Track the costs of the product
Managerial Accounting
EEC has introduced a new 1.5 gigabyte (GB) computer memory chip.
Should EEC use a job-order costing system, which is a costing system where costs are collected and assigned to units of production for each individual job, or a process costing system, which is a costing system that accumulates production costs by process or department for a given period of time, to report the costs of this new product?
How are the systems different?
Describe how the selected system would work to track the costs of the product.
Identify the cost driver, and explain the process of tracking the costs.
Provide examples of products that EEC might offer for which a job-order costing system would be appropriate.
Provide examples of products that EEC might offer for which a process costing system would be appropriate.
10. Under an activity-based costing system how are direct material costs handled?
Direct material costs must be assigned using an activity driver similar to the allocation of overhead.
Direct material costs due not apply to an activity-based costing system.
Direct material costs are handled in the same manner as was used in a traditional cost system.
Direct material costs are expensed as incurred rather than included as a component of product costs.
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