Ch.5: Job-Order Costing Flashcards
absorption costing
a costing method that includes all manufacturing costs - direct materials, direct labour, and both variable and fixed overhead - as part of the cost of a finished unit of product: synonymous with full costing.
period costs
all costs that are expensed on the income statement in the period in which they are incurred or accrued. Selling (marketing) and administrative expenses are period costs.
full costing
another name for absorption costing
process costing system
costing system used in those manufacturing situations where a single, homogeneous product (such as cement or oil) flows in a continuous stream out of the production process.
job-order costing system
a costing system used in situations where many different products, jobs, or services are produced each period.
bill of materials
a record that lists the type and quantity of each major item of the materials required to make a product.
materials requisition form
a detailed source document that specifies the type and quantity of materials that are to be drawn from the storeroom and identifies the job to which the costs of materials are to be charged.
job cost sheet
a form prepared for each job that records the materials, labour, and overhead costs charged to the job.
time ticket
a detailed source document that is used to record an employee’s hour-by-hour activities during a day.
allocation base
a measure of activity, such as direct labour-hours or machine-hours, that is used to assign costs to cost objects.
predetermined overhead rate
a rate used to charge overhead costs to jobs; the rate is established in advance for each period using estimates of total manufacturing overhead cost and of the total allocation base for the period.
overhead application
the process of charging manufacturing overhead cost to job cost sheets and to the Work in Process account.
normal cost system
a costing system in which overhead costs are applied to jobs by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job.
cost driver
a factor that causes overhead costs, such as machine-hours, beds occupied, computer time, or flight-hours.
underapplied overhead
a debit balance in the manufacturing overhead account that arises when the amount of overhead cost actually incurred is greater than the amount of overhead cost applied to Work in Process during a period.
