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Product costing guide Product Costing Guide ? DBA Software Inc CProduct Costing Guide ? DBA Software Inc CTable of Contents Contents Introduction Why You Need WIP-Based Product Costing Total Control Work ow Product Costing Overview Absorption Costing Abso

Product Costing Guide ? DBA Software Inc CProduct Costing Guide ? DBA Software Inc CTable of Contents Contents Introduction Why You Need WIP-Based Product Costing Total Control Work ow Product Costing Overview Absorption Costing Absorption Costing - Overview Absorption Costing - Cost of Sales Setup Absorption Costing - Shop Rates Absorption Costing - WC Cost Factors Job Receipts and Job Close Absorbed Cost Variances Inventory Value Cost of Goods Sold COGS Period End Using a Mainstream Accounting Package Product Costing Guidelines FAQs ? DBA Software Inc C Product Costing Guide Introduction What does product costing do for you Product costing provides the means by which material labor subcontract service and overhead costs are absorbed into item inventory costs and cost of goods sold Product costing provides the following features and bene ?ts Conforms to general accepted accounting principles and IRS and other tax authority guidelines Calculates the estimated cost of manufactured items Absorbs material direct labor subcontract service and manufacturing overhead costs into the inventory cost of your manufactured items Tracks total WIP value in real time Eliminates the need for associating speci ?c purchases or payroll costs to speci ?c jobs Eliminates the need for period end adjustments to inventory and WIP Our design is optimized for small business We ? ve designed our product costing system so that it can be successfully used by companies of any size especially small businesses for these reasons Product costing occurs as processes are performed and requires none of the maintenance and adjustments required to adapt a non-WIP system to a manufacturing business Hourly shop rates for direct labor and manufacturing overhead are automatically calculated based on historical job hours and actual costs Absorbed costing occurs automatically as job processes are performed Who is this guide for This guide is for the bene ?t of managers accounting personnel CPA ? s production planners and anyone who wants to learn how a WIP-based costing system works or is considering using DBA as a manufacturing solution ? DBA Software Inc CWhy You Need WIP-Based Product Costing Why You Need WIP-Based Product Costing All manufacturing companies require a WIP-based product costing system because work in process is the core set of activities performed by a manufacturing business When your accounting system is not WIP-based time consuming ine ?cient and inadequate workarounds are required to address WIP accounting issues Non-WIP systems are one- dimensional Manufacturing consists of two dimensions ?? ??material ? meaning the components that comprise each item and ??process ? which involves the labor and subcontract processes that comprise each item Non-WIP systems only address the material dimension and ignore the vitally important process dimension Three of the four major cost elements are ignored Manufactured items consist of four major cost elements ?? material labor subcontract services and manufacturing overhead Non-WIP systems only deal with the material cost element and ignore the other three Item costs are not GAAP or IRS compliant Without all four cost elements the inventory cost of individual items can