ch 3 & 5 managerial acc terms

job order costing

a costing system used in situations where many different products, jobs, or services, are produced each period

absorption costing

.A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs.

allocation base

A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects.

COGS Manufactured

The manufacturing costs associated with units of product that were finished during the period.

finished goods

Units of product that have been completed but not yet sold to customers.

job cost sheet

A form that records the direct materials, direct labor, and manufacturing overhead cost charged to a job.

normal cost system

A costing system in which overhead costs are applied to a job by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job.

overhead applied

A credit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process is greater than the amount of overhead cost actually incurred during a period.

overhead application

The process of assigning overhead cost to specific jobs.

predetermined overhead rate (POHR)

A rate used to charge manufacturing overhead cost to jobs that is established in advance for each period. It is computed by dividing the estimated total manufacturing overhead cost for the period by the estimated total amount of the allocation base for the period.

raw materials

Any materials that go into the final product.

schedule of cost of good manufactured

A schedule that contains three elements of product costs—direct materials, direct labor, and manufacturing overhead—and that 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.

schedule of cost of good sold

A schedule that contains three elements of product costs—direct materials, direct labor, and manufacturing overhead—and that 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.

underapplied overhead

A debit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process is less than the amount of overhead cost actually incurred during a period.

work in process

Units of product that are only partially complete and will require further work before they are ready for sale to the customer.

break even point

The level of sales at which profit is zero.

contribution margin ratio

A ratio computed by dividing contribution margin by sales.

cost volume profit graph

A graphical representation of the relationships between an organization’s revenues, costs, and profits on the one hand and its sales volume on the other hand.

degree of operating leverage

A measure, at a given level of sales, of how a percentage change in salesvolume will affect profits. The degree of operating leverage is computed by dividing contribution margin by net operating income.

incremental analysis

An analytical approach that focuses only on those costs and revenues that change as a result of a decision.

margin of safety

The excess of budgeted or actual dollar sales over the break-even dollar sales.

operation leverage

A measure of how sensitive net operating income is to a given percentage change in unit sales.

sales mix

The relative proportions in which a company’s products are sold. Sales mix is computed by expressing the sales of each product as a percentage of total sales.

target profit analysis

Estimating the level of sales needed to achieve a desired target profit.

variable expense ratio

A ratio computed by dividing variable expenses by sales.