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What is a Cost Pool?
A Cost pool is a grouping of individual indirect cost items.Can range from broad: all manufacturing plant coststo narrow: costs of operating certain machines TERM 2
What is Cost-Allocation
Base?
DEFINITION 2 Cost Allocation Base is a systemic way to link an indirect cost to cost objectsIt is a cost driver of indirect costsEX: amount of machine hours related to indirect machine operations TERM 3
What is an example of using Cost-Allocation
Base?
DEFINITION 3 There is $500,000 allocated to indirect machine operations and these machines operated for a total of 50,000 hours. This means the cost allocation base is the 50,000 hours TERM 4
What is an example of Cost Allocation Rate?
DEFINITION 4 There is $500,000 allocated to indirect machine operations and these machines operated for a total of 50,000 hours. This means the cost allocation rate is $10/machine hour operation TERM 5
What is a Job-costing
System?
DEFINITION 5 In this system, cost objects are units or multiple units of a distinct product/service called a job.Each job is distinct and uses a different number of certain cost objects (resources)
What is a Process-costing System?
In this system, a cost object is masses of identical or similar units of a product or service.In this system the company divides total costs of production by the total number of units produced to get the per-unit cost (it is an average) TERM 7
Difference between Process-costing and Job-
costing?
DEFINITION 7 Process-costing is when a company takes the total number of units produced and divides it into the total cost to find cost per unitJob-costing is when a company takes cost objects and classifies them into certain jobs that are all unique of each other. Because no job is the same as another. TERM 8
What is focused on in Chapter 4? Job-costing?
or Process-costing?
DEFINITION 8 Job Costing TERM 9
What 5 steps are used in Decision-
making?
DEFINITION 9
- Identify the Problems and uncertainties2) Obtain information3) Make predictions about the future4) Make decisions by choosing among alternatives5) Implement the decision, evaluate performance, and learn TERM 10
What are the two forms of Job-
costing?
DEFINITION 10
- Actual Costing2) Normal Costing
How is Actual Manufacturing OH rate found?
Why is this not used very often?
Actual annual manufacturing OH costs / Actual Annual quantity of the cost-allocation baseThis is not used very often because it means company's would have to wait until the end of the period to figure out the actual annual manufacturing OH costs and the Actual annual quantity of the cost- allocation base TERM 17
What does it mean when an Account has the
word "Control" in the title?
DEFINITION 17 It means these accounts have underlying subsidiary ledgers that contain additional details. TERM 18
What are Underallocated Costs?
DEFINITION 18 when allocated amount of indirect costs in an accounting period is less than the actual amount TERM 19
What are Overallocated Costs?
DEFINITION 19 when allocated amount of indirect costs in an accounting period is more than the actual amount TERM 20
What is the Adjusted Allocation-rate
Approach?
DEFINITION 20 This is when the actual OH rate is found and all jobs are recalculated at the end of the year to find actual costs instead of normal costs and if the costs were underallocated or overallocated
What is
Proration?
Proration spreads under/over allocated overhead among ending WIP inventory, FG inventory, and CoGS
