ACCT II Chapter 3
Absorbtion Costing
A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs.
Normal costing
A costing system that applies overhead to a job by multiplying a predetermined overhead rate by the actual amount of the allocation base used by the job.
Allocation Base
A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects.
POHR
A rate used to charge manufacturing overhead cost to jobs that is established in advance for each period.
POHR= Estimated total manufacturing/ estimated total amount of allocation base
How do you calculate predetermined overhead rate?
Job-order costing
a costing system used in situations where many different products, jobs, or services are produced each period
job costing
a form that records the direct materials, overhead cost charged to a job.
COGM
includes the manufacturing costs associated with units of product finished during the period..
Overhead Application
the process of assigning overhead costs to specific jobs using the following formula: overhead applied to a particular job = predetermined overhead rate X amount of the allocation base incurred by the job
COGS
what you pay for what you sell
