Cost Accounting Exam 2
operation costing
A hybrid costing system often used in manufacturing of goods that have some common characteristics plus some individual characteristics. (automobiles, computers, clothing)
Application of manufacturing overhead costs
A journal entry that debits Work in Process and credits Manufacturing Overhead under normal costing is recording
control account
Account in the general ledger that summarizes a set of subsidiary ledger accounts
subsidiary account
Account that records financial transactions for a specific job, customer, or vendor (Job 1 WIP, Job 2 WIP, Job 3 WIP, etc.)
job costing
An accounting system that traces costs to individual units or to specific jobs, contracts, or batches of goods. (custom homes, movies, services)
process costing
An accounting system used when identical units are produced through a series of uniform production steps. (cornflakes, facial tissues, paint)
actual costing
Cost of job determined by actual direct material, actual direct labor, and applied overhead using actual overhead rate and the actual allocation base
normal costing
Cost of job determined by actual direct material, actual direct labor, and applied overhead using the POHR and the actual allocation base
standard costing
Cost of job determined by standard (budgeted) direct material, standard direct labor, and applied overhead using the POHR and a standard (budgeted) allocation base
explain the fundamental principles behind the design of the cost system
Cost systems should have a decision focus. Different cost information is used for different purposes. Cost information for managerial purposes must meet the cost-benefit test.
Formula for DL
DL= direct labor hourly rate X the number of direct labor hours required to complete one unit
Formula for DM
DM= Beg. DM + DM purchased - End DM
there were more units transferred out than the units started (i.e., transferred in) during the period
If the number of physical units in the beginning Work-in-Process Inventory (e.g., the number of gallons of paint) are greater than the number of physical units in the ending Work-in-Process Inventory, then:
124,000
Rapid Enterprises allocates manufacturing overhead to its cost objects on the basis of 75% of direct material cost. If Product 17X had $93,000 of manufacturing overhead allocated to it during May, the direct materials assigned to Product 17X was:
basic features of job-order costing
Under this method, costs are collected and accumulated for each job, work order or project separately. Each job can be separately identified and hence it becomes essential to analyse the costs according to each job.
job
Unit of a product that is easily distinguishable from other units
How variable costs behave as a total and on "per unit" basis
Variable costs typically change in proportion to changes in volume of activity. If volume of activity doubles, total variable costs also double, while the cost per unit remains the same.
Work in process
What account is debited for the issuance of the direct materials into production?
Manufacturing overhead control
What account is debited to record indirect labor costs?
estimated allocation base
What activity drives the overhead costs?
Work-in-Process account, Finished Goods Inventory account, and Cost of Goods Sold account
When a company chooses to prorate over-applied or under-applied overhead between several accounts rather than just close it to the single Cost of Goods Sold account, the over-applied or under-applied overhead will be prorated between the following accounts:
Debit/ Credit
When overhead is over-applied and the company uses the single Cost of Goods Sold account to adjust for over-applied or under-applied overhead, a closing entry will __________________ the manufacturing overhead account and ________________ the Cost of Goods Sold Account.
Advertising agency
Which of the following companies would most likely use job-order costing?
predetermined overhead rate
he cost per unit of the allocation base used to charge overhead to products.
recognize the nature of the cost based on the given cost behavior.
how costs respond to a change in activity level within the relevant range
how fixed costs behave as a total and per unit basis.
if your fixed costs are $100,000 and you make 10,000 units, your fixed costs per unit come to $10. Double your production to 20,000 units and your fixed costs per unit drops to $5.
applied manufacturing overhead
is used to allocate overhead to jobs based on the predetermined OH rate
material requisition form
lists the items to be picked from inventory and used in the production process or in the provision of a service to a customer, usually for a specific job
direct materials
materials directly traceable to the product
equivalent units
the units in production multiplied by the percentage of those units that are complete (100 percent) or those that are in process
general principles of the allocation
Several products (i.e., cost objects are produced within the same facility. Indirect costs incurred now should be allocated (i.e., distributed) between those several products based on some principle.
Job Cost sheet
The document that records the materials, labor, and manufacturing overhead charged to a job is:
underapplied overhead
The excess of actual overhead costs incurred over applied overhead costs
overapplied overhead
The excess of applied overhead costs over actual overhead costs incurred
67500
The predetermined manufacturing overhead rate for 2020 was $5.00 per direct labor hour; employees were paid $6.00 per hour. If the estimated direct labor cost was $81,000, what was the estimated manufacturing overhead?
job order cost sheet
a document used in a job-order costing system to record all the costs incurred on a job
cost pool
a grouping of individual costs, typically by department or service center, cost allocations are then made from this
time card
a method for recording the amount of a worker's time spent on each job
Formula for MO
add up all the indirect costs
manufacturing overhead
all production costs except DM & DL (Indirect materials, indirect labor, other indirect costs)
examples of the businesses that use job-order costing
clothing factories, food companies, air craft manufacturing companies
product cost
costs related to inventory, costs that are recorded as an asset in inventory when incurred and expensed as COGS when sold; also called manufacturing costs
fixed cost
costs that are unchanged as volume changes within the relevant range of activity
variable cost
costs that change in direct proportion with a change in volume within the relevant range of activity
period cost
non-manufacturing costs related to the firm/ a cost that is incurred to sell a product and to operate the business (recognized as an expense when the cost is incurred)
what is the difference in recordings of product vs. period cost
product costs are only incurred if products are acquired or produced, and period costs are associated with the passage of time
Manufacturing Overhead Control
used to track all actual overhead expenses
direct labor
works directly traceable to transforming materials into the finished product
