Cost Accounting
Cost accounting is the process of recording, classifying, analyzing, and allocating costs to products, services, or activities to support management decision-making.
Explanation
Cost accounting distinguishes between product costs (direct materials, direct labor, manufacturing overhead) and period costs (selling and administrative expenses). Job order costing tracks costs by individual job or batch, while process costing accumulates costs by department for homogeneous products. Applied overhead uses a predetermined rate, and any difference between applied and actual overhead is over- or underapplied overhead, typically closed to cost of goods sold.
Key Points
- •Product costs: direct materials + direct labor + manufacturing overhead
- •Job order costing vs. process costing based on production type
- •Over/underapplied overhead = actual overhead minus applied overhead
Exam Tip
Know how to calculate predetermined overhead rate (estimated OH ÷ estimated activity base) and how to dispose of over/underapplied overhead.
Frequently Asked Questions
Related Topics
Activity-Based Costing (ABC)
Activity-based costing assigns overhead costs to products based on the activities that drive those costs, using multiple cost drivers rather than a single allocation base.
Variance Analysis
Variance analysis compares actual results to standard or budgeted amounts to identify and explain the causes of deviations in cost and revenue performance.
Test your knowledge
Practice scenario-based questions on this topic with detailed explanations.