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What is a product cost?
Manufacturing costs that a company incurs to acquire raw materials and convert them to finished goods ready for sale
What are the major components of product costs?
Direct materials
Direct labor (calculated by hourly wage rate x direct labor hours used)
Overhead: Indirect product costs that arise in manufacturing product which include indirect materials and indirect labor
What is a period cost?
Non manufacturing cost that is not a product costs which is associated with the selling or a product and the administration of the business
Selling and general & administrative costs are assocaited with…
period costs
What are the three forms of inventory accounts?
Raw Materials
Work in Process
Finished Goods Inventory
What is a job order costing system>
System where product costs are accumulated for each job or batch produced. When complete, total costs for the job are divided by the number of units to determine average cost per unit
How do you calculate predetermined overhead rate?
POR = (Budgeting total manufacturing overhead) / (budgeted activity level of application base)
How do you calculate applied overhead?
AO = (predetermined overhead rate) x (actual activity level of application base)
If the balance in manufacturing overhead is a debit, the amount is
underapplied overhead (not enough overhead cost was charged to the products)
If the balance to a manufacturing overhead is a credit, the amount is
overapplied overhead. )too much overhead cost was charged to products)