Principles of Cost Accounting, 15th Edition by Edward J. Vanderbeck
By Edward J. Vanderbeck
This e-book presents readers with an intensive, yet concise, realizing of strategies, habit, and accounting thoughts appropriate to production fee platforms.
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Extra info for Principles of Cost Accounting, 15th Edition
Rather, the company (or a department within the company) produces large numbers of virtually identical items that are sold (or transferred to other departments) as orders are received. Process cost accounting techniques also may be used by organizations that provide a service such as for determining the cost of a particular type of MRI in a hospital’s radiology department or the cost per passenger-mile for an airline. Chapters 5 and 6 cover process cost accounting. Figure 1-14 shows examples of the use of job order cost and process cost systems in service, merchandising, and manufacturing businesses.
66 In later periods, owing to intense competition, it might be found that this particular item cannot be sold at a price that will be high enough to cover all of its costs and provide a normal profit margin. Through analysis of the unit costs, management might effect costcutting measures or perhaps even discontinue production of the item. From this example, it is apparent that, at any given time, the cost of each item in inventory is available. It should be reemphasized that one function of cost accounting is the accurate determination of the cost of manufacturing a unit of product.
44 If the same type of table is produced in future periods, the unit costs of those periods can be compared with the unit costs for this month. Any significant differences can be analyzed so that management might take appropriate action. The unit cost also serves as a basis for establishing the selling price of the tables. After also considering the selling and administrative expenses, management establishes a selling price that should provide a reasonable profit. The selling price may be determined by adding a mark-on percentage, which is a percentage of the manufacturing cost per unit.