Lecture 3 Flashcards
Direct costs (actual costing)
Apply to actual cost
Overhead (actual costing)
End of period: add up all actual overhead costs and divide by actual allocation base to calculate a rate
Apply overhead to jobs by multiplying the rate by actual allocation usage
DIrect costs (normal costing)
Apply to actual costs
overhead (normal costing)
Beginning of period: add up all estimated overhead costs and divide by estimated allocation base
Apply overhead based on actual allocation usage
Standard costing
Instead of assigning costs based on what actually happened (actual costing) or a combination of budgeted rates and actual usage (normal costing), lets assign costs based on what they should be
How much something should cost to produce
just use budgeted numbers for both direct costs and overhead (although hthere are other ways to come up with standards)
Cost object
Something to which costs are being assigned/something that accumulates costs
Job-ordering costs
The cost object is the individual job/order/unit
Focus is on the individual job
(audit of delta airlines, productiong of doctor strange or remodel the smith home)
Process costing
The cost object is the entire process. Not a single unit but the whole periods worth of work
(mass production or average cost per unit)
Big idea of job costing
Track costs to individual units
Each unit gets different costs
Big idea of process costing
Track costs to the whole group of units
Average costs across all units produced
Equivalent units
A way of measuring work on partially completed units, measured as quantity of physical units times the percent of the way completed
Physical units
An actual unit, even if only partially completed
Average cost per unit
Total costs incurred/ number of equivalent units
Number of equivalent units unnown because some are partially incomplete
Estimating equivalent units
Separate estimation for raw materials and for conversion costs
Raw materials (RM) estimating equivalent costs
Are usually added 100% at the beginning
