Cost Accounting Exam 2

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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


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