Question

Terms:

overhead application rate

manufacturing overhead

cost of goods sold

cost of finished goods manufactured

cost accounting

managerial accounting

work in process inventory

period costs

product costs

Each of the following statements may (or may not) describe one of these technical terms. For each statement, indicate the accounting term, described, or answer "None" if the statement does not correctly describe any of the items.

a.) a manufacturing cost that can be traced conveniently and directly into manufactured units of product.

b.) the techniques and procedures used in determining the cost of manufacturing a specific product or performing a particular type of business activity.

c.) the account debited at the time that the manufacturing overhead account is credited

d.) the amount transferred from the work in process inventory account to the finished goods inventory account

e.) costs that are debited directly to expense accounts when the costs are incurred

f) the preparation and use of accounting information designed to assist managers to planning and controlling the operations of a business.

g) all manufacturing costs other than direct materials used and direct labor

h) a means of assigning indirect manufacturing costs to work in process during the period

Answer 1

(a). Product costs

Explanation;

Period costs are those costs that can be traced conveniently and directly into manufactured units of product. These costs include direct material, direct labor etc.

(b). Cost accounting

Explanation;

Cost accounting is consisted of all those techniques and procedures that are used in determining the cost of manufacturing a specific product or performing a particular type of business activity.

(c). Work in process inventory

Explanation;

Work in process inventory account must be debited when manufacturing overhead account is credited

(d). Cost of finished goods manufactured

Explanation;

We need to transfer all direct labor costs, direct materials costs, manufacturing overhead costs from work in process to cost of goods manufactured.

(e). Period costs

Explanation;

Period costs are debited directly to expense accounts at the time of incurred of costs.

(f). Managerial accounting

Explanation;

Managerial accounting is basically helpful to the managers and it provides accounting information to the managers in such a way so that decisions can be made easily.

(g). Manufacturing overhead

Explanation;

As we know that manufacturing cost is consisted of direct materials, direct labor and manufacturig overheads.

(h). Overhead application rate

Explanation;

Overhead application rate is a means of assigning indirect manufacturing costs to work in process during the period.