Chapter 3 Absorption Costing all manufacturing costs are absorbed by the units produced also called full costing meaning the finished unit includes direct materials labor and manufacturing overhead The U S and other countries require this for financial and tax reports it is the most common costing Job Order Costing Situation where many different products are produced each period ex Levi s Job order of a certain type of these many products ex bootcut mens jean Find the cost traced to the job divide by number of units in job average cost per unit Bill of Materials document that lists the type and quantity of each type of direct material needed to complete a unit of product Materials Requisition Form type and quantity of materials to be drawn from storageroom and tells the job that will be charged for the cost of the materials Job Cost Sheet records the materials labor and manufacturing overhead costs to that job after direct materials are issued the cost of these materials are automatically recorded on this Time Ticket hour by hour summary of employee s activities throughout the day Manufacturing overhead needs to be recorded on the job cost sheet this is difficult though because it is an indirect cost and because of fixed costs included in them they tend to stay relatively constant from one period to the next regardless of how many units were produced Allocation Base measure used to assign overhead costs to products and services most common are direct labor hours DLH direct labor cost machine hours MH and units of product Normal Cost System applies overhead to jobs by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the jobs above Cost Driver a factor that causes overhead costs ex machine hours beds occupied computer time etc Raw Materials any materials that go into the finished product when they are used in production their costs are transferred to the Work in Progress inventory account as direct materials
View Full Document
Unlocking...