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Accounting Flashcards

1
Q

Job order Costing

A

Helps with planning, controlling, and decision-making

Helps value ending inventories and COGS for external purposes

The cost attached to products not sold are included in the ending inventory Balance Sheet

The cost attached to products sold are included in the COGS Income Statement

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2
Q

Job order Costing
is used when

A

Used when there are many different products, jobs, and services produced each period

Products are manufactured to order

The unique nature of each order requires tracing or allocating costs, and maintaining cost records for each job

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3
Q

After the production order is issued

A

automatically generate a job cost sheet

Assigning and tracing costs to products and services

Direct cost is assigned - Indirect cost is allocated

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4
Q

External Perspective

A

amount of overhead applied to all jobs during a period will differ from the actual amount

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5
Q

underapplied overhead

A

company applies less overhead to production than it actually incurs

increases the cost of goods sold and decreases net operating income

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6
Q

overapplied overhead

A

applies more overhead to production than it actually incurs

decreases cost of goods sold and increases net operating income.

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7
Q

Finished Goods flow where

A

Flow first to the balance sheet then to the income statement

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8
Q

External Financial Reporting

A

Heavily influence companies to assign costs to products and services

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9
Q

Absorption Costing

A

Also known as “full costing,” is a managerial accounting method for capturing all costs associated with manufacturing a particular product.

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10
Q

Nonmanufacturing cost

A

Period cost & not assigned to products

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11
Q

Bill of Materials

A

Lists the quantity of each type of direct material needed to complete a unit

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12
Q

Materials Requisition Form

A

Controls the flow of materials into production

Type and quantity of materials drawn from the storeroom

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13
Q

Time tickets

A

Under direct labor. Hourly summary of employee activity

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14
Q

Predetermined Overhead Rates

A

A mix of variable and direct overhead cost

Usually have high overhead costs. So, total overhead tends to be constant each period while the average cost per unit varies.

Is used because it is impossible to trace overhead costs to jobs

Manufacturing overhead consists of different items

If the actual rate is computed monthly or quarterly, factors in overhead cost or in allocation base can produce fluctuations in the overhead rate

used to apply the estimated cost of manufacturing overhead to cost objects for a specific reporting period

Multiple predetermined rate is more accurate

To give the ability to estimate job costs during the period

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15
Q

Predetermine Overhead rates is established when?

A

Before the period

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16
Q

Why is predetermined overhead rate needed?

A

Actual OH is not known till the end of the period, inhibiting the ability to estimate job cost

Actual OH can fluctuate, misleading decision makers

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17
Q

Allocation Base

A

A Measure like direct labor hours or machine hours. Used to assign overhead costs to them

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18
Q

Allocation base should drive

A

To improve job cost accuracy: Allocation based on predetermined overhead rate should DRIVE overhead cost

Cost driver

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19
Q

plantwide overhead rate

A

a single predetermined overhead rate

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20
Q

Overhead Application

A

Overhead application is used to apply overhead costs to jobs throughout the accounting period

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21
Q

Manufacturing overhead

A

Computed after the period

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22
Q

Normal Cost System

A

adds actual direct material, actual direct labor, and applied manufacturing overhead costs to the work-in-process inventory

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23
Q

Job Cost Sheet

A

Records direct materials, labor, manu overhead charged to a job

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24
Q

Cost Plus Pricing

A

A pricing method.

Predetermined markup is applied to the cost base to determine the target selling price

25
Activity Based Approach
Using departmental overhead rates is one approach to creating a job-order costing system with multiple predetermined overhead rates. Another approach is to create overhead rates related to the activities performed within departments. Results in more overhead rates
26
Activity Based Costing
an alternative approach to developing multiple predetermined overhead rates more accurately measure
26
Cost Driver
a factor that causes overhead costs Machine hours, beds occupied, computer time, flight hours, etc,
26
Traditional Absorption Costing Problem
Traditional absorption costing tends to focus on volume-related drivers, such as labour hours
27
Activity-based Absorption Costing
Assign all manufacturing overhead costs to products based on the activities performed to make those products.
27
Activity Measure
denominator for an activity cost pool An allocation base
27
Activity Cost Pool
a “bucket” that accumulates costs related to a single activity Accumulates cost for for EXACTLY ONE activity measure
27
Activity Rate
assign costs from an activity cost pool to products
27
Activity-based Absorption different from traditional absorption costing
uses more cost pools includes some activities and activity measures that do not relate to the volume of units produced. The traditional approach relies exclusively on allocation bases that are driven by the volume of production include product-level activities Costs at the product level depend on the number of batches process
27
Batch Level Activity
Setting up equipment, placing purchase orders, and arranging shipments to customers
28
Product Level Activity
Activities such as design or engineering changes for an item being produced Costs incurred that are not related to number of batches run or unit produced, such as making design changes
28
If actual and applied Manu Overhead aren’t equal, year-end adjustment is
Required
29
Capacity-Based Overhead Rates
limitations of traditional absorption costing can be overcome by using the “estimated total amount of the allocation base at capacity” as the denominator of the predetermined overhead rate capacity-based approach would treat this cost as a period expense
30
Schedule of COGM
Contains direct materials, labor, and manu overhead Summarize portions of remaining in ending WIP and transfer out to finished goods
31
Actual overhead costs may not be proportional to the actual amount of the allocation base used because
overhead spending may not be under control many actual overhead costs are fixed
32
Widely used allocation bases in manufacturing include:
units of product direct labor hours direct labor cost machine hours
33
The journal entry to record the more accurate allocation of overapplied or underapplied overhead includes entries to
Finished goods Cost of goods sold Manufacturing overhead Work in process
34
Actual manufacturing overhead is ________ to the Manufacturing overhead account
debited
35
Applied overhead is _____ to the Manufacturing overhead account
Credited
36
A ________ in Manufacturing overhead means overhead is _____
Credit, Overapplied
37
The Manufacturing Overhead account is _______ when actual overhead costs are incurred
debited
38
The Manufacturing Overhead account is ______ when actual overhead is applied to Work in Process
credited
39
A journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record
rent expense on factory equipment factory utilities expense
40
A journal entry that debits Manufacturing overhead and credits Accounts payable would not be used to record
The incurrence of direct labor costs should be recorded by debiting Work in process accounts.
41
Why is the unit product cost different from the cost that would be incurred if another (additional) unit were produced?
The unit product cost is an average, not an incremental cost.
42
The unit product cost is the same as the
average product cost per unit total job cost divided by the number of units
43
Which of the following are used to calculate the Cost of goods available for sale on the schedule of cost of goods sold?
Cost of goods manufactured Beginning finished goods inventory
44
Closing underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold is
more accurate than closing the entire balance to the Cost of goods sold more complex than closing the entire balance to the Cost of Goods Sold calculated by multiplying applicable percentages by the over or under-applied overhead
45
Key Assumptions:
Always use only one predetermined overhead rate Under and Over manu overhead always closed to COGS Record transactions in Microsoft Excel using positive numbers to increase balance sheet accounts
46
Disposition of overapplied and underapplied overhead (remaining balance in manu overhead can be disposed by)
Closed to COGS Closed proportionally to WIP, FG, COGS (more accurate but more complex)
47
Schedule of COGS
Contains direct materials, labor, and manu overhead Summarize portions of remaining in ending Finished Goods and transfer out to COGS
48
Accounting for Nonmanufacturing
Not assigned to individual jobs Expensed in the period incurred
49
Schedules of COGM and COGS calculate
Raw materials and direct labor cost in production and Manu Overhead applied to production Manu cost associated with finished goods during the period
50
Raw materials placed in production are called direct materials
When materials are purchased they are recorded in the Raw materials inventory account. Raw materials inventory represents the cost of materials not yet used in production.
51
Process Cost Accounting System
appropriate for similar products that are continuously mass-produced.

Accounting Formulas (2 decks)

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