Job Costing Flashcards
How do manufacturing firms use product costing?
they purchase materials and/or components and convert them into different goods
example: oil refiners, furniture manufacturers, food manufacturers
How do retail/merchandising firms use product costing?
they purchase and then sell goods without changing their basic form
example: department stores, plumbing supply companies, plant nurseries
How do service firms use product costing?
they provide service or intangible products to their customers
example: audit firms, barbers, consulting firms
What are period costs?
expenses during period without becoming part of inventory
selling costs, general and administrative cost
What are product/inventoriable costs?
associated with goods produced or purchased for resale
DM, DL, MOH
What are prime costs?
DM and DL
What are conversion costs?
DL and MOH
What is spoilage?
units that don’t meet quality standards, and are discarded or sold at a discount
What is rework?
units that don’t meet quality standards, but we can spend more time/money to repair and sell as full-price finished goods
What is scrap?
residual materials from normal production
What are allocation bases?
metric based on which firms allocate overhead costs
examples: machine hours, cubic ft. of space, # of components, product line revenues (estimate of relative benefit)
What is cost allocation?
assignment of indirect costs to cost objects/objectives
examples: products, product lines, departments
What is a cost object?
anything for which a separate measurement of costs is desired
examples: product, service, customer
When is job costing used?
when products are manufactured to order
examples: clothing manufacturers, wedding invitations, audit firms
What is product costing?
assigning a single cost value to a unit of goods or services sold
