Quiz 1 - Chapter 2 Flashcards
What is a Process Cost System?
A costing system used for large volumes of similar products, where costs are accumulated over a period rather than assigned to individual jobs.
What is a Job Order Cost System?
A costing system where costs are assigned to specific jobs, each with its own characteristics, and computed per job.
What is Job Order Cost Flow?
The process of accumulating and assigning costs to raw materials, factory labor, and manufacturing overhead before transferring them through Work in Process, Finished Goods, and Cost of Goods Sold.
What are Raw Materials Costs?
The cost of materials purchased for production, recorded as:
Debit: Raw Materials Inventory
Credit: Accounts Payable/Cash
What are Factory Labor Costs?
Wages and payroll-related costs for factory employees, recorded as:
Debit: Factory Labor
Credit: Payroll Liabilities
What are Manufacturing Overhead Costs?
Indirect costs such as utilities, depreciation, and property taxes, recorded as:
Debit: Manufacturing Overhead
Credit: Utilities Payable, Accumulated Depreciation, Property Taxes Payable
What is Finished Goods Inventory?
The account where completed jobs are transferred before being sold, recorded as:
Debit: Finished Goods Inventory
Credit: Work in Process Inventory
What is Cost of Goods Sold (COGS)?
The cost of goods that have been sold, recorded by:
Debit: Cost of Goods Sold
Credit: Finished Goods Inventory
What is the Predetermined Overhead Rate?
A rate used to allocate overhead costs, calculated as:
Estimated Annual Overhead Costs / Estimated Direct Labor Costs
What is Underapplied Overhead?
When applied overhead is less than actual overhead incurred, leading to a debit adjustment to COGS.
What is Overapplied Overhead?
When applied overhead is greater than actual overhead incurred, leading to a credit adjustment to COGS.
In a job order cost system, costs are first accumulated in what before being assigned to Work in Process?
Raw Materials Inventory, Factory Labor, Manufacturing Overhead
When a job is completed, costs are transferred from what to Finished Goods Inventory?
Work in Process Inventory
The predetermined overhead rate is calculated by dividing estimated annual overhead costs by what?
Estimated Direct Labor Costs
How is overapplied overhead adjusted?
Crediting
Adjusted by crediting COGS.
How is underapplied overhead adjusted?
Debiting
Adjusted by debiting COGS.
At the end of each month, the balance in Work in Process Inventory should equal the sum of costs on what?
Job cost sheets of unfinished jobs
What is the predetermined overhead rate?
2.0 or 200%
Is overhead overapplied or underapplied when applied overhead is $120,000 and actual overhead is $110,000?
Overapplied by $10,000
Is overhead overapplied or underapplied when applied overhead is $80,000 and actual overhead is $90,000?
Underapplied by $10,000
Which of the following is NOT considered a manufacturing cost?
C) Advertising expenses
Advertising is a period cost, not a manufacturing cost.
What happens when goods are completed in a job order cost system?
B) They are transferred to Finished Goods Inventory
If a company applies more overhead than it incurs, what happens?
B) Overapplied overhead occurs
A process cost system is used for unique, custom-made products.
False
A job order cost system is used for unique products; a process cost system is used for mass-produced, similar products.
