Cost Accounting Ch 6 and 7
What are some ethical issues with job costing?
-Misstating the stage of completion - Charging costs to the wrong jobs - Misrepresenting the cost of jobs
Three components of Product Cost are?
1) Direct Materials 2) Direct Labor 3) Manufacturing Overhead
Reasons to Calculate Product or Service Costs
1) For decision making 2) For deciding what to sell 3) For setting prices 4) For knowing the cost of goods sold 5) For knowing the cost of inventory
What are all the complications?
1) Several Products 2) Several Products with different allocation reasons 3) Beginning and Ending WIP Inventory
POHR: Why use estimates?
1) products need to have costs applied during the period 2) The exact amount of indirect costs are not known until the end of the period
Two common events that lead to manufacturing overhead being recorded are
1. Preparing financial statements 2. Completing a job
Normal, Actual, or Standard? Cost of job determined by actual direct material, actual direct labor, and applied overhead using actual overhead rate and the actual allocation base.
Actual
How costs and units move through inventories formula
Beginning balance + Transfers in - Transfers out= Ending Balance
What is an Account in the general ledger that summarizes a set of subsidiary ledger accounts?
Control Account
Some firms prefer to use only one overhead account. If that is the case, then the debit side of the overhead account will contain the actual overhead incurred and the credit side will contain overhead applied. You would still transfer any over/under overhead applied to ____ at the end of the period.
Cost of Goods Sold
What is a Unit of a product that is easily distinguishable from other units?
Job
What is a firm that produces jobs?
Job Shop
What is a record of the cost of the job kept in the accounting system?
Job cost sheet
What is An accounting system that traces costs to individual units or to specific jobs, contracts, or batches of goods (custom homes, movies, services)?
Job order costing
Assume InShape maintains two manufacturing overhead accounts: ______ which is used to track all actual overhead expenses. ______ which is used to allocate overhead to jobs based on the predetermined OH rate.
Manufacturing Overhead Control; Applied Manufacturing Overhead
Normal, Actual, or Standard? Cost of job determined by actual direct material, actual direct labor, and applied overhead using the POHR and the actual allocation base.
Normal
What is A hybrid costing system often used in manufacturing of goods that have some common characteristics plus some individual characteristics (automobiles, computers, clothing)?
Operation costing
What do you call The excess of applied overhead costs over actual overhead costs incurred?
Overapplied overhead
____ is allocated to jobs using direct labor cost as its base.
Overhead
___ is the cost per unit of the allocation base used to charge overhead to products.
POHR
What is an An accounting system used when identical units are produced through a series of uniform production steps. (cornflakes, facial tissues, paint)?
Process costing
Normal, Actual, or Standard? Cost of job determined by standard (budgeted) direct material, standard direct labor, and applied overhead using the POHR and a standard (budgeted) allocation base.
Standard
What is an account that records financial transactions for a specific job, customer, or vendor (Job 1 WIP, Job 2 WIP, Job 3 WIP, etc.)?
Subsidiary ledger account
True/False Some companies prorate the over/under applied MOH to WIP, FG, and COGS.
True
What do you call the excess of actual overhead costs incurred over applied overhead costs?
Underapplied overhead
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: a. there were more units transferred out than the units started (i.e., transferred in) during the period. b. the number of units transferred out during the period are the same as the number of units started (i.e., transferred in) during this period. c. there were less units transferred out than the units started (i.e., transferred in) during the period d. the number of units transferred out is equal to the equivalent units in the ending WIP inventory.
a. there were more units transferred out than the units started (i.e., transferred in) during the period.
A credit balance in the manufactured overhead means
applied manufacturing overhead
A journal entry that debits Work in Process and credits Manufacturing Overhead under normal costing is recording a. the purchase of indirect materials b. application of manufacturing overhead costs c. completion of a job d. incurring actual overhead costs
b. application of manufacturing overhead costs
What account is debited for the issuance of the direct materials into production? a. raw materials b. work in process c. manufacturing overhead control d. finished goods inventory
b. work in process
What account is debited to record indirect labor costs? a. indirect labor b. work in process c. manufacturing overhead control d. salaries and wages payable
c. manufacturing overhead control
A general ledger account, the balance of which represents the sum of the balances in the accounts contained in a subsidiary ledger.
control account
A ____ is a grouping of individual indirect cost items
cost pool
Which of the following companies would most likely use job-order costing? a. Paper manufacturer b. Paint producer c. Breakfast cereal maker d. Advertising agency
d. Advertising agency
The document that records the materials, labor, and manufacturing overhead charged to a job is: A. Materials requisition form b. Time sheet c. Production report d. Job cost sheet
d. Job cost sheet
When a company chooses to prorate overapplied or underapplied overhead between several accounts rather than just close it to the single Cost of Goods Sold account, the overapplied or underapplied overhead will be prorated between the following accounts: a. raw materials, WIP, COGS b. raw materials, WIP, finished goods c. raw materials, Finished goods, COGS d. WIP, Finished goods, COGS
d. WIP, Finished goods, COGS
When overhead is overapplied and the company uses the single Cost of Goods Sold account to adujst for overapplied or underapplied overhead, a closing entry will ______ the manufacturing overhead account and ____ the cost of goods sold account. (Choose debit or credit in each case)
debit, credit
Translates partially completed work into fully completed units of output for costing purpose
equivalent units
POHR =
estimated overhead $ divided by estimated allocation base
Service organizations use (fewer/more?) direct materials than manufacturing companies.
fewer
A ______ is oriented to the needs of the decision makers and designed so that benefits exceed costs.
good cost management system
all manufacturing costs other than direct materials and direct labor; also called factory overhead and indirect manufacturing cost.
manufacturing overhead control
A written or electronic document requesting that specific material be transferred from Raw materials inventory store room to the production floor
material requisition
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 for the period
predetermined overhead rate
Indirect costs are allocated using a _____
predetermined overhead rate (POHR).
A ____ is a complex job that often takes months or years to complete and requires the work of many departments, divisions, or subcontractors.
project
One of a group of related accounts that support in detail the debit and credit summaries recorded in a control account. An example is the individual property taxpayers' accounts for taxes receivable in the general ledger.
subsidiary account
A record of the time an employee arrives at work, leaves work, and the total number of hours worked each day.
time card
