Job Costing Flashcards
(25 cards)
Why are costing systems important?
They improve costing accuracy, support pricing, customer charging, and provide competitive advantage.
What is product costing?
Accumulating, classifying, and assigning direct materials, direct labor, and factory overhead to cost objects.
How are direct and indirect costs treated in product costing?
Direct costs are traced; indirect costs are allocated using cost drivers.
What choices must be made when developing a costing system?
Cost accumulation method, cost measurement method, and overhead assignment method.
What is job costing?
Assigning all manufacturing costs to specific jobs or customers; used for customized products.
What is process costing?
Used in continuous mass production of homogeneous products.
What is actual costing?
Uses actual costs for materials, labor, and overhead; rare due to cost fluctuations and untimely data.
What is normal costing?
Uses actual costs for direct materials and labor but budgeted overhead rates.
What is standard costing?
Uses standard costs for all cost elements; helps with cost control, evaluation, and improvements.
What is volume-based costing?
Allocates overhead using drivers like units produced, labor hours, or machine hours.
What is activity-based costing (ABC)?
Allocates overhead using multiple cost drivers based on resource and activity consumption.
What strategic roles does product costing play?
Supports pricing, profitability analysis, customer profitability, management evaluation, and strategy refinement.
What document supports job costing?
The job-cost sheet, recording direct materials, direct labor, and overhead.
What is recorded in Work-in-Process (WIP) Inventory?
All accumulated costs for active jobs.
How are direct materials recorded?
Via materials requisitions; transferred to WIP Inventory.
How are indirect materials recorded?
Transferred to Factory Overhead.
How is direct labor recorded?
Using time tickets; costs are added to WIP Inventory.
How is indirect labor recorded?
Added to Factory Overhead.
How is overhead applied to jobs?
Using a predetermined overhead rate multiplied by actual activity.
How is the predetermined overhead rate calculated?
Estimated overhead costs ÷ Estimated activity level.
What are possible cost drivers for overhead?
Direct labor-hours, machine-hours, number of setups, orders, or manufacturing cycle-time.
What is overapplied overhead?
When applied overhead is greater than actual overhead.
What is underapplied overhead?
When applied overhead is less than actual overhead.
How can overapplied or underapplied overhead be adjusted?
By adjusting the Cost of Goods Sold or prorating among WIP, Finished Goods, and CGS.
