ACCT 2210 Ch.2

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.

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.

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 that 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, or flight-hours, that causes overhead costs.

overapplied overhead

A situation in which overhead assigned to work in process is greater than the overhead incurred.

underapplied overhead

A situation in which overhead assigned to work in process is less than the overhead incurred.

Time ticket

a document that is used to record the amount of time an employee spends on various activities

Job cost sheet

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

plantwide overhead rate

a single predetermined overhead rate that is used throughout a plant

Absorption Costing

all manufacturing costs, both fixed and variable, are assigned to units of product—units are said to fully absorb manufacturing costs. Conversely, all nonmanufacturing costs are treated as period costs and they are not assigned to units of product.

Job Order Costing

is used in situations where many different products, each with individual and unique features, are produced each period.