Ch. 2
A component of the value chain, starting with the letter D
Distribution
When a company has anticipated above what is necessary for yearly manufacturing overhead
Over allocation
When some products are over costed and others are under costed
Cost distortion
A component of the value chain, starting with the letter R
Research & Development
Method used when each job is unique among its procedures/labor costs/materials used
Job costing
Situations in which ABC would be used
When a company has varying cost pools, notably when one is much more costly than the rest.
Types of inventory a manufacturing company has
Formula to solve for over/under allocation of manufacturing overhead
Estimated manufacturing overhead / estimated allocation base, multiplied by actual allocation base for the year.
The ABC job costing formula
DM + DL + MOH, for each cost pool
Accounting treatment for period costs
Expense in the period incurred as Operating Expenses on the income statement
Formula for finding total job cost
DM + DL + MOH
Companies with high risk of cost distortion
Companies that produce multiple different products that use different resources, companies that produce high volumes of some products and low volumes of others
Accounting treatment for product costs
Two accounts impacted by job costing
Inventory accounts on the balance sheet (WIP and finished goods) and cost of goods sold on income statement
Cost to fix/rework poor quality products before they leave the warehouse
Internal failure cost