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Key Terms

  • Job Order Costing: Costing system that accumulates costs for each individual job
  • Process Costing: Costing system used for identical products produced in large quantities
  • Direct Materials: Raw materials that become part of the product and can be traced to jobs
  • Direct Labor: Labor cost of employees who work directly on products
  • Manufacturing Overhead: All manufacturing costs that cannot be easily traced to jobs
  • Job Cost Sheet: Document that accumulates all costs for a specific job
  • Work in Process: Inventory account for partially completed jobs
  • Finished Goods: Inventory account for completed jobs not yet sold
  • Raw Materials Inventory: Inventory account for materials not yet used
  • Predetermined Overhead Rate: Estimated overhead rate used to apply overhead to jobs
  • Applied Overhead: Overhead allocated to jobs using predetermined rate
  • Actual Overhead: Real overhead costs incurred during the period
  • Underapplied Overhead: When actual overhead exceeds applied overhead
  • Overapplied Overhead: When applied overhead exceeds actual overhead
  • Activity Base: Measure used to allocate overhead (labor hours, labor cost, machine hours)
  • Cost of Goods Sold: Cost of jobs/products sold to customers
  • Job: Specific order, project, or batch of products