ch3 guidlines Flashcards
process costing definition
costs are averaged over the units produced such that each unit bears the same unit cost
predetermined MOH rate
total estimated manufacturing overhead cost / total estimated amount of allocation base
MOH allocated to job
predetermined MOH rate * actual amount of allocation base used by the job
job costing
best suited to manufacturers that produce unique, custom-build products or relatively small batches of different products
process costing
best suited to manufactures that mass produce identical units in a series of uniform production processes
cost of manufacturing each job
the exact amount of DM and DL can be traced to individual jobs using material requisitions and labor time records. The exact amount of OH is unknown
predetermined MO
the exact amount of MO attributable to each job is unknown, and can’t be traced to individual jobs. So, companies use a predetermined OH rate to allocate MO to jobs as they are produced throughout the year
predetermined MON rate VS. actual MOH rate
most companies use a predetermined MON rate to allocate MO to jobs as they are produced throughout the year because companies would have to wait until the end of the year to have the info they they used
allocation base
most common bases: DL hours, DL cost, machine hours. some companies use multiple bases to have a more accurately allocated MOH.
job cost records
can be enhanced to provide more detail about the environmental impact of the resources used on the job. Mangers can use this info to determine how their products/production process can become greener
allocate operating expenses
can be assigned to jobs, but only for internal decision making purposes. can never be assigned to jobs for external financial reporting.. Direct operating costs traced to jobs. Indirect operating costs allocated t o jobs.
overallocating MOH
the jobs have been overcosted. Too much MO cost was posted on the job cost records
underallocating MOH
the jobs have been undercosted. Not enough MO cost was posted on the job cost records
overallocated and underallocated MOH
If the inventory produced during the period has been sold, manufacturers generally adjust the COGS for the total amount. If a significant portion of the inventory is still on hand the adjustment will be prorated between WIP, Finished Goods, and COGS.
increase COGS
if MO has been underallocated, COGS is to low and must be increased through a debit to COGS account
