Chapter 4 Flashcards
A grouping of individual indirect cost items.
Simplify the allocation of indirect cost because the costing system does not have to allocate each cost individually
Cost Pool
A systematic way to link an indirect cost or group of indirect costs to cost objects.
Cost- allocation base
When the cost object is a job, product, service or customer, the cost allocation based is also called_________
Cost application base
The cost object is a unit or multiple units of a distinct product or service called job.
Job- costing system
The cost object is masses of identical or similar units of product or service
Process- costing
Costing Approaches
- Actual Costing
- Normal Costing
Allocates indirect costs based on the actual indirect cost rates times the actual quantities of the cost Allocation base
Actual Costing
Allocates indirect costs based on the budgeted indirect cost rates times the actual quantities of the cost allocation base.
Normal Costing
7 step job costing
- Identify the job that is chosen cost object
- Identify the direct cost objects of the job
- Select the cost allocation base to use for allocating indirect cost to the job
- Identify the indirect cost associated with each cost allocation base
- Compute the rate per unit
- Compute the indirect costs allocates to job
The shorter the period, the greater is the influence of seasonal patterns on the amount of costs
The numerator reason( indirect-cost pool)
Quantity of the cost allocation base
The denominator reason
An original record that supports journal entries in an accounting system
Source document
Also called job-cost sheet
It is used to record and accumulate all the costs assigned to a specific job, starting when work begins.
Job- cost record
It contains information about the cost of direct materials used on a specific job and in a specific department.
Materials- requisition record
It contains information about the amount of labor time use for a specific job.
Labot-time sheet
Entries made at each step of the production process
Journal Entries
The purpose is to have the accounting system closely reflect the actual state of the business, its inventories and its production process
Journal Entries
Account in WIP process contro account
Direct materials
Direct Labor incurred
Factory Overhead allocated(or applied)
Manufacturing overhead control account
Actual indirect costs(overhead)
Actual cost will almost never equal budgeted cost. T/ F?
T
If Overheard Control> Overhead Allocated, this is called
Underallocated overhead
If Overheard control< Overhead Allocated, this is called
Overallocated Overhead
3 method for adjusting Over/ underapplied overhead
- Adjusted allocation rate approach
- Poration approach
- Write- off approach
All allocations are recalculated with the actual exact allocation rate
Adjusted allocation rate approach
The difference is allocated between COGS, WIP and Finished goods based on their relative sizes
Proration Approach
The difference is simply written off to the COGS
Written- off approach
It is often associated with the manufacturing sector but it is also very useful in service organizations
Job costing
