ACCT 2200 Chapter Notes - Chapter 3: Accounts Payable, Deferral, Cost Driver

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periwinklelizard551

5 May 2015

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There are two basic types of managerial costing systems: In this chapter we will cover job-order costing systems. Job-order-costing: in this type of costing each unit or batch produced is unique. Product costs = direct materials + direct labor + manufacturing overheads. Learning objective 1: compute a predetermined overhead rate. As a result of the above difficulties we allocate overhead costs to products. An allocation base is the basis upon which an entity allocates its overhead costs. Commonly used allocation bases are direct labor hours, direct labor dollars, machine hours, and direct materials. Manufacturing overhead is allocated to products using a pre-determined overhead rate. Ab limited uses direct labor hours to assign manufacturing overhead cost to job orders. The budget of the ab limited shows an estimated manufacturing overhead cost of for the next year. The company estimates that 10000 direct labor hours will be worked in the next year.

Related Questions

Identify each statement as true or false. If false, indicate howto correct the statement.

1. Process cost systems are used to apply costs to similarproducts that are mass-produced in a continuous fashion.
2. A process cost system is used when each finished unit isindistinguishable from another.
3. Companies that produce soft drinks, motion pictures, andcomputers chips would all use process cost accounting.
4. In a process cost system, costs are tracked by individualjobs.
5. Job order costing and process costing track differentmanufacturing costs elements.
6. Both job order costing and process costing account for directmaterials, direct labor, and manufacturing overhead.
7. Costs flow through the accounts in the same basic way for bothjob order costing and process costing.
8. In a process cost system, only one work in process account isused.
9. In a process cost system, costs are summarized in a job costsheet.
10. In a process cost system, the unit cost is total manufacturingcosts for the period divided by the units produced during theperiod.

byzantiumpanda529

Citra bhd manufacturers two types of components, C1 and C2 andabsorbs overheads on the basis of direct labour hours. Anticipatedoverheads for the upcoming accounting period is RM 972500,information about the company products is as follows

	C1	C2
Expected production volume (units)	3000	12000
Diect material costs	RM 32 PER UNIT	RM 40 PER UNIT
Direct labour /unit (rm 15/hour)	RM 30	RM 60

The overheads od citra bhd of RM 972500 can be identified withthree main activities as follows

Order processing	Rm 180000
Machine processing	Rm 650000
Product inspection	Rm 142500

These activities are driven by number of orders processed ,machine hours worked and insoection hours respectively. Datarelevant to these activities are as follows

	C1	C2
Order processed	380	220
Machine hours worked	22000	28000
Inspection hours	3000	12000

Q1A â Assuming the use of direct labour hours to apply overheadsto production, compute the unit manufacturing costs of products C1and C2 if the expected manufacturing volume is attained

Q1B - compute the absorption rates that would be used for orderprocessing, machine processing and product inspection

Q1C â assuming the use of activity based costing compute theunit manufacturing costs of products C1 and C2 if the expectedmanufacturing volume is attained

Q1D â comparing the unit product costs calculated under the twocosts calculated under the two costing systems state which productis overcost and which product is undercost, and how much?Additionally calculate the amount of the cost distortion for eachproduct.

orangehorse534

Listed below are seven technical accounting terms introduced oremphasized in this chapter.

Job Order costing

Overhead application rate

Overapplied overhead

Activity-based costing

Cost driver

Cost of finished goods manufactured

Job cost sheet

Each of the following statements may (or may not) describe thsestechinial terms. For each statment, indicate the term described, oramswer "None" if the statement does not correctly describe any ofthe terms.

a. An activity base that can b etraced directly to unitsproduced and can be used as a denominator in computing an overheadapplication rate.

b. The total of all direct lavor, direct materials andmanufacturing overhead transferred from work in process to finishedgoods.

c. A means of assigning indirect product costs to work inprocess during the period.

d. A debit balance remaining in the Manufacturing Overheadaccount at teh end of the period.

e. The type of cost accounting system likely to be used by aconstruction company.

f. The type of cost accounting method likely to be used foroverhead costs.

carmineplatypus255

ACCT 2200 Chapter Notes - Chapter 3: Accounts Payable, Deferral, Cost Driver

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