AC 351 ch 2

pohr = 120% of direct labor cost. job sheet listed $4000 in direct materials cost and $5000 in direct labor cost to manufacture 7500 units. unit cost of job is?

$2. bc DM + DL + overhead (pohr X direct labor cost) 4000+5000 + (1.2 X 5000) = 15000 unit product = 15000 / 7500 = 2

total cost of a job includes

-Direct Materials Cost -Direct Labor Cost -Applied Manufacturing Overhead

on cost summary on job sheet, it goes

1. DM 2. DL 3. MOH 4. Total product cost (sum) 5. unit product cost (total product cost / units completed)

overhead applied to a particular job =

POHR x Amount of the allocation base incurred by the job

activity based costing

When a company creates overhead rates based on the activities that it performs

Absorption Costing

all manufacturing costs, both fixed and variable, are assigned to units of product-units are said to fully absorb manufacturing costs conversely, all NONmanufacturing costs are treated as period costs and they are not assigned to units of product

normal cost system

applies to oh costs to job by multiplying a pohr by actual amount of allocation base incurred by job

costs assigned to units of product in absorption costing include ___ manufacturing costs

both var and fixed

to I rpove job cost accuracy, the allocation base in the pohr should

drive the oh cost

costs awssigned to units of product uner absoprtion costing include

fixed and variable manufacturing

in job order costing, what would be considered firect material

paperwork at lawfirm

overhead applied when using mutliple pohr is found by

pohr X dlh + next pohr X its dlh

total manufacturing costs tend to

remain constant

the absorption approach to overhead, charges products for ..

reources they dont use

product level activities

research and development that are NOT dependent on the number of units are

what is NOT a manufacturing cost

sell and admin costs

inaccurate job costs may cuase managers to establish selling prices that are

too high or too low relative to the prices established by more savvy competitors

_____absorption cost system uses a *volume related * allocation base for all of the manufacturing costs

traditional

steps of computing POHR

1. estiate the total amount of the allocation base(denominator) that will be required for next periods estimated level of production 2. estimate the total fixed manufacturing overhead cost for the coming period and the variable manufacturing overhead cost per unit of the allocation base ((finding moh cost needs be second bc it uses variable oh costs that depend on amount of allocation base)) 3. use the cost formula (Y= a + bX) to estimate the total manufacturing overhead cost (numerator) for the coming period 4. computer the pohr after this, oh applied = pohr x actual dlh

Absorption Costing

A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs.

allocation base

A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects.

Predetermined Overhead Rate

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 the allocation base for the period. pohr = est total MOH cost / est total amount of the allocation ase

job order costing

a costing system used in situations where many different products, jobs, or services are produced each period

activity cost pool relates to

a single activity measure in the activity based approach

all manufacturing costs are assigned to units of product, and all nonmanufacturing cots are treated as period cost under

absorption costing

allocation bases that do not drive overhead costs

can cause products to be distorted

markuo is also called

cost plus pricing , used to generate enough revenue to cover all of a jobs manufacturing costs and a portion of the companys manufacturing costs while generating some residual profit

the costs attached to products that have not been sold are included in

ending inventory on the balance sheet ; where as the costs attached to units that have been sold are included in cogs on the income statement

companies assign costs to products and services to

establish selling prices, value ending invesntory and under stand product profitability

too much fixed overhead may be appplied to products when the pohr is based on

estimated activity

cost per unit is not how much the price would be for an additional unit bc..

it would be less than, bc mch of the actual oh costs would not change if another was produced

total estimated overhead at capactiy is generally ___ than total estimated at th expected level of activity

larger than

indriect manufacturing costs also known as

moh costs

when a company applies excess overhead to production than it actaully incurs, what adjustment must be made

overapplied overhead ; decreases cogs and increases net operating income

single pohr is also called

plantwide oh rate ; uswed to allocate all manufacturing oh costs to jobs based on their useage of DLH , inaccurate and too simple

when a company applies less overhead to production than it actually incurs, and what adjustment mist be made

underapplied overhead ; increases cogs and decreases net operating income

actual overhead costs are not assigned to job bc

costs would be direct costs not overhead ; overhead assigned to the job is simply a share of the total oh that was estimated at the beginning of the year ; normal costing

avg moh cost per unit usually varies from one period to the next bc

fixed moh remainds constant in total even when production changes

if an actaul rate is computed monthly, or quarterly, season factors in oh costs or in the allocation base can produce ..

fluctuations in the oh rate ; seasonal AC rxample

pohr usd to apply oh cost to jobs thru out period, this is done to assign oh cost to job whcih goes to overhead applied to particular job

formula = pohr X amt of allocatino base incurred by job

when allocatio base is direct labor hours formula is

overhead applied to particular job = pohr X actaul direct labor hours wokred on the job amount applied is NOT actual amount of overhead caused by job

overhead applied formula=

pohr x actual dlh

a companys job cost sheet provides an underlying set of financial records that explain what specific jobs comrpromise...

the amounts reported in WIP and FG on balance sheet as well as COGS on income statement