Cost accumulation definition
/What is Cost Accumulation?
Cost accumulation involves the use of a formal cost accounting system to collect cost information. By collecting and analyzing cost information, management can make more informed decisions about the operations of a business. Cost accumulation systems fall into two main categories, which are noted below.
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Job Cost System
A job cost system accumulates materials, labor, and overhead costs about individual production or service jobs. It is designed for production processes that create products in smaller batches. The information is also useful for determining the accuracy of a company's estimating system, which should be able to quote prices that allow for a reasonable profit. The information can also be used to assign inventoriable costs to manufactured goods.
Process System
A process system accumulates costs by cost center and then assigns average costs to products. It is designed for production processes that create large quantities of units over an extended period of time, where the cost of each product produced is assumed to be the same as the cost of every other product.