Costing Methods In Managerial Accounting

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Running head: MANAGERIAL ACCOUNTING 1 Managerial Accounting – Costing Methods University of the People MANAGERIAL ACCOUNTING 2 Managerial Accounting – Costing Methods In order to understand the alternative costing methods, so the most appropriate one can be used, ensuring proper cost calculation, first it is necessary to understand what cost and what cost accounting mean. Cost can be described as being “a sacrifice of resources to obtain a benefit or any other resource.” (Jan, O. n.d.). It is necessary however, to identify, record, classify, analyze, summarize, allocate, and evaluate each cost. The process of doing it is called cost accounting, which “can be defined as the collection, assignment and interpretation of cost.”(Walther& Skousen,…show more content…
Taking into account that these two production categories are extremely different, then it is very unlikely that the companies would use the same accounting method for both. For that reason, in order to attend each demand in cost accounting, several cost accounting methods have been created and adopted by the different segments in the industry (or business), according to their needs. MANAGERIAL ACCOUNTING 3 The first cost accounting method to be defined and explained in this article is the job order costing. It can be described as being “a cost accounting system in which direct costs are traced and indirect costs are allocated to unique and distinct jobs instead of departments.” (Jan, O. n.d.) The job order costing is used when the product is somewhat unique, and it is…show more content…
However if the product or project is not reached via continuous processes, or if it is made singularly to a specific customer (customized), then the job order costing is the most suitable method to be employed. MANAGERIAL ACCOUNTING 4 Conclusion There is no right or wrong when it comes to the costing method adopted by a company

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