MANAGERIAL ACCOUNTING – 12th Edition

CH 3 TERMS

Absorption costing – A costing method that includes all manufacturing costs – direct materials, direct labor, and both variable and fixed overhead – as part of the cost of a product. (This term is synonymous of full cost)

Allocation base – A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects.

Bill of materials – A document that shows the type and quantity of each major item of materials required to make a product.

Cost driver – A factor, such as machine-hours, beds occupied, computer time, or flight-hours, that cause over-head costs.

Full cost – See Absorption costing.

Job cost sheet – A form prepared for each job that records the materials, labor, and overhead costs charged to the job.

Job-order costing system – A costing system used in situations where many different product s, jobs, or services are produced each period.

Material requisition form – A detailed source document that specifies the type and quantity of materials that are to be drawn from the storeroom and identifies the job to which the cost of materials are to be charged.

Multiple predetermined overhead rates – A costing system in which there are multiple overhead cost pools with a different predetermined rate for each cost pool, rather than a single predetermined overhead for the entire company.

Normal cost system – A costing system in which overhead costs are applied to jobs by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job.

Overapplied overhead – A credit balance in the manufacturing overhead account that occurs when the amount of overhead cost applied to Work in Process is greater than the amount of overhead cost actually incurred during a period.

Overhead application – The process of charging manufacturing overhead cost to job cost sheets and to the Work in Process account.

Plantwide overhead rate – A single predetermined overhead rate that is used throughout a plant.

Predetermined overhead rate – A rate used to charge overhead cost to a job; the rate is established in advance for each period using estimates of total manufacturing overhead cost and of the total allocation base for the period.

Process costing system – A costing system used in situations where a single, homogeneous product (such as cement or flour) is produced for long periods of time.

Time Ticket – A detailed source document that is used to record the amount of time an employee spends on various activities.

Underapplied Overhead – A debit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost actually incurred is greater than the amount of overhead cost applied to Work in Process during a period.