Managerial Accounting

Front 1

Raw Materials Inventory

Back 1

asset account used to accumulate the costs of materials (such as lumber, metals, paints, chemicals) that will be used to make the company's products

Front 2

Work In Process Inventory

Back 2

asset account used to accumulate the product costs associated with incomplete products that have been started but are not yet completed

Front 3

Finished Goods Inventory

Back 3

asset account used to accumulate the product costs associated with complete products that have not yet been sold

Front 4

predetermined overhead rate

Back 4

allocation rate calculated before actual costs or activity are known
-determined by dividing the estimated overhead costs for the coming period by some measure of estimated total production activity for the period, such as the number of labor-hours or machine-hours. The base should relate rationally to overhead use. The rate is used throughout the accounting period to allocate overhead costs to work in process inventory based on actual production activity

Front 5

applied overhead

Back 5

amount of overhead costs assigned during the period to work in process using a predetermined overhead rate

Front 6

Manufacturing Overhead account

Back 6

temporary account used during an accounting period to accumulate the actual overhead costs incurred and the amount of overhead applied to production. A debit balance in the account at the end of the period mans overhead has been underapplied and a credit balance means overhead has been overapplied. The account is closed at year-end in an adjusting entry to the Work in Process and Finished Goods Inventory accounts and the Cost of Goods Sole account. If the balance is insignificant, it is closed only to Cost of Goods Sold.

Front 7

overapplied overhead

Back 7

if more overhead has been applied that was actually incurred

Front 8

underapplied overhead

Back 8

if less overhead was applied than was incurred

Front 9

schedule of cost of goods manufactured and sold

Back 9

internal accounting report that summarizes the manufacturing product costs for the period; its result, cost of goods sold, is reported as a single line item on the company's income statement

Front 10

absorption (full) costing

Back 10

reporting method in which all product costs, including fixed manufacturing costs, are initially capitalized in inventory and then expensed when goods are sold

Front 11

variable costing

Back 11

costing method in which only variable manufacturing costs are capitalized in inventory; all fixed costs, including fixed manufacturing overhead, are expensed in the period incurred. On a variable costing income statement, all variable costs are subtracted from revenue to determine contribution margin, then all fixed costs are subtracted from the contribution margin to determine net income. Under variable costing, production volume has no effect on the amount of net income