#4

Question 1

Process Costing

Answer 1

Accumulate costs in a particular operation or department for an entire period. Homogeneus producs.
Formula: Unit cost=total manu cost/total units.

Question 2

Job-order Costing

Answer 2

Heterogeneus products. Record all materials and labour hours for each job. Manufacturing overhead is allocated with a predetermined overhead rate ( An estimate).

Question 3

Absorption costing

Answer 3

All manufacturing costs, fixed and varialbe, are assigned to units of products - units are said to fully absob manufacturing costs.

Question 4

Predetermined overhead rate

Answer 4

Estimated total manufacturing overhead cost/Estimated total units in the allocation base

Question 5

Traditional cost system

Answer 5

The allocation of manufacturing overhead (indirect manufacturing costs) to products on the basis of a volume metric such as direct labor hours or production machine hours. As manufacturing becomes more sophisticated the manufacturing overhead costs usually increase while the direct labor hours or production machine hours decrease. Hence, the direct labor or machine hours are unlikely to be the root cause of the manufacturing overhead.

Activity based costing (ABC) has developed as a technique to overcome the shortcomings of traditional costing.