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Job costing

a costing system that accumulates, tracks, and assigns costs for each job produced by a company

Process costing

a costing system that accumulates and tracks costs for each process performed and then assigns those costs equally to each unit produced

Operations costing

a hybrid of job and process costing; used by companies that make products in batches

Normal spoilage

spoilage resulting from the regular operations of the production process

Abnormal spoilage

spoilage resulting from unusual circumstances, including improper handling, poorly trained employees, faulty equipment, and so on

Fringe benefits

payroll costs in addition to the basic hourly wage

Idle time

worker time that is not used in the production of the finished product

Overtime premium

an additional amount added to the basic hourly wage owing to overtime worked by the workers


the process of finding a logical method of assigning overhead costs to the products or services a company produces or provides

Cost drivers

factors that cause, or drive, the incurrence of costs

Cost pools

groups of overhead costs that are similar; used to simplify the task of assigning costs to products using ABC costing

Normal costing

a method of costing using an estimate of overhead and predetermined overhead rates instead of the actual amount of overhead

Predetermined overhead rates

used to apply overhead to products; calculated by dividing the estimated overhead for a cost pool by the estimated units of the cost driver

Overapplied overhead

the amount of applied overhead in excess of actual overhead

Underapplied overhead

the amount of actual overhead in excess of applied overhead

Equivalent units

the number of finished units that can be made from the materials, labor, and overhead included in partially completed units

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