disc 2-10

Used in externally reported financial statements; follows GAAP

• Absorption Costing

• Job Order Costing

• Variable Cost

• Fixed Cost

ALL manufacturing/product/inventoriable costs (DM, DL + MOH) are product costs, regardless of cost behavior (variable/fixed). Costs are stored/CAPITALIZED in inventory accounts (RM to WIP to FG) until they are sold (moved to COGS IS).

• Absorption Costs

• Job Order Costs

• Activity Based Costs

• Inventory Cost

Cost of Goods Manufactured journal entry

• Dr. Finished Goods

  Cr. WIP

• Dr. WIP

  Cr. Finished Goods

• Dr. Raw Materials

  Cr. WIP

• Dr. Finished Goods

  Cr. Raw Materials

Type of absorption cost. How product costs are organized when a company manufactures unique products for each order.  Accounting for each unique customer order by tracking and tracing each order’s manufacturing costs (DM, DL, MOH) to an individual Work in Process subsidiary account.

• job order costing

• period costs

• manufacturing overhead

• preferred costs

A large portion of product costs are...

• direct

• indirect

Are not CAUSED by or DRIVEN by a specific/particular activity OR difficult to track their causation to individual products

• direct cost

• indirect cost

Overly simplified and not very accurate if a company produces many different types of inventory

• Single, plantwide, predetermined overhead rate

• Multiple Predetermined Overhead rates

• Activity Based Costing

• Departmental Overhead Rates

Total estimated MOH $ for the period / Total estimated activity or cost driver for the period =

• POHR

• MOH Applied

• Cost of Goods Manufactured

• activity costs

POHR * Actual Activity incurred =

• MOH applied

• Cost of goods manufactured

• production costs

• period costs

More accurate; attempts to be more in line with how an organization actually uses up resources; as closely linked to activity or cost drivers as possible

• Single, plantwide, predetermined overhead rate

• Multiple Predetermined Overhead rates

• Activity Based Costing

• Departmental Overhead Rates