Managerial Accounting Chapter 15

cost accounting system

records manufacturing activities using a perpetual inventory system, which continuously updates records for costs of materials, goods in process, and finished goods inventories. A cost accounting system also provides timely information about inventories and manufacturing costs per unit of product. 1) job order costing 2) process costing

materials requisition

sent to materials manager when materials are needed in production

receiving report

serves as a source document for recording materials received in a materials ledger card & general ledger

factory overhead ledger

subsidiary ledger controlled by the factory overhead account in the general ledger and includes all individual overhead cost

when goods are sold, their costs are transferred from finished goods inventory to what?

the income statement as cost of goods sold

time tickets

track how each employee's time is used on each job - separate ticket for each job

cost of goods sold

when a finished job is delivered to a customer, its accumulated costs are transferred from finished good inventory

underapplied overhead

when less overhead is applied (credit) than is actually incurred (debit), the remaining debit balance is called

overapplied overhead

when more overhead is applied (credit) than is actually incurred (debit), the resulting credit balance is called

work in process inventory

where accumulated costs are kept while a job is being produced

job cost sheet

- Separate record maintained for each job - identifies the customer, job number assigned, product, & key dates - DM & DL actually incurred are immediately recorded

job order production

- aka job order manufacturing & customized production - The production of products in response to special orders ex. special order machines, factory building, custom jewelry, wedding invitations, tattoos, audits

predetermined overhead rate

- aka predetermined overhead allocation & application rate - requires an estimate of total overhead costs & allocation factor = estimated overhead costs/estimated activity base

Process Operations

- aka process manufacturing & process production - the mass production of products in a continuous flow of steps - ex. tennis balls, Hershey chocolate, large mail order

job order operations

- custom orders - heterogeneous products and services - low production volume - high product flexibility - low to med standardization

record indirect labor used

- debit factory overhead - credit factory wages payable

record indirect materials used

- debit factory overhead - credit raw materials inventory

record other overhead costs

- debit factory overhead - credit to cash, accounts payable, utilities payable, & acc. depr. factory eq.

record purchase of materials for production

- debit raw materials inventory - credit accounts payable

record applied overhead

- debit work in process - credit factory overhead

record direct labor used

- debit work in process inventory - credit factory wages payable

record use of direct materials

- debit work in process inventory - credit raw materials inventory

posting to subsidiary records include

- debits to job cost sheets - credits to materials ledger cards

factory overhead T account

- left (debit): actual amounts - right (credit): applied amounts

process operations

- repetitive procedures - homogeneous products and services - high production volume - low product flexibility - high standardization

sources of overhead

1) materials requisitions for indirect materials 2) salary contracts or time tickets for indirect labor 3) vouchers authorizing payments for factory items like supplies and utilities 4) adjusting journal entries for costs like depr. on factory assets

four step process for overhead

1) set predetermined overhead rate 2) apply estimated overhead to specific jobs 3) record actual overhead 4) adjust overhead

job lot

a job that involves producing more than one unit of a custom product - ex. benches for a church, imprinted t shirts for a company picnic, ad signs for a chain of stores

finished goods inventory

accumulated costs are transferred from work in process inventory when a job is finished

when overhead is overapplied

cost of goods sold is too high - debit factory overhead - credit cost of goods sold

when overhead is underapplied

cost of goods sold is too low - debit cost of goods sold - credit factory overhead

job order costing system

determines the cost of producing each job or job lot & aims to produce the cost per unit

target cost

expected selling price - desired profit

activity (or allocation) base

factor to which overhead costs are linked - cause and effect relation

indirect material flow

from the materials ledger card to the indirect materials account in the factory overhead ledger

direct materials flow

from the materials ledger card to the job costs sheet

DM requisition

include job number, type of material, quantity needed, signature of authorized manager

value engineering

method of determining ways to reduce job cost until the target market is met

are actual indirect material costs immediately recorded in the work in process inventory and job cost sheets?

no

do requisitions of indirect materials directly impact work in process inventory?

no

does the use of indirect labor affect work in process inventory?

no

actual overhead costs incurred are not recorded in work in process inventory and are not posted to job cost sheets

only applied overhead is recorded in work in process inventory and posted to job cost sheets

period costs are recorded as what?

operating expenses on the income statement

materials ledger card

perpetual records that are updated each time materials purchased & issued for use in production - identifies the item, items stock number, location in store room, max & min, reorder quantity

job

production activities for a customized product