Chapter 4 Flashcards
what is shared and allocated
MOH
when do you debit the MOH clearing account
when you apply the OH that is actually used
when do you credit MOH clearing account
when you allocate the OH
what is the purpose of MOH account
to allocate overhead, since we don’t know exactly how much overhead is going into each product, we estimate the year amount and divide it over an estimated yearly base.
what does a job cost sheet do
tells you how much the total COGM was and allows you to figure out a per unit basis of the product
what is the PDOH rate
it is the allocation base as well as the cost driver
- example DL hours more OH
why do you not use PDOH for CVP
because the PDOH includes both fixed and variable OH costs where as CVP only accounts for variable costs
What are the 3 requirements to allocating OH
- must be common and indirect
- products must be identical
- seasonal fluctuations
why do we use estimated ANNUAL OH and not Actual
so we are able to quote a customer price that is even throughout the year and avoids seasonal fluctuations
- we don’t know our cost of MOH until the end of the year
What are the 3 types of seasonal fluctuations in terms of MOH
- Seasonal fluctuations in recurring MOH costs (example utilities increasing in winter)
- Seasonal fluctuations in sporadic MOH costs (needing to regrease machines twice a year)
- Seasonal fluctuations in product output volume (make more units so cost/unit of rent goes down)
in the journal entry for MD lamps and CC lamps why is this utility J.E wrong
utility expense
cash
wrong because the utilities are product costs since they were needed to make the lamps
in the journal entry for MD lamps and CC lamps why is this utility J.E wrong
WIP MDL
cash
it shows that it is a product cost but under costs CC lamps
When is actual costing use
when non identical products are made so seasonal fluctuations actually do change product costs
what happens when you allocate actual OH during the year instead of using a PDOH rate
cost/unit fluctuates due to seasonal fluctuations
why do you allocate the PDOH rate on a monthly basis
because I/S are delivered monthly and if we don’t then our Gross margins would be skewed
