Question

Match each term with the explanation.

Averages manufacturing costs across all units produced so that each identical unit bears the same cost Process of dividing the total manufacturing overhead among the jobs produced during the year Used to accumulate direct materials, direct labor and manufacturing overhead allocated to a job Predetermined manufacturing overhead rate multiplied by actual amount of allocation base used by job Account credited when recording the use of direct labor on jobs Account credited when finished goods are sold Actual manufacturing overhead is less than the amount of manufacturing overhead allocated to jobs Account debited when finished goods are sold Total job cost divided by the number of units Materials used in the manufacturing plant that cannot be traced to individual jobs Debited for the amount of indirect materials requisitioned for jobs Manufacturing overhead allocated is less than the actual manufacturing overhead Total estimated manufacturing overhead costs divided by total estimated amount of allocation base Account debited when raw materials are purchased Used by companies that produce unique, custom ordered products, or small batches of different products Records the time spent by each employee on each job he or she worked on throughout the day Debited for the amount of direct materials requisitioned for a job Cost + Markup on cost

1. Process costing 2. Job costing 3. Job cost record 4. Labor time record 5. Allocation of manufacturing overhead 6. Predetermined overhead rate 7. Calculation of Manufacturing overhead allocated to a job 8. Cost-plus pricing 9. Over-allocated manufacturing overhead 10. Under-allocated manufacturing overhead 11. Indirect materials 12. Manufacturing Overhead account 13. Work in Process Inventory account 14. Cost of each unit for a job 15. Cost of Goods Sold 16. Finished goods inventory 17. Wages Payable 18. Raw materials inventory

Answer 1

1. Process Costing -Averages manufacturing costs across all units produced so that each identical unit bears the same cost

Reason-This is used by companies that produce extremely large number of identical units through a series of uniform production steps or processes because each unit is identical ,each unit should cost the same to make

2. Job Costing-Used by companies that produce unique, custom ordered products, or small batches of different products

Reason:This is used by companies that produce unique, custom-ordered products, or relatively small batches of different products. Each unique product is considered a separate job.

3. Job cost record-Used to accumulate direct materials, direct labor and manufacturing overhead allocated to a job

Reason: Each job has its own job cost record. This is merely a form for keeping track of three manufacturing costs associated with each job.This record also shows the number of units produced on the job, as well as the cost per unit.

4. Labor time record-Records the time spent by each employee on each job he or she worked on throughout the day

Reason: All the direct laborers in the factory fill this record which shows simply records the time spent by each employee on each job he or she worked on throughout the day

5. Allocation of manufacturing overhead-Total estimated manufacturing overhead costs divided by total estimated amount of allocation base.

Reason:Manufacturing overhead costs are divided by the allocation base to determine the amount of manufacturing overhead that should be assigned to each unit of production

6. Predetermined overhead rate-Process of dividing the total manufacturing overhead among the jobs produced during the year

Reason:A Predetermined overhead rate is the rate used to apply manufacturing overhead to work-in-process inventory. The predetermined overhead rate is calculated before the period begins.

7. Calculation of Manufacturing overhead allocated to a job- Predetermined manufacturing overhead rate multiplied by actual amount of allocation base used by job

Reason: Add up total overhead then Compute the overhead allocation rate by dividing total overhead by the number of direct labor hours and lastly Apply overhead by multiplying the overhead allocation rate by the number of direct labor hours needed to make each product.

8. Cost-plus pricing-Cost+Markup on cost

Reason-This is used to determine a bid price for custom jobs. This involves taking the cost of the job and add a markup to help cover operating expenses and generate a profit.

9. Over-allocated manufacturing overhead-Actual manufacturing overhead is less than the amount of manufacturing overhead allocated to jobs

Reason: If the manufacturing overhead cost applied to work in process is more than the manufacturing overhead cost actually incurred during a period, the difference is known as over-applied manufacturing overhead.

10.Under allocated manufacturing overheads-

Manufacturing overhead allocated is less than the actual manufacturing overhead

Reason: if the manufacturing overhead cost applied to work in process is less than the manufacturing overhead cost actually incurred during a period, the difference is known as under-applied manufacturing overhead.

11.Indirect Materials-Materials used in the manufacturing plant that cannot be traced to individual jobs

Reason: Indirect materials are materials used in the production process, but which cannot be linked to a specific product or job

13. Work in process inventory account

When the materials are transferred to the factory floor, they are considered as WIP inventory which consists of all products that are part way through the production process.

14. Cost of each unit of job-Total job cost/number of units

Reason:In order to determine the total manufacturing cost per unit, you simply need to divide your total manifesting costs by the total number of units produced during a given period.

15. Cost of good sold

When the products are shipped to customers, the cost of manufacturing those products become COGS on the company’s income statement.

16. Finished goods inventory

As soon as the manufacturing process is complete, the products are moved out of the factory and into “this term”,storage area, or warehouse where they await sale and shipment to a customer.

18. Raw material inventory-Account debited when raw materials are purchased

Reason-Maintained in a storeroom, near the factory until the materials are needed in production.