Unit 2: Cost Management
This unit focuses on three categories of cost management: job costing, activity-based costing, and process/production costing. For a company that produces items for a job order, it is easy to identify the direct materials and direct labor needed to complete a specific job. However, how do you determine direct materials if the company uses a continuous assembly line? It would be inefficient to track each unit of production separately.
In this unit we also address how to allocate manufacturing overhead. Manufacturing overhead consists of costs not directly related to the product, but necessary to run the production process. This includes, but is not limited to, factory equipment, factory rent, and utilities for the factory.
Completing this unit should take you approximately 19 hours.
In this unit, you learned how to organize costs so that they can be efficiently used to assist management decision-making. You have read about and seen examples of job costing, activity-based costing, and process/production costing. Most management decisions involve predictions of future activity. If a manger decides to increase product price, she will be asked what effect that will have on the volume sold and profits. Unit 3 explores how short-term management decision-making is assisted by management accounting information.