Cost Accounting for Engineering Managers

This chapter presents basic cost accounting calculations and examples related to product and service costing. Product/service costs have direct and indirect cost components. While direct costs are relatively easy to assess, indirect costs that account for overhead charges related to facility, management, utilities, and others may need to be properly assessed by using tools such as ABC. This is especially true for the cases in which multiple products/services are produced and marketed to different customer groups each demanding special customization efforts, and the resulting overhead charge represents a significant percentage of the overall product/service costs. For enterprises with a single product/service and a minor amount of overhead charge relative to its total product/service cost, the traditional method of estimating the overhead charge is usually sufficient.