Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 25

Basic Product Costing

Big City Bank processes the checks its customers write at Riverdale Operations Center (ROC). ROC processed 2,800,000 checks in September. It takes only seconds to process a check, so none are left unprocessed at the end of the day. ROC cost data from September show the following costs:

Labor	$35,000
Center overhead	77,000

Required

Compute the cost per processed check for September at ROC.

Step 1 of 4

Cost accounting system

It is a system designed to report the cost of products and services. Material, labor and overhead costs are allocated to determine unit costs. Cost accounting system comprises of various types of formats, forms, procedures, reports and records. This can be maintained independently and can be part of formal accounting system also.

Cost accounting systems are used by both manufacturing and service firms to find the unit costing of their products or service. There are two types of cost accounting systems like job order costing system used for personalized products or services and process costing system used for large size of identical products. Some companies may use combination of job order costing and process costing system to fit its particular needs.

Basic cost flow model

Basic cost flow model is used as framework for recording the cost by all types of firms.

It is an inventory equation that is used to find out missing information: -

Basic cost flow model has four components like beginning balance, transfer in, transfer out and ending balance.