what is a cost accounting system?
way of measuring, recording, and reporting product costs
identify:
specific to business
applicable to the business
measurable
record:
raw materials inventory, finished goods inventory, work in progress inventory, factory labor, manufacturing overhead,
communicate:
cost of goods manufactured
income statement
balance sheet
types of cost accounting systems:
job order and process
job order costing
company assigns cost to each job or batch of goods
specialized, made to order
process costing
company manufactures large volumes of similar products
continuous and homogenous
raw materials inventory
assign costs:
Indirect materials to manufacturing overhead
direct materials to WIP inventory
factory labor
assign costs:
indirect labor to MO
direct labor to WIP inventory
manufacturing overhead
application of costs via computation to WIP inventory
predetermined overhead rate equation
estimated annual overhead cost / estimated annual operating activity
positive MOH balance:
under applied.
debit COGS and credit MOH
negative MOH balance:
over applied.
credit COGS and debit MOH
how are total cost of jobs determined?
total job cost (COGM) removed from WIP and transferred into finished goods
cost of goods sold for the month:
beginning finished goods + cost of goods manufactured - ending finished goods = cost of goods sold
job cost sheets constitute the subsidiary ledger for the:
work in process inventory account
all of the following would be entries in assigning accumulated costs to the work in process inventory:
raw materials used
overhead is applied
factory labor is used
the predetermined overhead rate is based on the relationship between the
estimated annual costs and expected annual activity
over applied MO exists when
actual MO is less than applied MO
the journal entry to record the application of MO to WIP includes a
credit to MO
the materials requisition slip shows that the direct materials requisitioned were $66 and indirect materials requisitioned were $9. The entryto record the transfer of materials from the storeroom is:
WIP inventory: $66
MO: $9
Raw materials inventory: $75
Estimated production 60,000 labor hours
Actual production 56,000 labor hours
Estimated overhead $1,800,000
Actual overhead$1,740,000
What is the predetermined overhead
application rate if Minton Company bases it on direct labor hours
(rounded to the nearest cent)?
$30 per hour
(1,800,000 / 60,000)
A job order cost system and a process cost system are two alternative methods for accumulating product costs.
true
When raw materials are purchased, the Work in Process Inventory account is debited.
false
Accumulating and assigning manufacturing costs are two important activities in a job order cost system.
true
three ways to allocated overhead costs
plantwide, departmental, activity based
plantwide has
one overhead rate
plantwide based on
direct labor hours
machine hours
departmental rate has
two or more overhead
departmental based on
direct labor hours
machine hours
activity based costing has
many overhead rates
activity based costing activities that drive costs:
cost per machine set up
cost per material order
cost per design change
cost per labor hour
assumptions of plantwide method
overhead costs change with the allocation base
all products use overhead in the same proportions
departmental method assumptions
different products are similar in volume, complexity, and production quantities
department overhead costs are proportional to the departmental allocation based on the