Acc 220 chapter 15 and 17

What is cost accounting?

Cost accounting involves measuring, recording, and reporting product costs.

What are the two types of cost accounting?

Job order system and process cost system

What is the job order system and what are some examples?

This is when cost are assigned to each job or batch and the objective is to compute the cost per job (Ex: no two are alike so movies, mobile homes, wedding invitations)

What is the process cost system?

This is used when a large volume of similar products are manufactured (Ex: potato chips, breakfast, cereal, CDs)

What is a job cost sheet?

It is where you keep up with cost for each job

What are the source documents for assigning costs?

Materials requisition slips (raw materials inventory), Time tickets (factory labor hours), and predetermined overhead rate (MOH)

What are the two steps in the flow of costs?

accumulating and assigning costs

What are the 3 journal entries for accumulating costs?

1. Raw materials inventory

Accounts payable

2. Factory Labor

Factory wages payable

Employer payroll taxes payable

3. Manufacturing overhead

Utilities Payable

Accumulated Depreciation

What are the 5 journal entries for assigning costs?

1. WIP inventory

MOH

Raw Materials Inventory

2. WIP inventory

MOH

Factory Labor

3. WIP inventory

MOH

4. Finished Goods inventory

WIP Inventory

5. Accounts Receivable

Sales Revenue

Cost of goods sold

Finished Goods inventory

What is undersupplied?

What is undersupplied?This is when the actual money is greater than the applied money. It will have a debit balance in MOH.

What is over overapplied?

This is when the applied money is greater than the the actual money. It will have a credit balance in MOH.

Cost of goods sold

MOH

What is the journal entry for undersupplied?

MOH

Cost of goods sold

What is the journal entry for overapplied?

Estimated overhead/ expected annal operating activity

What is the formula for the predetermined overhead rate?

Chapter 17

Chapter 17

new complex manufacturing processes require multiple allocation bases, meaning multiple OH rates (simply ABC is a way to allocate OH rates)

What is activity based costing?

a. first OH is allocated to multiple activity cost pools

b. the activity cost pools are assigned to products or services by means of cost drivers

How is overhead allocated in ABC?

Activity cost pool

What is this definition?

the OH cost attributed to a distinct activity (manufacturing activities that cause cost to income) Ex: machine hours, set up hours

Cost driver

What is this definition?

any factor or activity that has a direct cause-effect relationship with the resources consumed (measure the number of activities Ex: number of orders, number of inspections

more accurate product costing (primary benefit)

enhanced control over OH costs

better management decisions

What are the benefits of ABC?

- increase the perceived value of a product or service to customers

- activities that are essential

- activities of actually manufacturing the product

What are value-added activities?

- add cost to or increase the time spend on a product/service without increasing its value

- If eliminated NVA activities would not hinder operations or reduce the perceived worth of the product

-These are any activities that are not value added

What are non-value-added activities?

painting, packaging, machine assembly, and engineering design

What are value adding activities?

number of requisitions

number of setups

machine hours used

number of employees

number of inspections

number of parts assembled

square footage

number of employees

number of purchase orders

Name there cost drivers:

Materials handeling

machine setups

factory machine maintence

Factory supervision

Quality control

inventory control

Building maitence

Employee training

materials ordering

cost of goods sold

Any balance In MOH at year end is eliminated by adjusting???