Chapter 16 Accounting
manufacturing overhead
A "catchall" category including all manufacturing costs other than the costs of direct materials used and direct labor. (
job order costing
A cost accounting method under which the focal point of costing is a quantity of product known as a job or a lot. Costs of direct materials, direct labor, and overhead applicable to each job are compiled to arrive at average unit costs.
process costing
A cost accounting method used in enterprises with processes characterized by continuous mass production. Costs are assigned to a manufacturing process or department before being averaged over units produced.
roduction cost report
A detailed production report for a specified process and time period that details (1) the physical flow, (2) equivalent units, (3) cost per equivalent unit, and (4) total costs assigned.
direct manufacturing cost
A manufacturing cost that can be traced conveniently and directly into the quantity of finished goods manufactured. Examples include direct materials and direct labor.
indirect manufacturing cost
A manufacturing cost that cannot be conveniently traced to the specific products being manufactured. Examples include property taxes, depreciation on machinery, and other types of manufacturing overhead.
Overhead application rate
A means of assigning indirect product costs to work in process during the period.
equivalent units
A measure of the work done during an accounting period. Includes work done on beginning and ending inventories of work in process as well as work on units completely processed during the period.
job cost sheet
A record used in job order costing to summarize the manufacturing costs (materials, labor, and overhead) applicable to each job or batch of production. Job cost sheets may be viewed as a subsidiary ledger supporting the balance of the Work in Process Inventory control account.
schedule of the cost of finished goods manufactured
A schedule summarizing the flow of manufacturing costs into and out of the Work in Process Inventory account. Intended to assist managers in evaluating manufacturing costs.
value chainThe linked set of activities and resources necessary to create and deliver a product or service to customers.
The linked set of activities and resources necessary to create and deliver a product or service to customers.
cost accounting systems
The method and techniques used by enterprises to track resources consumed in creating and delivering products and services to customers.
Management accounting
The preparation and use of accounting information designed to assist managers in planning and controlling the operations of a business.
Cost of finished goods manufactured
The total of all direct labor, direct materials, and manufacturing overhead transferred from work in process to finished goods.
Activity-based costing
The type of cost accounting method likely to be used for overhead costs.
Job order costing
The type of cost accounting system likely to be used by a construction company.
benchmark study
A study designed to show an organization how its costs and processes compare to others in the industry.
conversion costs
The direct labor and overhead costs associated with converting direct materials into the units transferred out.
Manufacturing overhead
All manufacturing costs other than direct materials used and direct labor.
Cost driver
An activity base that can be traced directly to units produced and can be used as a denominator in computing an overhead application rate
period costs
Costs that are charged to expense accounts in the period that the costs are incurred. Includes all items classified as "expense."
Period costs
Costs that are debited directly to expense accounts when the costs are incurred.
prime costs
The direct materials and direct labor consumed in the production of goods and services.
work in process inventory
Goods at any stage of the manufacturing process short of completion. As these units are completed, they become finished goods.
activity cost pools
Overhead categories that represent the costs associated with an activity that consumes overhead resources.
direct labor
Payroll costs for employees who work directly on the products being manufactured, either by hand or with machines.
Work in process inventory
The account debited at the time that the Manufacturing Overhead account is credited.
Cost of finished goods manufactured
The amount transferred from the Work in Process Inventory account to the Finished Goods Inventory account.
manufacturing costs
The cost of manufacturing the goods that will be sold to customers. The basic types of manufacturing costs are direct materials, direct labor, and manufacturing overhead.
product costs
The costs of purchasing or manufacturing inventory. Until the related goods are sold, these product costs represent an asset—inventory. Once the goods are sold, these costs are deducted from revenue as the cost of goods sold. (p. 726)
over- or underapplied overhead
The difference between the actual manufacturing overhead incurred during the period and the amount applied to work in process by use of a predetermined overhead application rate.
