Lectire 3 Flashcards
Assigning costs
Purchase materials = direct materials
Assemblers payroll
Finishers payroll = direct labour
Supervisors payroll Depreciation Utilities Property taxes Landscaping = overhead
Cost pool
Cost pool is a grouping of cost items (depending on the desired scope)
Cost allocation base
Cost allocation base is a factor that is the common denominator for systematically linking an indirect cost or group of indirect costs to a cost object(cost driver as cost allocation base)
Types
Job costing systems: cost objects are individual units, batches or lots of a distinct product or service (called a job)
-distinct units, services, jobs, hard to standardise
Process costing systems: cost objects are identical or similar units, products or services
- mass production, easily comparable and easy to standardise
Hybrid systems - combination of job and process costing systems
Job costing: actual costing and normal costing
Actual costing problem is we can only allocate it overhead is known,
> costing of jobs is then possible
Normal costing - budget for OH:
We assume a budgeted amount of oh and a budgeted amount of a fost driver during a period
Job costing over and under allocated
End of period adjustment;
Difference if positive over allocated overhead (too much overhead )
Under allocated if too few overhead is allocated
ABC example
Budgeted indirect costs are 4000 and allocation base is 2000hours. Actual indirect costs are 4200 and allocation base is 2050 hours. If abc is using the normal costing system how much will be allocated In a job that used 75hours
2000/4000 =0.50 an hour
X75=37.50
Process costing
Production costs assigned to many units of identical or similir units, products or services.
Direct mat + direct lab + man oh >
Finished goods > unfinished goods (work in progress WIP)
Dm + conversion costs =DL + OH Direct costs (DM +DL ) + indirect costs (OH)
Wip (direct materials incurred at start) >transformed> conversion costs: everything that is not dm evenly added during process > FG
Process costing - inventory valuation
> assembly > testing > finished goods
Equilavnt units example
At the end of the period 100 bottles half finished 50% progress
Dm for 100 bottles
Equilavnt units for conversion costs: 100 x 50% =50 bottle (in equilavnt Units)
Weighted average vs fifo
Weighted average - focus on work done to data (regardless of period)
Equilavnt units of finished and unfinished goods grew the d equally
Fifo(first in first out): finish first the wip in op stock
All new products produced after
Seperatuon of old and new predicts
Standard costing
Setting standards (budget) for quantities of inputs simplifies costing process
Process costing systems using standard (budgeted) costs accumulate actual costs incurred seperately from the stock accounts under standard costs consumers
Standard costing (budgeted) variances. Actual costing
Transferred in costs
More than one operating decisions: units can move from division to division
Costs are also transferred: transferred in costs
Costs in one division affect costs of the next division: impact for performance evaluation
Transferred in costs treated as a seperate type of dm added in the beginning
Joint costs
Costs of single production process that yields multiple products
Split of point
The place in the production where two or more products become separately identifiable
