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Accounting Formulas > Accounting > Flashcards

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
Q

Activity Based Approach

A

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
Q

Activity Based Costing

A

an alternative approach to developing multiple predetermined overhead rates

more accurately measure

26
Q

Cost Driver

A

a factor that causes overhead costs

Machine hours, beds occupied, computer time, flight hours, etc,

26
Q

Traditional Absorption Costing Problem

A

Traditional absorption costing tends to focus on volume-related drivers, such as labour hours

27
Q

Activity-based Absorption Costing

A

Assign all manufacturing overhead costs to products based on the activities performed to make those products.

27
Q

Activity Measure

A

denominator for an activity cost pool

An allocation base

27
Q

Activity Cost Pool

A

a “bucket” that accumulates costs related to a single activity

Accumulates cost for for EXACTLY ONE activity measure

27
Q

Activity Rate

A

assign costs from an activity cost pool to products

27
Q

Activity-based Absorption different from traditional absorption costing

A

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
Q

Batch Level Activity

A

Setting up equipment, placing purchase orders, and arranging shipments to customers

28
Q

Product Level Activity

A

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
Q

If actual and applied Manu Overhead aren’t equal, year-end adjustment is

A

Required

29
Q

Capacity-Based Overhead Rates

A

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
Q

Schedule of COGM

A

Contains direct materials, labor, and manu overhead

Summarize portions of remaining in ending WIP and transfer out to finished goods

31
Q

Actual overhead costs may not be proportional to the actual amount of the allocation base used because

A

overhead spending may not be under control

many actual overhead costs are fixed

32
Q

Widely used allocation bases in manufacturing include:

A

units of product
direct labor hours
direct labor cost
machine hours

33
Q

The journal entry to record the more accurate allocation of overapplied or underapplied overhead includes entries to

A

Finished goods
Cost of goods sold
Manufacturing overhead
Work in process

34
Q

Actual manufacturing overhead is ________ to the Manufacturing overhead account

A

debited

35
Q

Applied overhead is _____ to the Manufacturing overhead account

A

Credited

36
Q

A ________ in Manufacturing overhead means overhead is _____

A

Credit, Overapplied

37
Q

The Manufacturing Overhead account is _______ when actual overhead costs are incurred

A

debited

38
Q

The Manufacturing Overhead account is ______ when actual overhead is applied to Work in Process

A

credited

39
Q

A journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record

A

rent expense on factory equipment
factory utilities expense

40
Q

A journal entry that debits Manufacturing overhead and credits Accounts payable would not be used to record

A

The incurrence of direct labor costs should be recorded by debiting Work in process accounts.

41
Q

Why is the unit product cost different from the cost that would be incurred if another (additional) unit were produced?

A

The unit product cost is an average, not an incremental cost.

42
Q

The unit product cost is the same as the

A

average product cost per unit

total job cost divided by the number of units

43
Q

Which of the following are used to calculate the Cost of goods available for sale on the schedule of cost of goods sold?

A

Cost of goods manufactured

Beginning finished goods inventory

44
Q

Closing underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold is

A

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
Q

Key Assumptions:

A

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
Q

Disposition of overapplied and underapplied overhead (remaining balance in manu overhead can be disposed by)

A

Closed to COGS

Closed proportionally to WIP, FG, COGS (more accurate but more complex)

47
Q

Schedule of COGS

A

Contains direct materials, labor, and manu overhead

Summarize portions of remaining in ending Finished Goods and transfer out to COGS

48
Q

Accounting for Nonmanufacturing

A

Not assigned to individual jobs
Expensed in the period incurred

49
Q

Schedules of COGM and COGS calculate

A

Raw materials and direct labor cost in production and Manu Overhead applied to production

Manu cost associated with finished goods during the period

50
Q

Raw materials placed in production are called direct materials

A

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
Q

Process Cost Accounting System

A

appropriate for similar products that are continuously mass-produced.

Accounting Formulas (2 decks)

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