How does costing interact with financial reporting?

In this section, I will now gather everything we have seen together into a synthetic example illustrating all the steps of the costing process and putting side by side the different methods. I will also build on this example to show you how the choices we make in the costing process affect the numbers reported in financial statements.

At the end of this section, you should be able to:

  • trace costs to cost objects;
  • allocate indirect costs to cost objects;
  • compute the cost of production and value the inventory;
  • value the cost of goods sold;
  • explain the impact of cost accounting choices on financial statements.

In Excel, you should also be able to:

  • use formula auditing.