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Hourly-rate Plan
definite rate per hour per employee
Piece-rate Plan
definite rate per output per employee
Modified Wage Plan
combination of hourly-rate and piece-rate plans
Daily-rate Plan
definite rate per day per employee
Time-keeping Department
accounts for the time spent by the employees
Payroll Department
computes each employee’s earnings
Regular time
charged to job debiting Work in Process
Overtime
may be charged to jobs, to factory overhead, or allocated partly to jobs and partly to overhead
Overtime premium
represent amount paid in excess of regular rate, to employees in excess of 8 hours in a day, or working during holidays or their rest day
Collective Bargaining Agreement
indicates overtime premium rate
Waiting or idle time
cost of non-productive hours of direct labor caused by lack of work, waiting for materials delay from scheduling machine breakdown and machine set-up
Make-up pay
benefits new employees because it guarantees them a minimum salary while they are learning their new job
Shift premium
extra pay to work during less desirable evening shift or night shift
Employers’ contribution
the amount remitted to different government agencies
Employee’s income tax
the amount of tax to be withheld each period depends on the following
Employee name
Rate per hour
Number of hours work
Classification
Data from time tickets
Labor records
used to trace the costs of direct manufacturing labor to individual jobs and to accumulate the costs of indirect manufacturing labor in the manufacturing overhead record
Employee’s supervisor
approves time tickets
Material Requisition
a written order to the storekeeper to deliver materials and supplies to the place designation or to issue the materials to the person presenting a properly executed requisition
Quantity
Material number
Job number
Data from Material requisition
Purchase Requisition
a written request, usually sent to inform the purchasing department for materials and supplies
Purchase Order
a written request to a supplier for specified goods at an agreed upon price
Purchase Order
the supplier’s authorization to deliver goods and submit a bill.
Purchase Order
stipulates the terms of delivery and terms of payment
Receiving Report
when the goods that were ordered are delivered, the receiving department will unpack and count them
Quantity Discounts
represent cost savings for volume purchases
Quantity Discounts
discounts that are not given explicit accounting recognition in the books
Cash discounts
granted to customers to motivate them to pay promptly
When taken method
purchases and liabilities are recorded at gross amounts at the time of purchase
When taken method
the discount is only recognized when the account is paid within the discount period
When not taken method
purchase and liabilities are recorded at net at the time of purchase
When not taken method
when payment is made after the lapse of the discount period, the discount not availed of is charged to a “material“ account
Direct Charging
the freight incurred on the purchase of raw materials is ADDED to the invoice price
Relative peso value method
freight is allocated on the basis of the peso value of the times purchased
Relative weight method
freight is allocated on the basis of the weight of the items purchased
Indirect Charging
the freight incurred on the purchase of raw materials is charged to Factory Overhead Control Account
Spoilage
refers to units of production—whether fully or partially completed—that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices
Rework
refers to units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units
Scrap
residual material that results from manufacturing a product
Abnormal loss
charged as an expense to accurately reflect the incurred expenses associated with the avoidable wastage occurring during the production process, thus ensuring transparency in financial reporting and adherence to accounting principles.
Job cost sheet
serves as the primary accounting document utilized for allocating costs to specific jobs within a manufacturing environmen
Raw Materials Inventory
serves as a control account, overseeing the flow of raw materials into and out of the inventory system, ensuring accuracy and accountability in material usage
Process Costing
a company produces many units of a single product
Job-order Costing
many different products are produced each period and are manufactured to order.
Predetermined overhead rate
used to apply overhead to jobs is determined before the period begins
Estimated cost / Estimated units
Predetermined overhead rate
Cost driver
a metric, such as the amount or volume of something or the level of an activity, that causally affects the level of a cost over a given time span.
POHR x Actual activity
Manufacturing overhead applied
Unit cost
calculated by dividing the total cost by the related number of units produced
Finished goods
transferred from the production departments to the finished goods warehouse when a job has been completed
Normal costing
a 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
Financial Accounting
accounting focused on reporting financial information to external parties
Management Accounting
process of measuring, analyzing, and reporting financial and nonfinancial information that helps managers make decisions
Strategy
specifies how the organization matches its own capabilities with the opportunities in the marketplace
Target customers
should be the focal point of a company’s strategy
Leadership Strategy
a strategy wherein companies provides quality product or services at low price
Differentiation Strategy
a strategy wherein companies offer unique products or services that appeal to their customers and are often priced higher than the less-popular products or service of their competitors
Value chain
the sequence of business functions by which a product is made progressively more useful to customers
Supply chain
flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers
Controller
the accounting executive primarily responsible for management accounting and financial accounting
Line positions
directly related to achievement of the basic objectives of an organization
Staff positions
support and assist line positions
Competence
Confidentiality
Integrity
Credibility
4 IMA Guidelines for Ethical Behavior
Actual cost
pertains to a cost that has occurred
Budgeted cost
pertains to a predicted cost
Cost accumulation
pertains to a collection of cost data in an organized manner
Cost assignment
pertains to a general term that includes gathering accumulated costs to a cost object
Cost object
pertains to anything of interest for which a cost is desired
Direct costs
related to the particular cost object and can be traced to it in an economically feasible (cost-effective) way
Indirect costs
related to the particular cost object but cannot be traced to it in an economically feasible (cost-effective) way
Relevant range
the band or range of normal activity level or volume in which there is a specific relationship between the level of activity or volume and the cost
Manufacturing
sector companies purchase materials and components and convert them into various finished goods
Merchandising
sector companies purchase and then sell tangible products without changing their basic form
Service
sector companies provide intangible products
Product costs
costs that are a necessary and integral part of producing the product
Product costs
costs that are recorded as inventory when incurred
Product costs
costs that are not an expense until the finished goods inventory is sold then cost of goods sold
Period costs
costs that are matched with revenue of a specific time period and charged to expense as incurred
Beginning raw materials + purchases - ending raw materials
Direct materials
Direct materials + direct labor + manufacturing overhead
Total manufacturing costs
Total manufacturing costs + beginning work in process - ending work in process
Cost of goods manufactured
Cost of goods manufactured + beginning finished goods - ending finished goods
Cost of goods sold
Finished goods
transferred from the production departments to the finished goods warehouse when a job has been completed
Product costs
assigned to inventories and are considered assets until the products are sold
Product costs
become cost of goods sold on the income statement at point of sale
Fixed cost
costs that remains constant, in total regardless of changes in the level of activity within the relevant range
Variable costs
costs that vary in total based on changes in the level of activity within the relevant range
Cost accounting
serves as a comprehensive and systematic process integral to the management and stewardship of organizational resources. It encompasses the measurement, detailed analysis, and comprehensive reporting of both financial and nonfinancial information pertaining to the acquisition or utilization of resources within an organization.
Line management
directly responsible for attaining the goals of the organization
Cost of completed goods
The final figure in the Schedule of Cost of Goods Manufactured
Theoretical capacity
level of capacity based on producing at full efficiency
Practical capacity
the level of capacity that reduces theoretical capacity by considering unavoidable operating interruptions, such as scheduled maintenance time, shut- downs for holidays and so on
Expected capacity
the level of capacity utilization that managers expect for the current budget period, which is typically one year
Normal capacity
the level of capacity utilization that satisfies average customer demand over a period (say two or three years) that includes seasonal, cyclical and trend factors
Traditional product-costing methods
single indirect cost rate to allocate costs to all products
Refined costs system
reduces the use of broad averages for assigning homogenous costs of resources to cost objects
Direct-cost tracing
identify as many direct costs as is economically feasible
Indirect-cost pools
each cost in the pool has a similar cause-and-effect relationship with a single cost driver
Cost-allocation bases
the cost driver serves as the cost allocation base for each homogeneous indirect-cost pool.
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