1) Absorption Costing: all manufacturing costs, both fixed and variable, are assigned to units of product—units are said to fully absorb manufacturing costs. Product costs include all manufacturing costs. 2) Most countries including the United States require some form of absorption costing. Used in both financial and management reports. 3) Process Costing: used in companies that produce many units of a single product for long periods. Homogeneous products that flow through the production process on a continuous basis. Unit product cost = total manufacturing cost/ total units produced. Bc all units are same, each unit produced during period is assigned same average cost. 4) Job-order costing: used in situations where many different products are produced each period. Costs are traced and allocated to jobs and then the total costs of the job are divided by total number of units in job to arrive at anaverage cost per unit. Used extensively in service industries. Hospitals, law firms, movie studios, accounting firms and advertising agencies. 5) Measuring direct materials cost: bill of materials is a document that lists the type and quantity of each type of direct material needed to complete a unit of product. Materials requisition form is a document that specifies the type and quantity of materials to be drawn from the storeroom and identifies the job that will be charged for the cost of the materials, used to control flow of materials into production and also making entries in accounting records. 6) Job cost sheet: form prepared for a job that records the materials, labor, and manufacturing overehead costs charged to that job. 7) Measuring direct labor cost: direct labor consists of labor charges that can be easily traced to a particular job. Charges that cant be traced are treated as part of manufacturing overhead (indirect labor; includes maintenance, supervision, and cleanup). Time tickets are an hour by hour summary of the employees activities throughout the day. 8) Applying manufacturing overhead: Three difficulties for assigining manufacturing overhead to a specific job- 1)indirect cost, either impossible or difficult to trace to particular job. 2) consists of many different items. 3) bc of fixed costs in manufacturing overhead, total manufacturing overhead costs tend to remain relatively constant from one period to the next even though number of units and fluctuate, Average cost per unit will vary from one period to the next. Allocation base- measure such a direct-labor-hours or machine-hours that is used to assign overhead costs to products and services. Predetermined overhead rate is computed by dividing the total estimated manufacturing overhead cost for the period by the estimated total amount of the allocation base for the period. Predetermined overhead rate = estimated total manufacturing overhead cost/ estimated total amount of the allocation base. Predetermined overhead rate is computed before period begins. Steps: 1) estimate amount of allocation base. 2) estimate total manufacturing cost at that level of activity. 3) compute the predetermined overhead rate. Rate is then used to apply overhead cost to jobs throughout the period. Overhead application- process of assigning overhead cost to jobs. Overhead applied to particular job= predetermined overhead rate * amountof the allocation base incurred by the job. When allocation base is direct laborhours: overhead applied to particular job = predetermined overhead rate * actual direct labor hours charged to job.