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Managerial Accounting 2
job order, process costing, activity based costing, and types of costing
51
Accounting
Undergraduate 1
03/25/2010

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Term
job order costing
Definition
costs are accumulated by costing
Term
job
Definition
one distinct unit or set of units
Term
actual cost system
Definition
only actual costs of DM, DL, and overhead are used to determine unit cost
Term
normal cost system
Definition
determines unit cost by adding actual DM, DL and estimated overhead (use predetermined overhead rate)
Term
steps to estimate overhead
Definition
1) calculate predetermined overhead rate
2) apply overhead to production throughout the year
3) reconcile the difference between the total actual overhead incurred during the year and total overhead applied to production
Term
predetermined overhead rate
Definition
is calculated at the beginning of the year by dividing the total estimated annual overhead by the total estimated level of the associated activity or cost driver
Term
applied overhead
Definition
is found by multiplying the predetermined overhead rate by the actual use of the associated activity for the period
Term
overhead variance
Definition
the difference between actual overhead and applied overhead
Term
underapplied overhead
Definition
actual overhead>applied overhead
Term
overapplied overhead
Definition
actual overhead
Term
plantwide overhead rate
Definition
is a single overhead rate calculated by using all estimated overhead for a factory divided by the estimated activity level across the entire factory
Term
departmental overhead rate
Definition
simply estimated overhead for a department divided by the estimated activity level for that same department
Term
normal cost of goods sold
Definition
the cost of goods sold before before an adjustment for an overhead variance is rate
Term
adjusted cost of goods sold
Definition
the cost of goods sold after the adjustment for the periods overhead variance takes place
Term
sequential processing
Definition
requires that the units pass through one process before they can be worked on in later processes
Term
parallel processing
Definition
is another processing pattern that requires two or more sequential processes to produce a finished good
Term
transferred in costs
Definition
are costs transferred from a prior process to a subsequent process
Term
production report
Definition
is the document that summarizes the manufacturing activity that takes in a process department for a given period of time
Term
equivalent units of output
Definition
are the complete units that could have been produced given the total amount of manufacturing effort expended for the period under consideration
Term
weighted average costing method
Definition
combines beginning inventory costs and work done with current period costs and work to calculate this periods unit costs
Term
steps in a production report
Definition
1) physical flow analysis
2) calculation of equivalent
3) computation of unit cost
4) valuation of inventories (goods transferred out and EWIP)
5) cost reconciliation
Term
unit level activities
Definition
activities that are performed each time a unit is produced
Term
nonunit level activities
Definition
activities that are not performed each time a unit of product is produced. factors that measure the consumption of nonunit level activities by products and other cost objects
Term
ABC cost hierarchy
Definition
1) unit level
2) batch level
3) product sustaining
4) facility sustaining
Term
unit level
Definition
vary with output volume
Term
batch level
Definition
vary with the number of groups or batched that are run
Term
product sustaining
Definition
vary with the diversity of the product or service line
Term
facility sustaining
Definition
do not vary with any factor but are necessary in operating the plant
Term
consumption ratio
Definition
the proportion of each activity consumed by a product
Term
activity inputs
Definition
are the resources consumed by the activity in producing its output
Term
activity output
Definition
is the result or product of an activity
Term
activity output measure
Definition
is the number of times the activity is performed
Term
absorption costing
Definition
assigns all manufacturing costs to the product. DM, DL, variable overhead and fixed overhead
Term
variable costing
Definition
assigns only variable manufacturing costs. DM, DL, variable overhead
Term
if more is sold than produced
Definition
variable costing is greater than absorption costing income
Term
direct fixed expenses
Definition
are fixed expenses that are directly traceable to a segment. sometimes known as avoidable
Term
common fixed expenses
Definition
are jointly caused by 2 or more segments. these expenses persist even if one of the segments to which they are common
Term
segment margin
Definition
the profit contribution each segment makes toward covering a firms common costs
Term
ordering costs
Definition
are the costs of placing and receiving an order
Term
carrying costs
Definition
are the costs of keeping and storing inventroy
Term
stockout costs
Definition
costs that occur if demand is uncertain. it is the costs of not having a product available when demanded by a customer or the cost of not having a raw material available when needed for production
Term
total inventory related cost
Definition
ordering cost + carrying cost
Term
ordering cost
Definition
number of orders per year * cost of placing 1 order
Term
average number of units in inventory
Definition
units in order / 2
Term
carrying cost
Definition
avg number of units in inventory * cost of carrying one unit in inventory
Term
economic order quantity (EOQ)
Definition
the number of units in the optimal size order quantity
Term
EOQ
Definition
sqrt(2*CO*(D/CC))
CO: the cost of placing one order
D: the annual demand for the item in units
CC: the cost of carrying one unit in inventory for a year
Term
reorder point
Definition
is the point in time when a new order should be produced
= rate of usage * lead time
Term
lead time
Definition
is the time required to receive the economic order quantity once an order is placed or a setup is started
Term
safety stock
Definition
is the extra inventory carried to serve as insurance against changes in demand
= (max daily usage - avg daily usage)*lead time
Term
just in time
Definition
maintains that goods should be pulled through the system by present demand rather than being pushed through on a fixed schedule based on anticipated demand
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