Chapters 16, 17, 18, 19, 20, 25, 22
MAC1
Gerbers AAD, Dion
Hanzehogeschool
, MAC chapter
Direct cost: cost directly traceable to the cost object
indirect cost: cost that you cannot directly trace to 1 specific product (electricity, rent)
Job order costing: an accounting system that
collects costs per job
Used by companies that manufacture unique products.
Process costing: an accounting system that
collects costs per process
Used by companies that manufacture identical products.
Job cost record: a document that shows the direct materials, direct labor, and
manufacturing overhead costs for an individual job
(Overhead expenses (costs): all costs on the income statement except for direct labor,
direct materials, and direct expenses.
Overhead expenses include accounting fees, advertising, insurance)
Materials requisition: request for the transfer of raw materials to the production floor
Direct materials: materials that you can easily and cost-effectively trace directly to the
finished product
Labor time record: a record used to assign direct labor cost to specific jobs
p. for what purpose are these calculations and how do they work?
Predetermined overhead allocation rate: estimated overhead cost per unit of the
allocation base, calculated at the beginning of the accounting period.
Total estimated overhead costs / total estimated quantity of the overhead allocation base
Allocation base: it links indirect costs to cost objects
Cost driver: primary factor that causes a cost to increase or decrease
For example: the cost of electricity increases when you use a machine more often, therefor
the cost driver for electricity is the amount of machine usage and the allocation base is the
machine hours (number of hours the machine runs)
The higher the quantity of the allocation base, the higher the overhead costs
The predetermined overhead allocation rate is based on 2 factors:
Total estimated overhead costs for the period
Total estimated quantity of the overhead allocation base
Allocated manufacturing = predetermined overhead allocation rate x actual quantity of
the allocation base used by each job
Over-allocated overhead: when the overhead is lower than expected
Under-allocated overhead: when the overhead is higher than expected
the next step is
1
MAC1
Gerbers AAD, Dion
Hanzehogeschool
, MAC chapter
Direct cost: cost directly traceable to the cost object
indirect cost: cost that you cannot directly trace to 1 specific product (electricity, rent)
Job order costing: an accounting system that
collects costs per job
Used by companies that manufacture unique products.
Process costing: an accounting system that
collects costs per process
Used by companies that manufacture identical products.
Job cost record: a document that shows the direct materials, direct labor, and
manufacturing overhead costs for an individual job
(Overhead expenses (costs): all costs on the income statement except for direct labor,
direct materials, and direct expenses.
Overhead expenses include accounting fees, advertising, insurance)
Materials requisition: request for the transfer of raw materials to the production floor
Direct materials: materials that you can easily and cost-effectively trace directly to the
finished product
Labor time record: a record used to assign direct labor cost to specific jobs
p. for what purpose are these calculations and how do they work?
Predetermined overhead allocation rate: estimated overhead cost per unit of the
allocation base, calculated at the beginning of the accounting period.
Total estimated overhead costs / total estimated quantity of the overhead allocation base
Allocation base: it links indirect costs to cost objects
Cost driver: primary factor that causes a cost to increase or decrease
For example: the cost of electricity increases when you use a machine more often, therefor
the cost driver for electricity is the amount of machine usage and the allocation base is the
machine hours (number of hours the machine runs)
The higher the quantity of the allocation base, the higher the overhead costs
The predetermined overhead allocation rate is based on 2 factors:
Total estimated overhead costs for the period
Total estimated quantity of the overhead allocation base
Allocated manufacturing = predetermined overhead allocation rate x actual quantity of
the allocation base used by each job
Over-allocated overhead: when the overhead is lower than expected
Under-allocated overhead: when the overhead is higher than expected
the next step is
1
