Costing Methods Flashcards
A valid reason to allocate the cost of the support department to the products manufactured in an operating department?
To determine the net margin of the products
what is the main reason to allocate manufacturing cost of the joint process?
methods of allocating cost are arbitrary therefore we can compare profitability or making decision based on the allocation of Joint cost. the main reason is to determine the value of inventory.
pre-determined overhead rate formula?
Manufacturing overhead cost divided by the activity level
Direct material EU formula under FIFO method?
= completed beginning WIP + Started and completed + Ending WIP
* Started and completed units = Started units in the period - total units in Ending WIP
Weighted Average costing method formula?
Total units finished + Ending WIP
* Total units finished = Beginning WIP + transferred in - Ending WIP
Note: FIFO formula is»_space; completed beginning WIP + Started and completed + Ending WIP to be completed
Cost of goods manufactured formula?
COGM = beginning WIP + DM used + DL used + OH applied - Ending WIP
Cost of good sold formula?
COGS = beginning WIP + COGM - ending WIP
How calculate product costs and where it is recorded?
DL+DM+ manufacturing OH = cost of inventory
what is variable costing?
Variable costing is a method of inventory valuation in which only variable OH costs are included as inventoriable costs. all fixed and non-manufacturing costs are classified as period costs and expensed during the specific time period.
Note: when fixed OH is expensed when incurred, it impacts the income statement immediately and no amount will sit in inventory on the balance sheet.
what is absorption costing?
when the inventoriable costs include both fixed and variable costs.
Note: where fixed OH is inventoried, the cost only appears on the income statement when the inventory is sold.
Computation of output EU under weighted average method?
Completed and transferred our in the period + WIP Ending
EU computation under FIFO method?
Completed and transferred from WIP beginning
+ Started and completed in the period ( Started minus Ending WIP)
+ WIP Ending
what is the purpose of costing methods?
determining the cost of a product or service allows management to determine how profitable a product or job is.
