two types of cost accounting systems.
The two principal types of cost accounting systems are: (1) job ...view middle of the document...
(b) May a company us both types of cost accounting systems?
A company may use both types of systems. For example, General Motors uses process costing for standard model cars and job order costing for custom-made vehicles.
3. What type of industry is likely to use a job order cost system? Give examples.
A job order cost system is most likely to be used by a company that receives special orders, or custom builds, or produces heterogeneous items or products; that is, the product manufactured or the service rendered is tailored to the customer or client’s requests, needs, or situation. Examples of industries that use job order systems are custom home builders, commercial printing companies, motion picture companies, construction contractors, repair shops, accounting and law firms, hospitals, shipbuilders, and architects.
4. What type of industry is likely to use a process cost system? Give examples.
A process cost system is most likely to be used by manufacturing firms with continuous production flows usually found in mass production, assembly line, large-volume, uniform, or relatively similar product industries. Companies producing appliances, chemicals, pharmaceuticals, rubber and tires, plastics, cement, petroleum, and automobiles utilize process cost systems.
5. Your roommate asks your help in understanding the major steps in the flow of costs in a job order cost system. Identify the steps for your roommate.
The major steps in the flow of costs in a job order cost system are: (1) accumulating the manufacturing costs incurred and (2) assigning the accumulated costs to work done.