Internet and the Music Industry

In: Business and Management

Submitted By Guntermingram
Words 764
Pages 4
Chapter 3
Job-costing systems

Terms used for costing systems:
* Cost object: anything for which a separate measurement of costs is desired.
* Direct costs of a cost object: costs that are related to the particular cost object and can be traced to it in an economically feasible (cost-effective) way.
* Indirect costs of a cost object: costs that are related to the particular cost object but cannot be traced to it in an economically feasible way. Indirect costs are allocated to the cost object using a cost-allocation method.
(cf table p.61)

Two other important concepts:
* Cost pool: a grouping of individual cost items. Cost pools can range from the very broad (a company-wide total-cost pool for fax machines) to the very narrow (costs of operating a car).
* Cost-allocation base: a factor that is the common denominator for systematically linking an indirect cost or group of indirect costs to a cost object. Can be financial (such as direct labour) or non-financial (number of car kilometres travelled).
These five terms constitute the building blocks that are considered relevant in the design of costing systems.
Two basic types of costing system to assign costs to products or services:
* Job-costing system: costs are assigned to a distinct unit. [a job is a task for which resources are expended in bringing a distinct product or service to market.]
* Process-costing system: the cost object is masses of identical or similar units. The customers all receive the same product.
Most companies neither pure job costing nor pure process costing. → they combine elements of both.
* The products or services accounted for with job costing can differ greatly.
* Companies that use process costing provide similar products or services to their customers. (a bank usually provides the…...

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