Chapter 15: Job-Order Costing

Estimated Overhead Cost

•A pre-determined overhead rate: is the rate used to apply factory overhead to work-in-process inventory. •The pre-determined overhead rate is so called because it is determined at the very beginning of an accounting period.

Overhead (OH) Cost

•Factory Overhead cost: is a pool of all indirect manufacturing costs. •Unlike direct materials and direct labor, overhead costs are not traced directly to individual jobs. •Still, each job's (each process') total cost must include estimated overhead costs. •At the end of the year, the company adjusts its estimated overhead to the actual amount of overhead incurred for that year (OH variance)

Process Costing :(Cost Accounting)

•To account for mass-production process of homogeneous (near-identical) products (examples: Titleist golf balls, Toyota Camry LE model). •Per-Unit Production Cost = Total Production cost / total number of Products Made in a Period

Job-Order Costing :(Cost Accounting)

•To account for small-scale production of a custom-made product(s). Examples: A custom-made car, a custom-made yacht, a custom-made submarine. •The work process to make a custom-ordered product is called a "job". •Each job has a separate Direct Materials account, Direct Labor account, and Factory-Overhead account.

Receiving Report

•When ordered materials are first received from suppliers, employees of the receiving company: 1.count and inspect the delivered items and 2.record the items' quantity and cost on a receiving report.

What are the two types of Cost Accounting?

1. Process Costing 2. Job-Order Costing

Job Lot

When a job involves producing more than one unit of a custom product, it is often called a job lot

Job

a work to product a single customized product