ACCOUNTING 1-4

a normal cost system applies overhead to jobs

by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job

normal costing

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

mixed costs

contains both variable and fixed elements

indirect costs

costs that cannot be easily and conveniently traced to a unit of product or other cost object

which observation is true of period costs

they are expenses in the period they are occurred

if the level of activity increases

total variable cost will increase while fixed cost per unit will decrease

predetermined overhead rate (POHR)

used to apply overhead to jobs is determined before the period begins

cost behavior classifications

variable costs fixed costs mixed costs

variable cost

varies in direct proportion to changes in the level of activity a variable cost per unit is constant

example of direct labor

wages paid to automobile assembly workers

formula doe computing the cost per equivalent unit

weighted-average method

the distinction between indirect and direct costs depends on

whether a cost can be easily and conveniently traced to the product

work in progress

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

the traditional income statement uses which of the following cost categories

cost of goods sold, selling and administrative expenses

selling costs

costs necessary to secure the order and deliver the product. selling costs can be direct or indirect

direct costs

costs that can be easily and conveniently traced to a unit of product or other cost object

journal entry for depreciation on factory equipment

debit: manufacturing overhead credit: accumulated depreciation

examples of indirect costs

manufacturing overhead

allocation base

used to assign manufacturing overhead to individual jobs: direct labor-hours, direct labor dollars, or machine-hours

absorption costing

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

underapplied overhead

a company applies less overhead to production that it actually incurs

overapplied overhead

a company applies more overhead to production that it actually incurs

a manufacturing company reports cost of goods manufactured as

a component in the calculation of cost of goods sold on the income statement

which of the following industries would be most likely to use a job order cost system

a construction company

fixed cost

a cost that remains constant regardless of changes in the level of activity

job cost sheet

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

example of a direct material

a radio installed in an automobile

process costing

a single product is produced either on a continuous basis or for long periods of time... all units of product are identical

the salary of the company's accountant is classified as

administrative cost

administrative costs

all executive, organizational, and clerical costs. administrative costs can be either direct or indirect costs

manufacturing overhead

all manufacturing costs except direct material and direct labor... these costs can not be readily traced to finished products included indirect materials and indirect costs

subsidiary ledger

all of the company's job cost sheets collectively form

product costs

all the costs that are involved in acquiring or making. a product

manufacturing overhead is applied to each job

be means of predetermine overhead rate

the direct materials required to manufacture each unit of product are listed on a

bill of materials

types of fixed costs

committed and discretionary

finished goods

consists of completed unites of product that have not yet been sold to customers

which of the following occurs when finished jobs are shipped to customers

debit to cost of goods sold

which of the following best describes the journal entry to record the withdrawal of raw materials from the storeroom for use as direct and indirect materials in production

debit work in progress debit manufacturing overhead credit raw materials

which of the following best describes the journal entry to record the use of direct and indirect labor in production

debit work in progress debit manufacturing overhead credit salaries and wages expense

journal entry when products are sold

debit- COGS credit- finished goods

adjusting overapplied overhead

decreases COGS and increases net operating income

examples of manufacturing overhead

depreciation of manufacturing equipment, utility costs, property taxes, insurance premiums incurred to operate a manufacturing facility

the predetermined overhead rate is

determined at the beginning of the year

can be called "touch labor" because worked typically touch the product while it is made

direct labor

is common to both prime cost and conversion cost

direct labor

which if the following costs would be included both as a part of prime cost and as part of conversion cost

direct labor

the wages of employees who assemble computers from components is classified as

direct labor cost

what is not an appropriate cost driver for allocating overhead in a highly automated manufacturer of auto parts

direct labor hours

materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product are called

direct material

the cost of a hard drive installed in a computer is classified as

direct materials

examples of direct costs

direct materials and direct labor

when companies incur selling and administrative costs, those costs

do not flow through the three inventory accounts

an important feature of a job order cost system is that each job

has its own distinct characteristics

sunk costs

have already been incurred and cannot be changed now or in the future

operation costing

hybrid of job-order and process costing because it possesses attributes of both approaches

period costs

include all selling costs and administrative costs

product costs

include direct materials, direct labor, and manufacturing overhead

raw materials

included any materials that go into the final product

cost of goods manufactured

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

adjusting underapplied overhead

increases COGS and decreases net operating income

common costs

indirect costs incurred to support a number of cost objects. this costs cannot be traced to any individual cost object

direct labor

labor costs that can be easily traced to individual units of product

committed fixed cost

long-term, cannot be significantly reduced in the short term

depreciation on equipment used to test assembled computers before release to customers is classified as

manufacturing overhead cost

the salary of the assembly shop's supervisor is classified as

manufacturing overhead cost

items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in

manufacturing overhead costs

job-ordering costing systems are used when

many different products are produced each period, products are manufactured to order, the unique nature of each order required tracing or allocating costs to each job and maintaining cost records for each job

requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized.

matching principle

the source documents for assigning costs to job cost sheets are

materials requisition forms and time tickets

discretionary cost

may be altered in the short term by current managerial decisions

companies can improve job cost accuracy by using

multiple predetermined overhead rates

property taxes associated with a company's administrative facility are considered

non-manufacturing cost

equivalent units equation

number of partially completed units x percentage completion

which of the following statements about processing costing is false

process costing is used when a company produces a continuous flow of units that are distinguishable from one another

how should the wages of a sheet metal worker in a fabrication plant be classified?

product cost

direct materials

raw materials that become an integral part of the product and that can be conveniently traced directly to it

manufacturing product costs

raw materials, work in process, finished goods

the three inventory accounts used by a manufacturing firm are

raw materials, work-in-process, and finished goods

cost behavior

refers to how a cost will react to changes in the level of activity

sales commissions paid to the company's salespeople is classified as

selling cost

the cost of advertising in the Puget Sound Computer User newspaper is classified as

selling cost

nonmanufacturing costs

selling costs and administrative costs

opprotunity Cost

the potential benefit that is given up when one alternative is selected over another

equivalent units

the product of the number of partially completed units and the percentage completion of those units

the balance in the work in process account should equal

the sum of the totals on all the job cost sheets for uncompleted jobs

journal entry for purchase of raw materials

debit: raw materials credit: accounts payable or cash

which of the following occurs when a job has been completed and transferred to the finished goods warehouse

credit to work in progress

journal entry when products are complete

debit- finished goods credit- work in process

journal entry when MOH is applied to goods

debit- work in progress credit- MOH

activity base (cost driver)

measure of what causes the incurrence of a variable cost

differential costs

a difference in cost between two alternatives