AGB 323 Chp 2

Job Costing Versus Process Costing 1. Auto body repair shop 2. Producer of basketballs

1. Job Costing 2. Process Costing

Job Costing Versus Process Costing 1. Landscape design firm 2. Oil refinery

1. Job Costing 2. Process Costing

Job Costing Versus Process Costing 1. Surgical unit of hospital 2. Pencil producer

1. Job Costing 2. Process Costing

Job Costing Versus Process Costing 1. Upholstery repair shop 2. Sports drink producer

1. Job Costing 2. Process costing

Job Costing Versus Process Costing 1. Toner cartridge producer 2. Custom home builder

1. Process Costing 2. Job Costing

Job Costing Versus Process Costing 1. Dairy farm 2. Builder of pools

1. Process costing 2. Job costing

Job Costing Versus Process Costing 1. Producer of T-shirts 2. Plumber

1. Process costing 2. Job Costing

Job Costing Versus Process Costing 1. Candy bar producer 2. legal firm

1.Process Costing 2.Job Costing

What is the purpose of using a predetermined overhead rate?

A predetermined overhead rate is used to allocate manufacturing overhead costs to jobs. The term used to describe this process is overhead applied.

What information is included on a timesheet?

A timesheet is used by workers to track the hours spent on each job and includes the employee's name, date, job number, and hours worked for each job.

What cost information is recorded on the debit side of the manufacturing overhead account

Actual manufacturing overhead costs incurred are recorded as a debit to the Manufacturing Overhead account

characteristics of companies that use a process costing system.

Companies that produce identical units of product in batches are likely to use a process costing system. Examples include producers of soft drinks, snack foods (chips, cookies, and the like), milk, and paint.

characteristics of companies likely to use a job costing system

Companies that produce unique products or provide unique services, easily distinguished from other products or services, are likely to use a job costing system. Examples include custom home builders, auto mechanics, and tax accountants.

Predetermined overhead rate

Estimated overhead costs/ Estimated activity in allocation base

What is the purpose of a job cost sheet?

Job cost sheets accumulate manufacturing costs incurred for each job, and serve as a subsidiary ledger to the Work in Process Inventory account.

What cost information is recorded on the credit side of the manufacturing overhead account

Manufacturing overhead applied to jobs is recorded as a credit to the Manufacturing Overhead account.

When is manufacturing overhead over applied?

Manufacturing overhead is overapplied when overhead applied is more than actual overhead costs incurred, resulting in a credit balance in the Manufacturing Overhead account.

When is manufacturing overhead underapplied?

Manufacturing overhead is underapplied when overhead applied is less than actual overhead costs incurred, resulting in a debit balance in the Manufacturing Overhead account.

What is the Normal Costing System

a cost system that tracks actual direct materials and actual direct labor costs for each job, and charges manufacturing overhead to jobs using a predetermined overhead rate.

What two options are available when closing the manufacturing overhead account at the end of the period, depending on the significance of the balance?

The first option is to close the Manufacturing Overhead account to Cost of Goods Sold. This is appropriate when the balance is not significant (i.e., immaterial). The second option is to close the Manufacturing Overhead account to three different accounts-Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold-in proportion to the account balances in each of these accounts. This is appropriate when the Manufacturing Overhead account balance is significant (i.e., material).

What information is included on the materials requisition form?

The materials requisition form includes the type, quantity, and cost of materials being requested and placed into production, and the job number where the materials will be used.

Describe the two important factors in selecting an overhead allocation base.

The two important factors to consider when selecting an allocation base are that the base must have some link to overhead costs (that is, must drive overhead costs), and the base must be relatively easy to measure (for example, direct labor hours are easy to measure-simply use timesheets to track this data).

Describe the information typically included on a job cost sheet.

This form includes the job number, customer name, and manufacturing costs incurred (direct materials, direct labor, and manufacturing overhead applied).

What is the difference between actual manufacturing overhead costs and manufacturing overhead applied called?

over applied or underapplied overhead

Why is Predetermined overhead used?

• Actual overhead costs can fluctuate from month to month causing high amounts of overhead to be charged to jobs during high cost periods. Normal costing smoothes out these fluctuations. • Actual overhead cost data is typically only available at the end of the month, quarter, or year. Managers do not like to wait for this information to figure out the cost of jobs. • The price charged to customers is often established based on product cost. Managers want a way to estimate manufacturing overhead-a predetermined overhead rate provides the means to do this. • Bookkeeping is simplified. The accountant simply uses a predetermined rate to record manufacturing overhead costs.