Accounting 116, Chapter 3 Notes
Accounting 116, Chapter 3 Notes ACCT 116
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This 2 page Class Notes was uploaded by Shubham Agarwal on Tuesday April 12, 2016. The Class Notes belongs to ACCT 116 at Drexel University taught by Stacey Kline in Fall 2015. Since its upload, it has received 42 views. For similar materials see Managerial Accounting in Accounting at Drexel University.
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Date Created: 04/12/16
Chapter 3: Job-Order Costing 1. Job-order costing systems are used when: Many different products are produced each period Products are manufactured to order The unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job 2. Bill of Material – a document that lists the type and quantity of each type of direct material needed to complete a unit of product. 3. Materials requisition form – a document that specifies the type and quantity of materials to be drawn from the storeroom and identifies the job that will be charged for the cost of the materials. 4. Job cost sheet – records the materials, labor, and manufacturing overhead costs charged to that job. 5. Time ticket – an hour by hour summary of the employee’s activities through-out the day. 6. Allocation base – a measure such as direct labor-hours or machine hours that is used to assign overhead costs to products and services. 7. Predetermined overhead rate – is computed by dividing the total estimated manufacturing overhead costs for the period by the estimated total amount of the allocation base. Four Step Process: i. Estimate the total amount of the allocation base (the denominator) that will be required for next period’s estimated level of production. ii. Estimate the total fixed manufacturing overhead costs for the coming period and the variable manufacturing overhead cost per unit of the allocation base. iii. Use the cost formula (Y=a +bX) to estimate the total manufacturing overhead cost (the numerator) for the coming period. iv. Compute the predetermined overhead rate. 8. Overhead application = (Predetermined overhead rate) * (Amount of the allocation base incurred by the job) 9. Normal Cost System – applied overhead to jobs by multiplying a predetermined overheard rate by the actual amount of the allocation base incurred by the jobs. 10. Cost Driver – factor, such as machine-hours, beds occupied, computer time etc. that cause overhead costs. 11. Raw materials – includes any materials that go into the final product. 12. Work in process – consists of units of product that are only partially complete and will require further work before they are ready for sale to the customer. 13. Finished goods – consist of completed units of product that have not yet been sold to customers. 14. Costs of goods manufactured – includes manufacturing costs associated with the goods that were finished during the period. 15. Manufacturing costs other than direct materials and direct labor are classified as manufacturing overhead costs. 16. Non-Manufacturing costs should not go into the manufacturing overhead account. 17. Schedule of cost of goods manufactured – contains three elements of product costs – direct materials, direct labor, and manufacturing overhead – and it summarizes the portions of those costs that remain in ending Work in Process inventory and that are transferred out of Work in Process into Finished Goods. 18. Schedule of cost of good sold – contains three elements – direct material, direct labor and manufacturing overhead. It summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods into Cost of Goods sold. 19. Raw Materials= Beginning raw materials inventory + Purchases of raw material - Ending raw materials inventory 20. Total Manufacturing costs= Direct materials + Direct labor + Manufacturing overhead applied to work in process 21. Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory – Ending work in process inventory 22. Unadjusted cost of goods sold = Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory 23. Underapplied/Overapplied – the difference between the overhead costs applied to Work in Process and the actual overhead costs of a period. The cause of under applied or Overapplied overhead basically uses the method of applying overhead to jobs using a predetermined overhead rate assuming that actual overhead costs will be proportional to the actual amount of the allocation base incurred during the period. 24. Plantwide overhead rate – single predetermined overhead rate for an entire factory 25. Multiple predetermined overhead rare – system in which each production department may have its own predetermined overhead rate