Chapter 2 - Managerial Accounting PDF

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Summary

Managerial Accounting...

Description

Job-Order Costing

10/13/2016

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Predetermined Overhead Rate

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This rate is determined at the beginnings of the period so that jobs can be costed throughout the period rather than waiting until the end of the

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period Predetermined Overhead Rate = Estimated Total Manufacturing Overhead Cost ÷ Estimated Total Amount of Allocation

Applying Overhead Cost  Predetermined Overhead Rate x Actual amount of the allocation base used by the job Total Cost Per Unit & Average Cost Per Unit of a Job  Total cost includes the actual direct materials and direct labor costs plus 

the applied overhead Average cost = Total Cost of a Job ÷ Number of Units in the Job

Flow of Costs  Direct material costs are debited to Work in Process when they are 

released for use in production Direct labor costs are debited to Work in Process as “incurred”

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Actual manufacturing overhead costs are debited to Manufacturing

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Overhead as “incurred” Manufacturing overhead costs are applied to Work in Process using predetermined overhead rate (debit Work in Process, credit Manufacturing Overhead)

Under-applied vs. Over-applied Overhead  Under-applied or over-applied overhead is closed out to Cost of Goods 

Sold When overhead is under-applied  balance in Manufacturing Overhead is

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debited to Cost of Goods Sold  Effect: Increases COGS  Occurs because cost assigned to products have been understated When overhead is over-applied  balance in Manufacturing Overhead is credited to Cost of Goods Sold  Effect: Decreases COGS

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Occurs because costs assigned to products have been overstated

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Raw materials used in production = Beginning raw materials in inventory

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+ Purchases of raw materials – Ending raw materials inventory Total Manufacturing Costs = Direct materials + Direct labor +

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Manufacturing overhead applied to work in process Unadjusted COGS = Beginning finished goods inventory + Cost of goods manufactured – Ending finished goods inventory...