Chapter 2 notes

production activities of customized product

production of more than one customized unit

Records manufacturing activities usually using perpetual system and Provides timely information about inventories and manufacturing cost per unit

An accounting system for manufacturing activities that accumulates production costs and assigns them to products and services

costs assigned to each unique unit or batch of units

Basic type of cost accounting that is used to determine the cost of producing each job or job lot

Job lots and Jobs

beginning of the period, so once all costs are transferred to finished goods

actual cost exceed applied cost, overhead balance is a debit

applied cost exceed actual cost, overhead balance is a credit

Dr. Cost of Goods Sold Cr. Factory Overhead

Dr. Factory Overhead Cr. Cost of Goods Sold

customization of products to customers specific requests

Step1: predict cost to complete job; job initiated by customer order Step 2: negotiate price and decide whether to pursue the job; cost-plus contracts, market determines rates, or target cost Step 3: Schedule job production: company assess capacity to meet customer’s needs and orders raw material to begin production

expected selling price-desired profit

find ways to reduce job cost

information about raw materials, overhead cost, jobs in process, finished goods, etc

Materials are purchased from suppliers and then issued for use in production

Temporary account for ALL payroll costs to then be allocated to jobs and overhead

• Indirect materials

• Indirect labor

• Payments for supplies and utilities

• Adjusting entries like depreciation

predicted in advance and assigned to jobs at a predetermined overhead rate

estimated overhead costs/ estimated activity base

actual activity base amounts

Time cards --> direct/indirect cost --> job cost sheets/Factory Overhead