Finance and accountng Chapter 17 samenvatng
LO17-1 Explain the purpose of cost accountnn systems
Cost accountng ssstems provide informaton useful for managing the actvites that consume
resources. Managers use the informaton to evaluate and reward emplosee performance. In
additon, the cost informaton is reported on external inancial statements as, inventories, cost of
goods sold and period expenses.
Cost accountnn systems The methods and techniques used bs enterprises to track resources
consumed in creatng and delivering products and services to
customers
LO17-2 Identfy the processes for creatnn noods and seriices that are suited to boc costnn
Job order costng methods are appropriate for companies that product customized jobs that require
differing amounts and tspes of direct labour, direct materials, and overhead.
Job order costnn A cost accountng method under which the focal point of costng is a
quantts of product known as a job or lot. Costs of direct materials,
direct labour, and manufacturing overhead applicable to each job
are accomplished to arrive at average units cost.
LO17-3 Explain the purpose and computaton of oierhead applicaton rates for boc order costnng
An overhead applicaton rate is a device used to assign appropriate amounts of overhead costs to
speciic services, products, or jobs that are in progress. The overhead applicaton rate expresses the
relaton between the overhead costs and some actvits base that can be used to trace costs directls
to each speciic job. An overhead applicaton rate is computed bs dividing the expected amounts of
actvits (for example, machineshhours, labor hours, etc.)e related to the actvits base.
The predetermined overhead rate (POHR)e used to appls overhead to jobs is determined before the
period begins.
estimated total manufacturing overhead
POHR=
e stimated total units∈the activity base
total overhead applied=POHR x Actual activity
Overhead Applicaton ate A device to appls a normal amount of overhead costs to work in
process. The rate is predetermined at the beginning of the sear and
expresses the percentage relatonship between estmated total
overhead of the sear and the estmated total of some cost driver,
such as direct labour hours, direct labour costs, or machinehhours.
Use of the overhead applicaton rate causes overhead to be charged
to work in process in proporton to the amount of ‘cost driver’
traceable to those units.
Predetermined overhead The rate used to appls manufacturing overhead costs to products or
rate jobs order
Actvity-based costnn Costs accountng method that tracks indirect costs to the actvites
that consume resources.
Cost driver An actvits base that can be traces directls to units produced and
that can be used a denominator on computng an overhead
applicaton rate (e.g. machines hours incurred during the period,
direct labour hours)e
LO17-1 Explain the purpose of cost accountnn systems
Cost accountng ssstems provide informaton useful for managing the actvites that consume
resources. Managers use the informaton to evaluate and reward emplosee performance. In
additon, the cost informaton is reported on external inancial statements as, inventories, cost of
goods sold and period expenses.
Cost accountnn systems The methods and techniques used bs enterprises to track resources
consumed in creatng and delivering products and services to
customers
LO17-2 Identfy the processes for creatnn noods and seriices that are suited to boc costnn
Job order costng methods are appropriate for companies that product customized jobs that require
differing amounts and tspes of direct labour, direct materials, and overhead.
Job order costnn A cost accountng method under which the focal point of costng is a
quantts of product known as a job or lot. Costs of direct materials,
direct labour, and manufacturing overhead applicable to each job
are accomplished to arrive at average units cost.
LO17-3 Explain the purpose and computaton of oierhead applicaton rates for boc order costnng
An overhead applicaton rate is a device used to assign appropriate amounts of overhead costs to
speciic services, products, or jobs that are in progress. The overhead applicaton rate expresses the
relaton between the overhead costs and some actvits base that can be used to trace costs directls
to each speciic job. An overhead applicaton rate is computed bs dividing the expected amounts of
actvits (for example, machineshhours, labor hours, etc.)e related to the actvits base.
The predetermined overhead rate (POHR)e used to appls overhead to jobs is determined before the
period begins.
estimated total manufacturing overhead
POHR=
e stimated total units∈the activity base
total overhead applied=POHR x Actual activity
Overhead Applicaton ate A device to appls a normal amount of overhead costs to work in
process. The rate is predetermined at the beginning of the sear and
expresses the percentage relatonship between estmated total
overhead of the sear and the estmated total of some cost driver,
such as direct labour hours, direct labour costs, or machinehhours.
Use of the overhead applicaton rate causes overhead to be charged
to work in process in proporton to the amount of ‘cost driver’
traceable to those units.
Predetermined overhead The rate used to appls manufacturing overhead costs to products or
rate jobs order
Actvity-based costnn Costs accountng method that tracks indirect costs to the actvites
that consume resources.
Cost driver An actvits base that can be traces directls to units produced and
that can be used a denominator on computng an overhead
applicaton rate (e.g. machines hours incurred during the period,
direct labour hours)e
