A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs.
Absorption costing
A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects.
Allocation base
A document that shows the quantity of each type of direct material required to make a product.
Bill of materials
A factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs.
Cost driver (type of allocation base)
A pricing method in which a predetermined markup is applied to a cost base to determine the target selling price.
Cost-plus pricing
A form that records the direct materials, direct labor, and manufacturing overhead cost charged to a job.
Job cost sheet
A costing system used in situations where many different products, jobs, or services are produced each period.
Job-order costing
A document that specifies the type and quantity of materials to be drawn from the storeroom and that identifies the job that will be charged for the cost of those materials.
Materials requisition form
A costing system with multiple overhead cost pools and a different POHR for each cost pool, rather than a single POHR for the entire company. Each production department may be treated as a separate overhead cost pool.
Multiple predetermined overhead rates
A costing system in which overhead costs are applied to a job by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job.
Normal cost system
The process of assigning overhead cost to specific jobs.
Overhead application OR applying overhead
A single predetermined overhead rate that is used throughout a plant.
Plantwide overhead rate
A rate used to charge MOH cost to jobs that is established in advance for each period. It is computed by dividing the estimated total MOH cost for the period by the estimated total amount of the allocation base for the period.
Predetermined overhead rate (POHR)
A document that is used to record the amount of time an employee spends on various activities.
Time ticket
