Ch 4 Key terms

Question 1

cost object

Answer 1

anything for which a measurement of costs is desired (ex: product such as Mac computer; service such as the cost of providing a knee replacement surgery)

Question 2

direct costs of a cost object

Answer 2

costs directly related to a particular cost object and that can easily and unambiguously be traced to it (ex: implants needed for a knee replacement surgery)

Question 3

indirect cost of a cost object

Answer 3

costs related to a particular cost object but that cannot be easily and unambiguously traced to it

Question 4

cost assigment

Answer 4

general term for assigning costs (whether direct or indirect)

Question 5

cost tracing

Answer 5

process of assigning direct costs

Question 6

cost allocation

Answer 6

process of aligning indirect costs

Question 7

cost pool

Answer 7

a grouping of individual cost items; simplify the allocation of indirect costs because separate cost items do not have to be allocated individually

Question 8

cost allocation base

Answer 8

a factor that links in a systematic way an indirect cost/ group of indirect costs to a cost object

Question 9

job costing system

Answer 9

cost object is a unit/ multiple units of a distinct product or service called a job; product/ service usually single unit; products/ services are distinct/ unique

Question 10

process costing sys

Answer 10

the cost object is masses of identical/ similar units of a product/ service; in each period process costing system divided the total costs of producing an identical/ similar product/ service by the total number of unit produced to obtain a per unit cost

Question 11

actual costing

Answer 11

traces direct costs to a cost object by using actual direct cost rates times the actual quantity of direct cost inputs and allocates indirect costs based on the actual indirect- cost rates times actual quantity of the cost allocation bases

Question 12

budgeted indirect-cost rate

Answer 12

budgeted annual indirect costs in a cost pool divided by the budgeted annual quantity of the cost allocation base

Question 13

normal costing

Answer 13

costing system (1) traces direct costs to a cost object bu using the actual direct cost rates times actual quantities of the direct cost inputs and (2) allocates indirect costs based on the budgeted indirect cost rates times the actual quantity

Question 14

source document

Answer 14

an original record that records and accumulates all the costs assigned to a specific job, starting when work begins

Question 15

labor-time sheet

Answer 15

source document that contains information about the amount of labor time used for a specific job in a specific department

Question 16

actual indirect-cost rate

Answer 16

actual total indirect cost in a cost pool divided by actual total quantity of the cost allocation base for that cost pool

Question 17

underallocated indirect costs

Answer 17

allocated amount of indirect costs in an accounting period is < actual (incurred) amount in that period (underapplied indirect cost; underabsorded indiret costs)

Question 18

adjusted allocation rate approach

Answer 18

restates all overhead entries in the general ledger and subsidiary ledgers using actual cost rates rather than budgeted cost rate

Question 19

proration

Answer 19

spreading of underallocated manufacturing overhead or overallocated manufacturing overhead among ending WIP, finished goods and COGS