A costing method that includes all manufacturing costs: Direct materials, direct labor, and both variable and fixed manufacturing overhead in the cost of a product.
A measure of activity such as direct labor hours or machine hours that is used to assign costs to cost objects.
Bill of Materials
A document that shows the quantity of each type of direct material required to make a product.
A factor such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs.
Cost of Goods Manufactured
The manufacturing costs associated with the goods that were finished during the period.
Units of product that have been completed but not yet sold to customers.
Job Cost Sheet
A form that records the materials, labor, and manufacturing overhead costs charged to a job.
Job Order Costing
A costing system used in situations where many different products, jobs, or services are produced each period.
Materials Requisition Form
A document that specifies the type and quantity of materials to be drawn from the storeroom and that identifies the job that will be charged for the cost of those materials.
Multiple Predetermined Overhead Rates
A costing system with multiple overhead cost pools and a different predetermined rate for each cost pool, rather than a single predetermined overhead rate for the entire company. Each production department may be treated as a separate overhead cost pool.
Normal Cost System
A costing 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.
A credit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process exceeds the amount of overhead cost actually incurred during a period.
The process of charging manufacturing overhead cost to job cost sheets and to the Work in Process account.
Plantwide Overhead Rate
A single predetermined overhead rate that is used throughout a plant.
Predetermined Overhead Rate
A rate used to charge manufacturing overhead cost to jobs that is established in advance for each period. It is computed by dividing the estimated total manufacturing overhead cost for the period by the estimated total amount of the allocation base for the period.
Any materials that go into the final product.
Schedule of Cost of Goods Manufactured
A schedule that contains three elements of product costs: Direct materials, direct labor, and manufacturing overhead, and that summarizes the portions of those costs that remain in ending. Work in Process inventory and that are transferred out of Work in Process into Finished Goods.
Schedule of Cost of Goods Sold.
A schedule that contains three elements of product costs: Direct materials, direct labor, and manufacturing overhead, and that summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods into Cost of Goods Sold.
A document that is used to record the amount of time an employee spends on various activities.
A debit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost actually incurred exceeds the amount of overhead cost applied to Work in Process during a period.
Work in Process
Units of product that are only partially complete and will require further work before they are ready for sale to the customer.
Direct labor cost plus manufacturing overhead cost.
The product of the number of partially completed units and their percentage of completion with respect to a particular cost. The number of complete whole units that could be obtained from the materials and effort contained in partially completed units.
Equivalent Units of Production (Weighted-Average Method).
The units transferred to the next department (or to finished goods) during the period plus the equivalent units in the department's ending work in process inventory.
A process costing method in which equivalent units and unit costs relate only to work done during the current period.
A hybrid costing system used when products have some common characteristics and some individual characteristics.
A costing method used when essentially homogeneous products are produced on a continuous basis.
An organizational unit where work is performed on a product and where materials, labor, overhead costs are added to the product.
A process costing method that blends together units and costs from both the current and prior periods.
Services provided between service departments: Cafeteria, Custodial Services.
Ignores services provided by service department to other departments. Allocates all service department costs directly to operating departments.
Step Down Method
Sequential, Step by Step process from department to department starting from the one that provides the most service to the least.
Full recognition to interdepartmental services. Allocates cost in both directions.