Cost Accounting: Job Order Costing Theories

Vocabulary flashcards covering core cost accounting terms, journal entries, source documents, and job order costing principles.

Job Order Costing

A costing system used for heterogeneous products produced in small quantities, where the job serves as the primary focal point of cost accumulation.

Process Costing

A costing system characterized by continuous mass production of homogeneous products in large quantities.

Normal Cost System

A costing system that debits Work in Process Inventory for actual direct material, actual direct labor, and applied overhead, rather than actual overhead.

Drawbacks of Applying Actual Overhead

Delays in assigning costs to products, fluctuating per-unit fixed overhead charges due to volume changes, and cost distortions caused by seasonality.

Credit to Work in Process Inventory

A general ledger entry representing the transfer of completed goods out of production and into Finished Goods Inventory.

Subsidiary Ledger

A group of additional, detailed accounts that comprise and support the total balance of a single general ledger control account.

Total Manufacturing Costs to Account For

The sum of total manufacturing costs incurred during the current period plus the beginning Work in Process Inventory balance.

Direct Material Requisition Entry

A journal entry that debits Work in Process Inventory and credits Raw Material Inventory when direct materials are placed into production.

Material Requisition Form

The source document recording raw materials requested for production; includes the job number, quantity required, and unit cost, but typically not the purchase order number.

Job Order Cost Sheet

The primary accounting document in a job order system that provides management with a cumulative historical record of direct material, direct labor, and applied overhead for a specific job.

Work in Process Subsidiary Ledger

The collection of job order cost sheets for all incomplete jobs remaining in production at the end of the accounting period.

Finished Goods Subsidiary Ledger

The collection of job order cost sheets for all completed jobs that have not yet been sold.

Indirect Labor Accrual Entry

A journal entry that debits Manufacturing Overhead and credits Wages Payable to record the cost of indirect factory labor utilized.

Factory Employer Payroll Taxes

Payroll taxes paid by the employer for factory workers, accounted for as manufacturing overhead costs in job order costing.

Expired Factory Insurance Entry

A journal entry that debits Manufacturing Overhead control and credits Prepaid Insurance when production equipment insurance expires.

Overhead Application Entry

A journal entry that debits Work in Process Inventory and credits Manufacturing Overhead control to assign overhead costs to production.

Predetermined Overhead Application Rate

A rate calculated by dividing budgeted overhead by a budgeted quantity of an appropriate cost driver.

Credit to Manufacturing Overhead Control

An entry in the Manufacturing Overhead control account representing the total amount of overhead applied to production.

Employee Time Sheet

The source document that tracks the amount of time an employee spent working on a specific job and records their applicable wage rate.

Timing of Overhead Application

The rule in job order costing requiring overhead to be applied to jobs at the end of a period or as jobs are completed, whichever is earlier.

Underapplied Overhead

A debit balance in Manufacturing Overhead resulting when actual overhead costs incurred exceed overhead applied; written off by increasing Cost of Goods Sold if immaterial.

Overapplied Overhead

A credit balance in Manufacturing Overhead resulting when actual overhead costs incurred are less than overhead costs applied/charged to production.

Debit to Cost of Goods Sold

An entry in a perpetual inventory system that records the manufacturing cost of items sold at the time of transfer to the customer.

Product Costing

A branch of cost accounting concerned with cost identification, measurement, and assignment, but not with cost origination.