CH 2 Flashcards
when is Job-order costing used?
Used when many different products (with separate, individual features each) are produced each period.
Example where Job-order costing is used?
Diesel clothing- having separate articles for men and women
What is an “order”?
whats being ordered (the number)
for ex. 1,000 mens bluee denim jeans
What HAPPENS in a job-order costing system?
- costs are traced, assigned to jobs
- costs of jobs divided by # of units in a job (1k for ex)
What does the Job-order costing system produce?
Unit product cost
–> it is average cost per unit
cases where Job-order costing is used?
- Large construction projects
- commercial aircraft
- business cards
- airline meals
Bill of Materials?
document listing quantity of EACH type (pre-established, not new) [and the type] of direct material needed to complete 1 product
Materials Requisition Form?
specifies the TYPE & # of materials to be brought from l’entrepot
–> also identifies the “job that will be charged” for the materials cost
Job Cheat Sheet (when it happens and what is)?
Happens after production order
–> records materials, labor and manufacturing overhead cost doing this job
Time Ticket
hour-by-hour summary of employees activities in a day
What is included in “product costs” in “absorption costing”
direct labor/materials & manufacturing overhead
What is allocation method
assigns overhead costs to products
what is “allocation base”?
(Only ONE) measure [of activity] (like machine-hours) that that is used to assign overhead costs to products and services
How is manufacturing overhead usually assigned to products?
Predetermined overhead rate
WHat is Predetermined overhead rate (POR) and WHEN is it computed?
total estimated manufacturing overhead cost (of the pd) / estimated total amount of the allocation base
computed before the period begins and applied to the pd following
Equation to determine overhead applied to specific job?
POR x amount of Allocation base brought by the job
Normal cost system?
(applies overhead to jobs
–> POR x amount of allocation base brought by job
The allocation base and POR should DRIVE the…
overhead cost
A “cost driver”?
a factor (computer time, machine-hours) that causes overhead costs
Why is a “multiple predetermined overhead rates” system more accurate?
shows “across departements” how jobs consume overhead costs
What is Absorption Costing?
How do average manufacturing costs react to average cost per unit?
Causes it to change with production levels
(manufacturing) allocation bases include?
Direct labor cost, Machine Hours, direct labor hours
Equation to calculate estimated manufacturing overhead?
Y= a+ bx
a = The estimated total FIXED manufacturing overhead cost
b = The estimated VARIABLE manufacturing overhead cost per unit of “allocation base”
X = The estimated total amount of the “allocation base”
In “absorption costing”, what costs are manufacturing costs?
BOTH fixed and variable
TOTAL Manuf. costs remain ___ from one pd to next?
“Total” remain CONSTANT
Average cost per unit (manuf. costs) _____ from one period to the next?
“Average” VARY from pd to pd
When does “cost-plus pricing” happen?
when a mark-up % is added to cost of job
How to calculate mark-up and add it to job?
Mark-up % x Manuf. cost (DM + DL + MO) = mark-up
Mark-up + Manuf. cost = total job selling price
What do all of the company’s “job sheets” form when viewed collectively?
Subsidiary ledger
