ACCT $230($Fall $2024)$ Study Guide for Exam $2$

Ch$.4$: Job$-$Order Costing and Overhead Application $($Textbook pp$.148171)$

$1.$ Two types of product costing systems: Process Costing vs$.$ Job$-$Order Costing

$\backslash (\backslash$rightarrow $\backslash )$ How are they different? See the handout!

$2.$ Types of production systems suitable for Job$-$Order Costing $\backslash$& for Process Costing

$\backslash (\backslash$rightarrow $\backslash )$ What are the examples of products whose cost can be computed by job$-$order costing and by process costing?

$3.$ Cost flow under job$-$order costing in a T$-$account system

$-$ Where are DM and DL costs assigned $($added$)$ when they happen? The WIP account!

$-$ Where are all indirect costs accumulated? The MOH account!

$-$ In which account $($also on which side of it$,$ e$.$g$.,$ debit or credit$)$ is COGM recorded?

$-$ How to determine the ending balance of each important account $($e$.$g$.,$ RM$,$ WIP, $\backslash ($ F $/$ G$,$ C O G S$)\backslash )?$

$4.$ How to prepare "Job$-$Order Cost Sheet"?

$-$ Job$-$Order Cost Sheet is the key source document used in Job$-$order costing to determine the total cost of each job, and a subsidiary account to the "Work$-$InProcess" account. $\backslash (\backslash$rightarrow $\backslash )$ Review BE $4-26\backslash$& E $4-44!$

$5.$ How to set a "predetermined overhead rate" and how to use it to compute applied overhead for each job or production? $\backslash (\backslash$rightarrow $\backslash )$ Review BE $4-22\backslash$& E $4-38!$

$-$ Why a "predetermined" overhead rate rather than an "actual" overhead rate?

$-$ What is the difference between "normal costing" and "actual costing"?

$6.$ How to determine the amount of "over$-$applied" or "under$-$applied" overhead?

$-$ Which side of the MOH account $($debit$/$credit$)$ shows "actual overhead" or "applied overhead"?

$-$ How to compute overhead variance?

$\backslash (\backslash$rightarrow $\backslash )$ Overhead Variance $=$ Actual overhead $-$ Applied Overhead

$-$ How to determine whether overhead is over$-$applied or under$-$applied?

Actual overhead $$ Applied overhead $=$ Over$-$applied variance

Actual overhead $>$ Applied overhead $=$ Under$-$applied variance

$-$ How to adjust COGS for either over$-$applied or under$-$applied overhead variance?

If over$-$applied $\backslash (\backslash$rightarrow $\backslash )$ Subtract the overhead variance from COGS.

If under$-$applied $\backslash (\backslash$rightarrow $\backslash )$ Add the overhead variance to COGS.

$\backslash (\backslash$rightarrow $\backslash )$ Review BE $4-23\backslash$& E $4-39!$