Learning Objectives

After studying Chapter 2, you should be able to:

1

Distinguish between process costing and job-order costing and identify companies that would use each costing method.

2

Identify the documents used in a job-order costing system.

3

Compute predetermined overhead rates and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process.

4

Prepare journal entries to record costs in a job-order costing system.

5

Apply overhead cost to Work in Process using a predetermined overhead rate.

6

Prepare T-accounts to show the flow of costs in a job-order costing system and prepare schedules of cost of goods manufactured and cost of goods sold.

7

Compute under- or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts.

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