mid term

  1. Conversion cost
    The cokmbined cost of direct labor and factory overhead, which is necessary to convert the direct materials into finished goods.
  2. Cost accounting
    includes those parts of financial and management accounting that collect and analyze cost information
  3. factory overhead
    all costs related to the manufacture of a product except directr materials and direct labor; these costs include indirect materials, indirect labor, and other manufacturing expenses, such as depreciation supplies, utilities, maintenance, insurance, and taxes.
  4. finished goods
    the invenory account that represents the total cost incurred in manufacturing goods that are complete but still on hand at the end of the accounting period.
  5. manufacturing (or production) costs
    all costs incurred in the manufacturing process; the costs are classified into three basic elements; direct materials, direct labor, and factory overhead.
  6. prime cost
    the combined costs of direct materials and direct labor incuurred in manufacturing a product.
  7. Backflush costing
    the name for the iaccounting system used with JIT manufacturing. Costs are not "flushed out" of the accounting system until goods are completed and sold.
  8. carry costs
    • the cost incurred as a result of maintaingin (carrying) inventories:
    • materials storage & handling
    • interest
    • insurance & Taxes
    • losses from theft
    • dterrioration or obsolescence
    • record keeping
  9. economic order quanity (EOQ)
    The optimal (most economical) quanity of materials that should be ordred at one time; represents the order size that minimizes total order and carrying costs
    • the square root of
    • 2 x the cost per order X the number of units required annually
    • divided by
    • carry cost per unit
  11. order point
    the point at which an item of inventory should be ordered; occurs when a predetermined minimum level of inventory on hand is reached.
  12. purchase requisition
    prepared by the storeroom keeper, to notify the purchasing agent that additional materials are needed.
  13. incentive wage plan
    a wage plan modified to increase worker productivity by paying a bonus rate per hour when an employee meets or exceeds established production quotas
  14. applied factory overhead
    the account credited when applying estimated overhead to production with the debit to Work in Process. Use of a separate "applied" account avoids confustion with actual overhead costs charged to Factory Overhead, the control account in the general ledger.
  15. high - low method
    a method used to isolate the fixed and variable elements of a semivariable cost; involves comparison of a high volume and its related cost with a low volume and its related cost to determine the variable amount per unit and the fixed element.
  16. high low formula
    • identify the high and the low
    • subtract the low from the high for both untis and costs.

    • costs
    • divided by
    • units
    • variable cost per unit - then subtract the variable cost per unit to find the fixed cost per unit.
  17. machine hour method
    a method of applying factory overhead to production based on the number of machine hours used for a job or process
  18. semi variable costs
    manufacturing costs that are somewhat responsive to changes in production but do not change proportionally with increases or decreases in volume; examples include indirect materials, indirect labor, repairs and maintenance, and power
  19. under and overapplied factory overhead
    an account used to accumulate differences from period to period between actual and applied factory overhead. At the end of the year, the balance in thius account may be closed to Cost of Goods Sold (if the amount is relatively small) or allocated on a pro rata basis to work in process, finished goods and cost of goods sold.
  20. formula for under and overapplied factor overhead when allocating to other accounts
    • add the amounts of the balance in the accounts affected.
    • for example:
    • 35,000 work in process
    • 65,000 finished goods
    • 100,000 cost of goods sold
    • 200,000

    divide 35,000 by 200,000 to get .175, then multiply 200,000 by .175 to get the amount for the WIP account.
  21. formula for machine hour method
    divide the budgeted factory overhead cost by estimated hours of production

    • example
    • $100,000 / 10,000+ $10.00 per machine hour

    • job 100 used $1,000 direct material
    • $3,000 direct labor

    300 machine hours.

    so if the job required 300 machine hours

    • $3000.00 direct labor
    • $1000.00 direct materials
    • $3500.00 (10 X 300)
  22. journalize see pg 34
    • work in process 7200
    • factory overhead 1800
    • materials 9000

    • work in process 8000
    • factory overhead 1400
    • payroll 9400

    • work in process 3200
    • factory overhead 3200

    • finished goods 18400
    • work in process 18400
  23. vacation & holiday pay
    • figure out daily rate
    • figure vacation pay divided by daily rate (use the number of week they are actually getting paid) - (deduct the vacation time)
Card Set
mid term
accounting terms