ACCT CH19

Job Order Costing

A cost accounting system used for products manufactured based on specific customer orders.

Direct Materials

Materials that are identifiable with a specific job.

Direct Labor

Employee effort that directly converts materials to finished products for a specific job.

Factory Overhead

Indirect manufacturing costs shared across multiple jobs.

Job Cost Sheet

Main document tracking materials, labor, and overhead for each job.

Receiving Report

Source document confirming receipt of materials.

Materials Requisition

Prepared by the production manager to authorize material use for jobs.

Predetermined Overhead Rate (POHR)

Formula used to allocate overhead costs based on estimated overhead and activity base.

Overapplied Overhead

When applied overhead is greater than actual overhead, resulting in a credit balance.

Underapplied Overhead

When applied overhead is less than actual overhead, resulting in a debit balance.

Period Costs

Costs not part of manufacturing costs, such as administrative or selling expenses.

Schedule of Cost of Goods Manufactured (COGM)

Monthly summary of total manufacturing costs used to compute the cost of goods completed.

Income Statement

Financial statement that includes revenue, cost of goods sold (COGS), gross profit, and period expenses.

Closing Overhead Accounts

The process of reconciling applied and actual overhead costs in accounting records.

Services in Process Inventory

Used in service companies to account for the costs associated with incomplete services.

Gross Profit Ratio

Calculated by comparing gross profit to revenue, similar to manufacturing.