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Accounting Textbook Chapter Notes 5,8,10,11.docx

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ACC 410
Keith Whelan

Chapter 5Job CostingProduct costs are costs involved in either makingpurchasing a product and they are called manufacturinginventoriable costs they are the directindirect costs of producing GSPeriod costs are the operating costs that are not part of makingpurchasing a product such as salesadministrative expensesWhat goes into making a product consists of direct materials that become part of the product cost object direct labour that includes the wages paid to the operatorassembly workers and the manufacturing overhead which includes all indirect expenses that go into making the product such as utilitiesmachine amortizationplant insurancemaintenancerepairindirect materialsindirect labour etcDirect materialslabour combinedreferred to as prime cost and direct labour and manufacturing overhead combinedreferred to as conversion cost reflecting the fact that these 2 costs convert materials into finished goodsCost of Goods Sold COGSBeginning Merchandise InventoryPurchasesEnding Merchandise InventoryCOGSBeginning Finished Goods InventoryCOG manufacturingEnding Finished Goods InventoryProcess Costingallocates both directoverhead costs to continuousflow processing lines it is the approach generally used for massproduced productsWhen a customer with specific productservice requirements places an order we call the order a job and when a client brings his tax records to an accountant the accounting firm considers this order a jobJob Costingprocess of assigning products to custom productsservicesTotal Work in Process WIPequal to the sum of the accumulated costs for all jobs in the subsidiary ledgerSource Documentsmanualelectronic records created to captureprovide information about transactionseventsJob Cost Recordcostactivity information gathered from source documents is used to record costs in a subsidiary ledger for a new job it contains all the costs traced and assigned to a specific jobCost Poolgroup of individual costs that are accumulated for a particular purposeAllocation Basebase chosen to assign overhead costs to cost objectsAllocation Rate amountunit of allocation base used to allocate overhead to each cost objectActual Allocation RateActual Overhead CostActual Quantity of Allocation BaseEstimated Allocation RateEstimated Overhead CostEstimated Quantity of Allocation BaseActual Costingoverhead is allocated using the actual volume of the allocation base multiplied by the actual allocation rate
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