Cost Accounting – 12^th Edition

Ch 4 Terms

Actual costing – cost incurred (a historical cost), as distinguished from a budgeted or forecasted cost

Adjusted allocation-rate approach – restates all overhead entries in the general ledger and subsidiary ledgers using actual cost rates rather than budgeted cost rates.

Budgeted indirect-cost rate – budgeted annual indirect cost in a cost pool divided by the budgeted annual quantity of the cost allocation base

Cost-allocation base – a factor that links in a systematic way an indirect cost or group of indirect costs to a cost object

Cost-application base – cost-allocation base when the cost object is a job product or customer

Cost pool – a grouping of individual cost items

Indirect-cost rate – total overhead costs in a cost pool divided by the total quantity of the cost-allocation base for that cost pool

Job – a unit or multiple units of a distinct product or service

Job-cost record – source document that records and accumulates all the costs assigned to a specific job, starting when work begins. Also called job-cost sheet

Job-cost sheet – see job cost record

Job-costing system – costing system in which the cost object is a unit or multiple units of a distinct product or service called a job

Labor-time record – source document that contains information about the labor time used on a specific job and in a specific department

Manufacturing overhead allocated – indirect manufacturing costs allocated to a job, product, or service based on the budgeted rate multiplied by the actual quantity used of the cost-allocation base

Manufacturing overhead applied – see manufacturing overhead allocated

Materials-requisition record – source document that contains information about the cost of direct materials used on a specific job and in a specific department

Normal costing – a costing method that traces direct costs to a cost object by using the actual direct cost rates times the actual quantity of the direct cost inputs and allocates indirect costs based on the budgeted indirect cost rates times the actual quantity of the cost allocation bases

Over absorbed indirect costs – see over allocated indirect costs

Over allocated indirect costs – allocated amount of indirect costs in an accounting period is greater that the actual (incurred) amount in that period.

Over applied indirect costs - see over allocated indirect costs

Process-costing system – costing system in which the cost object is masses of identical or similar units of a product or service

Proration – the spreading of under allocated or over allocated overhead among ending work in process, finished goods, and cost of goods sold

Source document – an original record that supports journal entries in an accounting system

Under absorbed indirect costs – see under allocated indirect costs

Under allocated indirect costs – allocated amount of indirect costs in an accounting period is less than the actual (incurred) amount in that period

Under applied indirect costs - see under allocated indirect costs