2.1 Job Order Costing Flashcards
What is job order costing concerned with?
Accumulating costs by specific job
When is job-order costing appropriate?
When producing products with individual characteristics. eg. yachts
How does job order costing treat overhead and why?
It uses an estimated rate because outputs are customized and vary from period to period
What is the natural balance of the manufacturing overhead control account?
Debit balance
What is the natural balance of the manufacturing overhead applied account?
Credit
How are actual indirect costs paid throughout the year collected?
They are collected in a manufacturing overhead control account
What happens to manufacturing overhead applied account and the overhead control account at the end of the year?
The two accounts are netted. If a credit balance, overhead was over applied. If there is a debit balance it was under applied
How is an immaterial variance between the two overhead accounts treated?
It is closed directly into cost-of-goods sold
How is an material variance between the two overhead accounts treated?
It should be allocated based on the relative values of WIP, Finished goods, and cost of goods sold
What is spoilage?
Output that does not meet the standards for salability
How does job-order costing treat normal spoilage?
It is treated as a product, and allowed to remain in the WIP inventory account that created it and no entry is required
How is abnormal spoilage treated?
It is treated as a period cost, and a loss from abnormal spoilage expense account is debited and WIP is credited
What happens if normal spoilage can be sold?
Spoiled inventory at fair market value is debited and WIP inventory is credited
What happens if abnormal spoilage can be sold?
Spoiled inventory and loss from abnormal spoilage (The difference) accounts are debited and WIP is credited
