Chapter 17

Labor time record

a record used to assign direct labor cost to specific jobs

Overhead is overallocated

actual cost < allocated costs

Overhead is underallocated

actual cost > allocated costs

Manufacturing Overhead

allocated to the Work-In-Process inventory account using the predetermined overhead allocation rate

Underallocated overhead

occurs when the actual manufacturing overhead cost are more than allocated manufacturing overhead costs

Overallocated overhead

occurs when the actual manufacturing overhead costs are less than allocated manufacturing overhead cost

Allocated manufacturing overhead cost equation

predetermined overhead allocation rate X actual quantity of the allocation base used for each job

Finished Goods Inventory; debit

A manufacturing company completed work on a job. The cost of the job is transferred into _____ with a ______.

Increase

Does labor incurred increase or decrease wages payable?

WIP Inventory is debited and Manufacturing Overhead is credited

Give the journal entry for the allocation overhead

Finished goods inventory is debited and WIP Inventory is credited

Give the journal entry for the completion of a job

Overallocated

If a company incurred $5,250 in actual overhead costs and allocated $5,575 to jobs, was the overhead account for overallocated or underallocated overhead?

jobs

Job order costing accumulates costs by....

processes

Process costing accumulates costs by...

Job Order Costing

Used by companies that manufacture unique products or provide specialized services

Process Costing

Used by companies that produce identical units through a series of uniform processes

Asset

What type of account is Finished Goods inventory?

Cost of Goods Manufactured

When a company finishes a job, it totals the cost and transfer them to Finished goods inventory

work in process inventory

When a manufacturing company uses direct labor, it assigns the cost by debiting...

work in process inventory

When a manufacturing company uses direct materials, it assigns the cost by debiting...

Manufacturing Overhead

When a manufacturing company uses indirect materials, it accumulates the cost by debiting...

Cost of Goods Sold

When the job's units are sold, the costing system moves the costs from finished goods to ...

Process Costing

Would a cell phone manufacturer use job order or process costing?

Job Order Costing

Would an advertising agency use job order or process costing?

Allocation base

a denominator that links indirect costs to cost objects. Ideally, the allocation base is the primary cost driver of the indirect costs

Materials requisition

a document that requests the transfer of raw materials to the production floor

Job cost record

a document that shows the direct materials, direct labor, and manufacturing overhead costs for an individual job

Raw Materials Subsidiary Ledger

allows for better control of inventory as it helps track the quantity and cost of each type of material used in production

Job order costing

an accounting system that accumulates costs by job. Used by companies that manufacture unique products or provide specialized services

Cost accounting systems

an accounting system that measures, records, and reports product costs

Subsidairy ledger

contains details of a general ledger account and the sum of the accounts in this ledger equals the balance in the general ledger account

Unit product cost equation

cost of goods manufactured / total units produced

Predertermined overhead allocation rate definition

estimated overhead cost per unit of the allocation base; calculated at the beginning of the accounting period

Cost driver

the primary factor that causes a cost to increase or decrease

Job

the production of a single unique product or specialized service, or a batch of unique products

Predetermined overhead allocation rate equation

total estimated overhead costs/total estimated quantity of the overhead allocation base

at the end of the period

when is the manufacturing overhead account adjusted?