JOB ORDER COSTING

MANAGERIAL ACCOUNTING
Manufacturing Costs
● are the costs incurred during the production of
a product. These costs include the costs of
direct material, direct labor, and manufacturing
overhead.
Direct Materials
● are those materials and supplies that are
consumed during the manufacture of a
product, and which are directly identified with
that product.
Overhead
● Is the third element of manufacturing costs
includes all costs of manufacturing except
direct materials and direct labor.
Non-Manufacturing Costs
Selling Costs
● Includes all costs that are incurred to secure
customer orders and get the finished
product to the customer. These cost are
sometimes called order-getting and
order-filling costs.
Administrative Costs
● Includes all executive, organizational and
clerical costs associated with the general
management of an organization rather than
with manufacturing or selling.
Product Costs
● Includes all cost involved in acquiring or
making a product. It also initially assigned to
an inventory account on the balance sheet.
Period Costs
● Is any cost that cannot be capitalized into prepaid
expenses, inventory, or fixed assets. A period cost is more
closely associated with the passage of time than with a
transactional event. Instead, it is typically included within
the selling and administrative expenses section of the
income statement.
Prime Costs and Conversion Costs
● Prime Costs is the sum of direct material costs and
direct labor costs
● Conversion Costs is the sum of direct labor costs and
manufacturing costs.
Balance Sheet
- A balance sheet is an accounting tool that
shows a company's financial position at a
certain point in time.
Income Statement
-isa financial statement that reports the revenues
and expenses of a business as well as its net
income at the end of a fiscal period. An income
statement may be prepared at any time but is always
prepared at the end of a fiscal year to show the
results of the year's operations.
Inventoriable Costs
- is the cost from the supplier plus all costs necessary to
get the item into inventory and ready for sale, e.g.
freight-in. For a manufacturer the product costs include
direct material, direct labor, and the manufacturing
overhead (fixed and variable).
Variable Costs
-is a corporate expense that changes in proportion to
production output.

-increase or decrease depending on a company's production

volume; they rise as production increases and fall as
production decreases.
Fixed Costs
-is a cost that is constant in total regardless of changes in the
level of activity.

-Unlike variable costs, fixed costs are not affected by the

changes in activity.
Direct Costs, Indirect Costs & Common Costs
- Direct costs are expenses that a company can easily connect to a specific
"cost object," which may be a product, department or project.

- Indirect costs go beyond the expenses associated with creating a particular

product to include the price of maintaining the entire company.

- Common Cost is an expense associated with operating a facility, product, or

segment that is shared between two or more departments or users.
Opportunity Costs & Sunk Costs
- Opportunity Costs the loss of potential gain from other alternatives when
one alternative is chosen.

- Sunk cost refers to money that has already been spent and which cannot
be recovered.
Idle time & Overtime Premium
-Idle time is the time associated with employees waiting, or when a piece of
machinery cannot be used.

-Over time Premium is the additional payment made to an employee for

hours worked in excess of 40 hours per week.
Labor Fringe Benefits & Quality of Conformance
- Labor Fringe Benefits are additions to compensations that companies give
their employees.

- Quality of conformance is the ability of a product, service, or process to

meet its design specifications.
Prevention Costs & Appraisal Costs
-Prevention costs are any expenditures incurred that are intended to
minimize the number of defects in products and services.

-Appraisal Costs are specific category of quality control costs. Companies

pay appraisal costs as part of the quality control to process to ensure their
product and services meet customer expectations and regulatory
requirements.
Internal & External Failure Costs
-Internal External Failure Costs result from identifying
defects before they shipped to customers. While the
External Failure Costs results when a defective
products is delivered to a customer.
Quality Costs Report
-Details the prevention costs, appraisal costs, and
costs of internal and external failures that arise from
the company’s current quality control effects.