Managerial Accounting: Chapter three: Job-order costing

Absorption Costing

A costing method that includes all manufacturing costs- direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Normal cost system

a costing system in which overhead costs are applied to a job by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job.

Job-order costing

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

Multiple predetermined overhead rates

a costing system with multiple overhead cost pools and a different predetermined overhead rate for each cost pool, rather than a single predetermined overhead rate for the entire company. Each production department may be treated as a separate overhead cost pool.

overapplied overhead

a credit balance in the manufacturing overhead account that occurs when the amount of overhead cost applied to work in process exceeds the amount of overhead cost actually incurred during a period.

under-applied overhead

a debit balance in the manufacturing overhead account that occurs when the amount of overhead cost actually incurred exceeds tha amount of overhead cost applied to work i process during a period

time ticket

a document that is used to record the aount of time an emplotee spends on various activities.

Bill of materials

a document that shows the quantity of each type of direct material required to make a product

Materials requisition form

a document that specifies the type and quantity of materials to be drawn from the storeroom and the identifies the job that will be charged for the cost of those materials.

cost driver

a factor, such as machine-hours, beds, occupied, computer time, r flight-hours, that causes overhead costs.

Job cost sheet

a form that records the materials, labor, and manufacturing overhead costs charged to a job

Allocation base

a measure of activity such as direct labor-hours or machine- hours that is sued 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 fo the period.

schedule of cost of goods sold

a schedule that contains three elements of produces costs- direct materials, direct labor, and manufacturing overhead - and that summarizes the portion of those costs that remain in ending finished goods inventory and that are transferred out of finished goods into cost of foods sold.

Schedule of cost of goods manufactured

a schedule that contains three elements of product costs- direct materials, direct labor, and manufacturing overhead - - and that summarizes the portions of those costs that remain in ending work in process inventory and that are transferred out of work in process into finished goods.

plant-wide overhead rate

a single predetermined overhead rate that is used throughout a plant.

Raw mateirals

any materials that go into the final product

cost of goods manufactured

the manufacturing costs associated with the goods that were finished during the period

Overhead application

the process of charging manufacturing overhead cost to job cost sheets and to the work in process account

work in process

units of product that are only partially complete and will require further work before they are ready for sale to the customer.

Finished goods

units of product that have been completed but not yet sold to customers.