HDFRIChapter4Solutions13e - CHAPTER 4 JOB COSTING 4-1 Cost...

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CHAPTER 4JOB COSTING4-1Cost pool––a grouping of individual cost items.Cost tracing––the assigning of direct costs to the chosen cost object.Cost allocation––the assigning of indirect costs to the chosen cost object.Cost-allocation base––a factor that links in a systematic way an indirect cost or group ofindirect costs to a cost object.4-2In ajob-costing system,costs are assigned to a distinct unit, batch, or lot of a product orservice. In aprocess-costing system,the cost of a product or service is obtained by using broadaverages to assign costs to masses of identical or similar units.4-4The seven steps in job costing are: (1) identify the job that is the chosen cost object, (2)identify the direct costs of the job, (3) select the cost-allocation bases to use for allocatingindirect costs to the job, (4) identify the indirect costs associated with each cost-allocation base,(5) compute the rate per unit of each cost-allocation base used to allocate indirect costs to thejob, (6) compute the indirect costs allocated to the job, and (7) compute the total cost of the jobby adding all direct and indirect costs assigned to the job.4-6Three major source documents used in job-costing systems are (1) job cost record or jobcost sheet, a document that records and accumulates all costs assigned to a specific job, startingwhen work begins (2) materials requisition record, a document that contains information aboutthe cost of direct materials used on a specific job and in a specific department; and (3) labor-timerecord, a document that contains information about the labor time used on a specific job and in aspecific department.4-8Two reasons for using an annual budget period area.The numerator reason––the longer the time period, the less the influence of seasonalpatterns, andb.The denominator reason––the longer the time period, the less the effect of variations inoutput levels on the allocation of fixed costs.4-9Actual costing and normal costing differ in their use of actual or budgeted indirect cost rates:ActualCostingNormalCostingDirect-cost ratesIndirect-cost ratesActual ratesActual ratesActual ratesBudgeted ratesEach costing method uses the actual quantity of the direct-cost input and the actual quantity ofthe cost-allocation base.4-13Alternative ways to make end-of-period adjustments for underallocated or overallocatedoverhead are as follows:(i)Proration based on the total amount of indirect costs allocated (before proration) inthe ending balances of work in process, finished goods, and cost of goods sold.(ii)Proration based on total ending balances (before proration) in work in process,finished goods, and cost of goods sold.4-1
(iii)Year-end write-off to Cost of Goods Sold.

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Term
Spring
Professor
jamesswanson
Tags
Cost Accounting, Finished Goods, Manufacturing Overhead Records

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