Managerial accounting Charles E. Davis Elizabeth Davis PRODUCT COSTS AND JOB ORDER COSTING SYSTEM

Product and Period Costs Product Cost Flows Job Order Costing Under applied and Over applied Manufacturing Overhead

Product and Period Costs Why do managers need to understand product and period costs? What is a product cost? Give three specific examples (not categories) that are not mentioned in the chapter. What is a period cost? Give three specific examples (not categories) that are not mentioned in the chapter. Describe the three major categories of product costs. Why are some raw materials costs and some labor costs treated as manufacturing overhead? What are those components of manufacturing overhead called?

Product Cost Flows Refer to the T-accounts in Exhibit 4-18. Answer the following questions in words, not numbers. What increases Raw Materials Inventory? What decreases Raw Materials Inventory? What increases Work in Process Inventory? What decreases Work in Process Inventory? What increases Finished Goods Inventory? What decreases Finished Goods Inventory? What increases Manufacturing Overhead? What decreases Manufacturing Overhead? What increases Cost of Goods Sold? What is the cost of goods manufactured? How does it differ from total manufacturing cost?

Job Order Costing Why must overhead be applied instead of traced to specific jobs? How is the predetermined overhead rate calculated? When is the predetermined overhead rate calculated? Why do some companies prefer to use predetermined overhead rates instead of waiting for the actual rates? Give three reasons. How are job cost sheets used to determine the Work in Process account balance at any particular time? How would an attorney use job order costing?

Underapplied and Overapplied Manufacturing Overhead Why do companies that use job order costing have under- and overapplied overhead? What two methods can companies use to dispose of under- and overapplied overhead?