A manufacturer must determine the unit cost of any individual product produced. Manufacturing costs may be accumulated and assigned to individual products by use of one of two basic systems: a job order cost system or a process cost system. In this chapter, we will discuss the nature of a job order cost system, the situations in which its use is appropriate, and the flow of information through the accounting records when a job order system is in use. Process costing will be discussed in the next chapter.


  1. Explain the characteristics and purposes of cost accounting. Cost accounting involves the procedures for measuring, recording, and reporting product costs. From the data accumulated, companies determine the total cost and the unit cost of each product. The two basic types of cost accounting systems are job order cost and process cost.
  2. Describe the flow of costs in a job order costing system. In job order costing, manufacturing costs are first accumulated in three accounts: Raw Materials Inventory, Factory Labor, and Manufacturing Overhead. The accumulated costs are then assigned to Work in Process Inventory and eventually to Finished Goods Inventory and Cost of Goods Sold.
  3. Explain the nature and importance of a job cost sheet. A job cost sheet is a form used to record the costs chargeable to a specific job and to determine the total and unit costs of the completed job. Job cost sheets constitute the subsidiary ledger ...

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