chapter 3

Question 1

cost pool

Answer 1

grouping of individual cost items. can range from very broad to very narrow.

Question 2

cost-allocation base

Answer 2

factor that is the common denominator for systematically linking an indirect cost or group of indirect costs to a cost object. can be financial or non-financial. often the cost driver of indirect costs.

Question 3

job-costing system

Answer 3

costs are assigned to a distinct unit, batch or lot of a product or service. a job is a task for which resources are expended in bringing a distinct product or service to the market, which is often custom-made. it accommodates the cost accounting for distinct and identifiable individual services or products.

Question 4

process-costing system

Answer 4

used when the cost object is masses of identical or similar units. the cost of a product or service is obtained by using broad averages to assign costs to masses of identical or similar units.

Question 5

actual costing

Answer 5

costing method that traces direct costs to a cost object by using the actual direct-cost rate * actual quantity of the direct-cost inputs and allocates the indirect costs based on the actual indirect-cost rate * actual quantity of the cost-allocation base.

Question 6

source documents

Answer 6

original records that support journal entries in an accounting system.

Question 7

normal costing

Answer 7

method that traces direct costs to a cost object by using the actual direct-cost rate * actual quantity of the direct-cost input and allocates indirect costs based on the budgeted indirect-cost rates * actual quantity of the cost-allocation base.

Question 8

job cost record

Answer 8

key source document in a job-costing system. it records and accumulates all the costs assigned to a specific job.

Question 9

materials requisition record

Answer 9

a form used to charge departments and job cost records for the cost of materials used on a specific job.

Question 10

labour time record

Answer 10

used to charge departments and job cost records for labour time used on a specific job.

Question 11

under-allocated/underapplied indirect costs

Answer 11

occur when the allocated amount of indirect costs in an accounting period is less than the actual amount in that period.

Question 12

over-allocated/under-absorbed indirect costs

Answer 12

occur when the allocated amount of indirect costs in an accounting period exceeds the actual amount in that period.

Question 13

adjusted allocation rate approach

Answer 13

restates all entries in the general ledger by using actual cost rates rather than budgeted cost rates.

Question 14

proration

Answer 14

a term used to refer to spreading over under- or over-allocated overhead among closing stocks and cost of goods sold.