Chapter 4 book (4.1, 4.2, 4.4) Flashcards
anything for which a measurement of costs is desired
cost object
costs that are directly related to a particular cost object and that can easily and unambiguously to be traced to it
direct costs of a cost object
costs that related to a particular cost object but that cannot easily and unambiguously be traced to it
indirect costs of a cost object
assigning costs, whether direct or indirect, to a cost object
cost assignment
the process of assigning direct costs
cost tracing
the process of assigning indirect costs
cost allocation
a grouping of individual indirect cost items
(simplify the allocation of indirect costs because the seperate cost items do not have to be allocated individually)
cost pool
a systematic way to link an indirect cost or group of indirect costs (operating costs of all metal cutting machines) to cost objects (different products)
cost allocation base
(example: $500,000 indirect costs of operating metal cutting machines / running the machines for 10,000 hours =416 days 16 hours $50 per machine hour which makes machine hours the cost allocation base)
some companies allocate costs like these to their individual divisions and products on the basis of revenues: the higher a divisions revenue, the higher the allocated costs of the advertising program. allocating costs this way is based on the criterion of
benefits received
(not cause and effect)
companies generally use the _______ and ______ criterion to allocate costs, followed by _____ _____ , and finally and more rarely, by ______ to ________
- cause and effect
- benefits received
- ability to bear
a unit or multiple units of a distinct poduct or service
job
2 basis types of costing systems to assign costs to products or services
- job costing system
- process costing system
costing system in which the cost object is a unit or multiple units of a distinct product or service called a job
job costing system
(each special machine mad ebut hitachi is unique and distinct from the other machines made at the plant)
costing system in which the cost object is masses of identical or similar units of a product or service
process costing system
(all minute maid consumers receive the same frozen orange juice product)
in a job costing system, the cost object is
a job
in a process costing system, the cost object is
masses identical or similar units of a product or service
(ex:citibank provides thte same service to all its customers when processing customer deposits)
- identifying the job that is the chosen cost object
- identify the direct costs of the job
- select the cost allocation bases to use for allocating indirect costs to the job
- identify the indirect costs associated with each cost allocation base
- compute the indirect cost rate for each cost allocation base
- compute the indirect costs allocated to the job
7.compute the total cost fo the job by adding all direct and indirect costs assigned to the job
7 step approach used to compute direct and indiret costs of a job
an original record (such as labor time card on which an employees work hours are recorded) that supports journal entries in an accounting system
source document
used to record and accumulate all the costs assigned to a specific job, starting when work begins
job cost record
or
job cost sheet
source document that contains information about the cost of dicrect materials used on a specific job and in a specific department
materials requisition record
the source document for direct manufactuing labor, which contains information about the amount of labor time used for a specific job in a specific department
labor time sheet
budgeted manufacturing over head rate equation
budgeted manufacturing overhead rate =
budgeted manufacturing overhead costs
/
budgeted total quantity of cost allocation base
