ACCTG 231 – 1st Edition Lecture 5 Outline of Last Lecture I. Job-order CostingII. Allocation Basea. Manufacturing Overheadb. Predetermined Overhead RateOutline of Current Lecture I. Job-order Costing: The Flow of CostsII. Under-applied/Over-applied OverheadCurrent Lecture- Key Definitions:o Raw Materials: Includes any materials that go into the final product.o Work-in-process: Consists of units of production that are only partially complete and will require further work before they are ready for sale to customers.o Finished goods: Consists of completed units of product that have not been sold to customers.o Cost of goods manufactured: Includes the manufacturing costs associated with the goods that were finished during the period.The Flow of Costs:- The transactions (in T-account and journal entry form) that capture the flow of costs in a job-order costing system are illustrated on the following slides.These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- Accounting for Nonmanufacturing Cost:o Nonmanufacturing costs are not assigned to individual jobs, rather they are expensed in the period incurred.- Schedule of Cost of Goods Manufactured: o This schedule contains three costs, namely direct materials, direct labor, and manufacturing overhead. It calculates the cost of raw material and direct labor used in production and the amount of manufacturing overhead applied to production. It calculates the manufacturing costs associated with goods that were finished during the period.- Product Cost Flows:o As items are removed from raw materials inventory and placed into the production process, they are called direct materials.o Conversion costs are costs incurred to convert the direct material into a finished product.o All manufacturing costs added to production during the period are added to the beginning balance of work-in-process.o Costs associated with the goods that are completed during the period are transferred to finished goods inventory.Under-applied and Over-applied Overhead:- The difference between the overhead cost applied to Work-In-Process and the actual overhead costs of a period is referred to as either under-applied or over-applied overhead. Underapplied overhead exists when theamount of overhead applied to jobs duringthe period using the predeterminedoverhead rate is less than the total amount ofoverhead actually incurred during the period.Overapplied overhead exists when theamount of overhead applied to jobs duringthe period using the predeterminedoverhead rate is greater than the totalamount of overhead actually incurred duringthe