Chapter 5 Key Terms

Front 1

Actual Cost System

Back 1

Only the actual cost of direct materials, direct labor, and overhead are used to determine unit cost.

Front 2

Adjusted cost of goods sold

Back 2

After the normal costs of goods sold is adjusted for the overhead variance. This is the figure that will appear as the COGS on the income statement.

Front 3

Applied Overhead

Back 3

This is found by taking the predetermined overhead rate and multiplying it by the actual activity level. This will find the overheard rate to be used to find total normal product costs for the period.

Front 4

Casual Factors

Back 4

Also known as drivers, these are ways to measure the consumptions on support services by the production services.

Front 5

Common Costs

Back 5

These costs are for resources that are shared by more than one department or service, such as an IT or maintenance department.

Front 6

Departmental overhead rate

Back 6

Similar to plantwide overhead, departmental overhead rates is calculated by taking the estimated overhead cost and dividing it by the estimated departmental activity level.

Front 7

Direct method

Back 7

Support costs are only assigned to producing departments, not to other support departments, thus ignoring support deparment interactions for the purpose of applying overhead.

Front 8

Job

Back 8

One distinct unit or set of units.

Front 9

Job order cost sheet

Back 9

This sheet is prepared every time a new job is started and it is used to track / allocated specific costs to a specific job.

Front 10

Job order costing system

Back 10

the process of assigning costs to the job that accumulates them.

Front 11

Materials requisition form

Back 11

this form is how we calculate direct materials cost. When a particular job calls for 10 boxes of widgets this form would show the date, job number (or other identifier), the quantity, and the price of these materials.

Front 12

Normal cost of goods sold

Back 12

This is what a business calculates as their COGS before any adjustments for overhead variance are taken into account.

Front 13

Normal cost system

Back 13

determines unit costs by using actual direct material cost, actual direct labor cost, and estimated overhead. This cost system one of the most common cost systems.

Front 14

Overapplied overhead

Back 14

If the actual overhead is less than the applied overhead then the estimate was over stated, thus Overapplied overhead

Front 15

Plantwide overhead rate

Back 15

this is when the overhead rate is calculated for the entire factory by using the estimated overheard for the factory as a whole by the activity level for the factory as a whole.

Front 16

Predetermined overhead rate

Back 16

This is calculated at the beginning of the year and is found by dividing your estimated annual overhead by the estimated annual production level.

Front 17

Process-costing system

Back 17

this is most commonly used for business or industries that produce large quantities of homogeneous materials. Costs are allocated and accumulated by department or process over a given period of time.

Front 18

Producing departments

Back 18

these departments are directly responsible for creating products or services that are sold to customers.

Front 19

Reciprocal method

Back 19

this method recognizes all interactions between support departments. However this is not commonly used due to its complexity.

Front 20

Sequential method

Back 20

also known as the step allocation method allows for costs to be allocated in a predetermined order, usually in order of greatest to least in terms of services rendered.

Front 21

Support departments

Back 21

these departments provide essential services to the producing departments but do not actually produce the products or services that are sold to customers.

Front 22

Time ticket

Back 22

Similar to the material requisition form a time ticket tracks the hours an employee works, the hourly rate for their wages, and which job they spent their time on so the wage expense can be properly allocated to a job as direct labor.

Front 23

Underapplied overhead

Back 23

If the actual overhead is more than the applied overhead then the estimate was under stated, thus Underapplied overhead