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Manual for Product Costing

Deliverable Length: 300 - 400 words
Details: As the management accountant, you are responsible for setting costs for your manufacturing company's products, prior to setting the budget for the upcoming year. You meet with your junior accountants to discuss the importance of this whole process and how exactly your team will cost each of these products.

As a result of the meeting, you write a procedure manual that the junior accountants can keep on their desk for future reference.

Create a manual titled Product Costing: Why and How in outline form with the following sections:

Why accurate product costing is important.
How to set establish product costs:
Direct labor content
Direct material content
Overhead content/unit (make specific mention of the importance of picking the correct target volume)
How using contribution margin analysis can make product costing easier.


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Cost has been defined by many experts in different terms though the crux of all of them remains same i.e. the price you pay to get something. It may or may not be quantifiable. As per Sprouce, Robert and Mourice "Cost is an exchange price, a foregoing, a sacrifice made to secure some benefit." The Institute of Management Accountants, USA, says "cost is a measurement in monetary terms of the amount of resources used for some purpose." 9 pg 19 cost accounting book

Product cost= Direct materials, direct labor, and manufacturing overhead used in making its products. (IN product costs we will consider all manufacturing costs)
Product cost is internally focused as it reports for the use of management within an organization. It gives the internal reports relating to the product. Hence one can take decisions relating ...

Solution Summary

This solution guide provides information for creating a manual on product costing.