ACCT 202 ch 3

cost of goods manufactured

Includes the manufacturing costs associated with the goods that were FINISHED during the period -The amount transferred from the Work in Process inventory account to the Finished Goods inventory account

overhead application

The process of assigning overhead costs to specific jobs using the following formula:

period costs

(or selling and administrative expenses) do not flow through inventories on the balance sheet. They are recorded as expenses on the income statement in the period incurred

inventory

-raw materials -work in progress -finished goods

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

job order costing

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

job cost sheet

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

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 using the following equation:

finished goods

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

work in progress

Consists of units of production that are only partially complete and will require further work before they are ready for sale to customers.

raw materials

Include any materials that go into the final product

manufacturing overhead cost

applied to Work in Process by multiplying the predetermined overhead rate by the actual quantity of the allocation base consumed by each job

raw materials purchased

are recorded in the Raw Materials inventory account

indirect materials

are transferred to factory overhead

flow of cost

beginning inventory + cost of goods purchased = cost of goods available for sale

Manufacturing Overhead account

is a clearing account and must be closed out at the end of the accounting period. Usually closed out to COGS.

direct labor cost

is added to the Work in Process inventory account to transform direct materials into completed jobs

job order costing-the flow of costs

review of journal entries and T accounts

as goods are sold

their costs are transferred from the Finished Goods inventory account to Cost of Goods Sold

when jobs are completed

their costs are transferred from the Work in Process inventory account to the Finished Goods inventory account

when raw materials are used in production as directin materials

their costs are transferred to the Work in Process inventory account.