Job Order Costing Accounting And Overhead Allocation And Apportionment Flashcards
What is an overhead?
CIMA - ‘expenditure on labour, materials or services that cannot be economically identified with a specific saleable cost unit ‘
What are the two types of cost centres
- Production cost centres
- Service cost centres
What’s the different between allocation and apportioned?
Allocation - expenses are allocation to those cost centres to which they obviously belong to
Apportioned - non-allocable costs are apportioned on a logical basis
What is the first stage of allocation/apportion?
Overheads assigned to departments or cost centres
E.g. rent of building - floor area
Costs that have been apportioned to service cost centres have to be re-apportioned to the production cost centres
What is the second stage of allocation and apportion?
Cost accumulated to cost centres are assigned to products (units)
You need
1. Overhead cost for period
2. Productive capacity available in that period
What is the predetermined overhead rate?
It’s used to apply overhead to jobs and is determined before period begins
= estimated total mfg. OH costs for coming period/ estimated total units in the allocation base for coming period
What are cost drivers?
Machine hours
Direct labour hours
Direct wages
Direct materials
Prime costs
No.of units
What is the formula for overhead applied?
POHR X actual activity
What happens if manufacturing overhead is under applied?
You increase the cost of goods sold
What happens if manufacturing overhead is over applied?
You decrease the cost of goods sold
What is marginal/variable costing?
This type of costing only considers the variable costs
Product costs = direct materials, direct labour and variable mfg. overhead
Period costs = fixed mfg. overhead and selling and admin exp
What is absorption costing?
Takes fixed and variable costs into consideration
Product costs = direct materials, direct labour, variable mfg. overhead, fixed mfg overhead
Period costs = selling and admin exp
How do u calculate the unit product cost for both absorption and variable costing?
Absorption = direct materials, direct labour, variable mfg overhead and mfg fixed cost
Variable = direct materials, direct labour and variable mfg overhead
What is the absorption costing layout?
Sales
Less cost of goods sold:
beginning inventory
+ cogm
= goods available for Sale
Less ending inventory.
= costs of goods sold
= gross margin
Less selling admin and exp
Variable
Fixed
= net income
What is the marginal/variable costing layout?
Sales
Less variable expenses:
Beginning inventory
+ cogm
= goods available for sale
Less ending inventory
= variable cost of goods sold
+ variable selling and admin exp
= contribution margin
Less fixed expenses:
Manufacturing overhead
Selling and admin exp
= net income
