1. Introduction and Objectives
The structural architecture of a company’s production model dictates how costs are collected and tracked through the accounting system. This lesson outlines the primary accumulation models utilized globally.
2. Structural Cost Accumulation Systems
- Job-Order Costing: Used when distinct, unique, customized products or separate jobs are produced. Costs are accumulated on a specific tracking document called a Job Cost Sheet.
- Applicable Industries: Custom home construction, commercial printing, auditing firms, aircraft manufacturing.
- Process Costing: Used when homogenous, identical products are manufactured continuously in massive volumes through a series of sequential production departments. Costs are averaged across all units produced during a specific time period.
- Applicable Industries: Petroleum refining, chemical processing, beverage bottling, cement production.
- Operational Costing: A hybrid system combining elements of both job-order and process costing. It applies when batches of products go through similar conversion processes but use distinct, custom raw materials (e.g., clothing manufacturing).
3. Systems Flow Framework
[Raw Materials Procurement] ──> [Work-in-Progress (WIP) Ledger] ──> [Finished Goods Inventory] ──> [Cost of Goods Sold (COGS)]
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[Direct Labor Tracking] ───────────────┤
[Manufacturing Overheads Applied] ─────┘
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