Chapter 3Absorption 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 costingJob Order Costing: Situation where many different products are produced each period ex: Levi’sJob: order of a certain type of these many products ex: bootcut mens jeanFind the cost traced to the job, divide by number of units in job = average cost per unitBill of Materials: document that lists the type and quantity of each type of direct material needed to complete a unit of productMaterials 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 thisTime Ticket: hour-by-hour summary of employee’s activities throughout the dayManufacturing 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 productNormal 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
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