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51 Cards in this Set
- Front
- Back
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A managerial cost system should provide cost data to help managers...
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-plan
-direct and motivate -control -make decisions |
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absorption costing
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A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product
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A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product
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absorption costing
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Process Costing
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A costing system used in situations where a single, homogeneous product (such as cement or flour) is produced for long periods of time
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A costing system used in situations where a single, homogeneous product (such as cement or flour) is produced for long periods of time
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Process Costing
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The basic formula for process costing
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Unit product cost = (Total manufacturing cost) / (Total units produced)
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Job-Order Costing
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A costing system used in situations where many different products, jobs, or services are produced each period
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A costing system used in situations where many different products, jobs, or services are produced each period
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Job-Order Costing
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bill of materials
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a document that shows the quantity of each type of direct material required to make a product
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a document that shows the quantity of each type of direct material required to make a product
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bill of materials
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materials requisition form
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A document that specifies the type and quantity of materials to be drawn from the storeroom and that identifies the job that will be charges for the cost of those materials
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A document that specifies the type and quantity of materials to be drawn from the storeroom and that identifies the job that will be charges for the cost of those materials
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materials requisition form
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Job cost sheet
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A form prepared for a job that records the materials, labor, and manufacturing overhead costs charged to that job
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A form prepared for a job that records the materials, labor, and manufacturing overhead costs charged to that job
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Job cost sheet
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time ticket
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a document that is used to record the amount of time an employee spends on various activities
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a document that is used to record the amount of time an employee spends on various activities
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time ticket
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What are three reasons assigning manufacturing overhead to a specific job involves difficulties?
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1. Manufacturing overhead is an indirect cost.
2. Manufacturing overhead consists of many different items. 3. Total manufacturing overhead costs tend to remain relatively constant from one period to the next. |
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allocation base
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A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects
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A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects
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allocation base
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Problem: assigning manufacturing overhead to a specific job is difficult
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Solution: Allocation is used to assign overhead costs to products
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predetermined overhead rate
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A rate used to charge manufacturing overhead cost to jobs that is established in advance for each period. It is computed by dividing the estimated total manufacturing overhead cost for the period by the estimated total amount of allocation base for the period
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A rate used to charge manufacturing overhead cost to jobs that is established in advance for each period. It is computed by dividing the estimated total manufacturing overhead cost for the period by the estimated total amount of allocation base for the period
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predetermined overhead rate
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Predetermined overhead rate equation
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predetermined overhead rate = (Estimated total manufacturing overhead cost) / (Estimated total amount of the allocation base)
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Steps involved in computing the predetermined overhead rate
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1. estimate the amount of the allocation base that will be required to support operations in the upcoming period.
2. Estimate the total manufacturing cost at that level of activity. 3. Compute the predetermined overhead rate. |
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When is the predetermined overhead rate computed?
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BEFORE the period begins
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overhead application
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The process of charging manufacturing overhead cost to job cost sheets and to the Work in Process account
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The process of charging manufacturing overhead cost to job cost sheets and to the Work in Process account
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overhead application
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Formula for determining the amount of overhead cost to apply to a particular job
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Overhead applied to a particular job = (predetermined overhead rate) x (Amount of the allocation base incurred by the job)
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Formula for determining the amount of overhead cost to apply to a particular job when allocation base is direct labor-hours
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Overhead applied to a particular job = (predetermined overhead rate) x (Actual direct labor-hours charged to the job)
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normal cost system
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A costing system in which overhead costs are applied to a job by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job
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A costing system in which overhead costs are applied to a job by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job
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normal cost system
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cost driver
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A factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs
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A factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs
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cost driver
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Raw Materials is what kind of account?
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Asset
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Flow of documents in a Job-Order Costing System
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1. Sales Order - prepared as basis of issuing a...
2. Production order - initiates work on job. Costs charged through... 3. a. Materials requisition form b. Direct labor time ticket c. Predetermined overhead rates -accumulated on a form by acct dept. known as... 4. Job Cost sheet |
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What is the purpose of the Manufacturing Overhead account?
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to accumulate all manufacturing overhead costs as they are incurred during a period
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What does the journal entry look like for $52K in raw materials requisitioned from the storeroom in use for production if $50K are direct materials and $2K are indirect?
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Debit: WIP $50K
Debit: MOh $2K Credit: Raw Materials $52K |
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What is the journal entry for $60K direct labor and $15K indirect labor?
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Debit: WIP $60K
Debit: MOh $15K Credit: Salaries and Wages payable $75K |
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How are manufacturing overhead costs assigned to WIP?
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By means of the predetermined overhead rate
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What does the Manufacturing Overhead account operate as?
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A clearing account
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What is the sequence the Manufacturing Overhead account goes through?
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-Debit: Actual overhead costs are charged to this account as the are incurred throughout the period.
-Credit: Overhead is applied to WIP using the predetermined overhead rate |
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How do companies treat nonmanufacturing costs?
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they are treated as period expenses and are charged directly to the income statement
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What accounting is recorded as finished goods are shipped to customers?
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accumulated costs are transferred from the Finished Goods account to the Cost of Goods Sold account
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What accounting is recorded as finished output is transferred from the production departments to the finished goods warehouse?
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The costs of the completed job are transferred out of the WIP account and into the Finished Goods account
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Overapplied Overhead
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A credit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process exceeds the amount of overhead cost actually incurred during a period
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Underapplied Overhead
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A debit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost actually incurred exceeds the amount of overhead cost applied to Work in Process during a period
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How is the under or overapplied balance remaining in the manufacturing overhead account at the end of the period treated?
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-Closed out to COGS or
-Allocated among the WIP, Finished Goods, and COGS accounts in proportion to the overhead applied during the current period in ending balances |
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A debit balance in the manufacturing overhead account means what?
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The overhead is underapplied by that amount
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A credit balance in the manufacturing overhead account means what?
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The overhead is overapplied by that amount
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Plantwide overhead rate
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A single predetermined overhead rate that is used throughout a plant
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Multiple predetermined overhead rates
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A costing system with multiple overhead cost pools and a different predetermined overhead rate for each cost pool, rather than a single predetermined overhead rate for the entire company. Each production department may be treated as a separate overhead cost pool
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