Discussion
1. For the non-accountant, the concept of cost and expense can be confusing. A cost is basically exchanging one asset such as cash for another asset such as materials or supplies. An expense is an expired cost or an item (cost) that has been used up. Think about the business that you are entering and then list three costs you might incur and then three expenses.
2. There are basically three types of costs, fixed, variable and mixed (semi-variable, semi-fixed, or mixed). Putting aside mixed costs because they have components of both fixed and variable, list some costs in your business that will be fixed and variable. How do these costs differ from each other?
3. A job order accounting system accumulates costs for the particular (distinct) job that is being performed. Costs that will go into a particular job are direct materials, direct labor, and overhead. Think about your business plan. What types of direct material, direct labor and overhead will you incur? List three of each (direct materials, direct labor, and overhead) and explain how they will impact your product. If you have a service type of business plan (accounting or legal practice, hair salon, etc.), you may have difficulty with direct materials but you should be able to identify direct labor and overhead.
4. A traditional job order cost system will apply overhead using some type of driver such as direct labor hours. Activity based costing will apply the same amount of overhead but will use some type of activity (machine setup as an example) instead of the traditional labor hours. List three activities in your business plan that you might use to apply overhead.
5. A process cost system will have three inventory accounts, raw materials, work-in-process, and finished goods. Give examples of each in a furniture manufacturing facility.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.