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8/8/2019 13632 Session 2-Job Costing
1/17
McGraw-Hill/Irwin
33--11
Job Costing
ch3
8/8/2019 13632 Session 2-Job Costing
2/17
McGraw-Hill/Irwin
33--22
Product and Service Costing
FinancialAccounting
Product costs areused to valueinventory and tocompute cost of
goods sold.
ManagerialAccounting and
Cost Management
Product costs areused for planning,
control, directing, andmanagement decision
making.
8/8/2019 13632 Session 2-Job Costing
3/17
McGraw-Hill/Irwin
33--33Accumulating Costs in a
Job-Order / Batch Costing
System
THE JOB
or Batch
Direct
materials
Directlabor
Manufacturingoverhead (OH)
Applied to eachjob using a
predeterminedrate
8/8/2019 13632 Session 2-Job Costing
4/17
McGraw-Hill/Irwin
33--44
Job-Order Cost RecordRoseCo Job-Cost Recor
Job Number A - 143 Date Initiated 3-4-X2
Date Completed
Department B3 Units Completed
Item Wooden car o crate
Direct Materials Direct Labor Manufacturing O er eadReq. No. Amount icket ours Amount ours Rate Amount
Cost Summary Units Shipped
Amount Date Number Balance
Direct Materials
Direct Labor
Manufacturing O erhead
Total Cost
Unit Cost
Product Costs
8/8/2019 13632 Session 2-Job Costing
5/17
McGraw-Hill/Irwin
33--55
Job-Order Costing
Document Flow Summary
MaterialsLedger Cards
MaterialsLedger Cards
MaterialsLedger Cards
MaterialsRequisition
Directmaterial
s
MaterialsRequisition
indicates the
cost ofDirect Material
to charge toJobs
& the cost ofIndirect MaterialIndirect Materialto charge to Mfg
Overhead.
Indirectmaterials
Job CostSheets
Job CostSheets
Job CostSheets
Job-CostRecords
ManufacturingOverheadAccount
8/8/2019 13632 Session 2-Job Costing
6/17
McGraw-Hill/Irwin
33--66
Emplo ee timetickets indicate
the cost ofDirect Laborto charge to
Jobs
& the cost ofIndirect LaborIndirect Laborto charge toOverhead.
Job CostSheets
ManufacturingOverheadAccount
Job CostSheets
Job CostSheets
Job-Cost
Records
DirectLabor
IndirectLabor
Emplo ee TimeTicket
Emplo ee TimeTicket
Emplo ee TimeTicket
Emplo ee TimeTicket
Job-Order Costing
Document Flow Summary
8/8/2019 13632 Session 2-Job Costing
7/17
McGraw-Hill/Irwin
33--77
Job-Order Costing
Document Flow Summary
ManufacturingOverheadAccount
Emplo eeTime Ticket
Job-CostRecords
MaterialsRequisition
OtherActual OHCharges
Indirect
Material
Indirect
Labor Overhead
Appliedwith
OHR
=
Actual
Driver
Qt
x
OHR
8/8/2019 13632 Session 2-Job Costing
8/17
McGraw-Hill/Irwin
33--88
Job Card FilledRoseCo Job-Cost Record
Job Number X - 32 Date Initiated 3-9-X2
Date Completed 3-11-X2
Department B3 Units Completed 6
Item Wooden cargo crate
Direct Materials Direct Labor Manufacturing O erheadReq. No. Amount Ticket ours Amount ours Rate Amount
X7-7456 240$ 23 26 286$ 26 4$ 104$
Cost Summary Units Shipped
Amount Date Number Balance
Direct Materials 240$
Direct Labor 286$
Manufacturing O erhead 104$
Total Cost
Unit Cost
Product Costs
8/8/2019 13632 Session 2-Job Costing
9/17
McGraw-Hill/Irwin
33--99
Overhead is applied to jobs using a predeterminedOverhead is applied to jobs using a predeterminedoverhead rate (POHR) based on estimates madeoverhead rate (POHR) based on estimates made
at the beginning of the accounting period.at the beginning of the accounting period.
Manufacturing Overhead Costs
POHR =Budgeted manufacturing overhead cost
Budgeted amount of cost driver (or activit base)
Overhead applied = POHR Actual activit
Based on estimates, anddetermined before the
period begins
Actual amount of the allocationbase, such as direct labor hours,
incurred during the period
8/8/2019 13632 Session 2-Job Costing
10/17
McGraw-Hill/Irwin
33--1010
POHR Calculation
For the Next Financial Year, Rose Co hasFor the Next Financial Year, Rose Co hasBudgeted for :Budgeted for : Manufacturing Overhead of $640,000.Manufacturing Overhead of $640,000.
Direct LaborHour of 160,000Direct LaborHour of 160,000
Compute its POHR.Compute its POHR.
8/8/2019 13632 Session 2-Job Costing
11/17
McGraw-Hill/Irwin
33--1111
Overhead Application Example
RoseCosRoseCos actualactual overheadoverhead for the yearfor the yearwas $650,000was $650,000and a total of 170,000 directand a total of 170,000 direct--labor hours were worked.labor hours were worked.
Using RoseCos predetermined overhead rate of $4.00Using RoseCos predetermined overhead rate of $4.00per directper direct--labor hour, how much overhead waslabor hour, how much overhead wasappliedapplied to all ofRoseCos jobsto all ofRoseCos jobs during the yearduring the year??
8/8/2019 13632 Session 2-Job Costing
12/17
McGraw-Hill/Irwin
33--1212
RoseCosRoseCos actualactual overheadoverhead for the yearfor the yearwas $650,000was $650,000and a total of 170,000 directand a total of 170,000 direct--labor hours were worked.labor hours were worked.
Using RoseCos predetermined overhead rate of $4.00Using RoseCos predetermined overhead rate of $4.00per directper direct--labor hour, how much overhead waslabor hour, how much overhead wasappliedapplied to all ofRoseCos jobsto all ofRoseCos jobs during the yearduring the year??
Overhead Application Example
SOLUTIONApplied Overhead = POHR Actual Direct Labor Hours
Applied Overhead = $4.00 per DLH 170,000 DLH = $680,000
RoseCo has overappliedoverhead for the earb $30,000. What will
RoseCo do?
8/8/2019 13632 Session 2-Job Costing
13/17
McGraw-Hill/Irwin
33--1313
Overapplied and Underapplied
Manufacturing Overhead
Work in
Process
Finished
Goods
Cost ofGoods Sold
$30,000ma be allocated
to these accounts.
$30,000 ma beclosed directl to
cost of goods sold.
Cost ofGoods Sold
RoseCos Method
OR
8/8/2019 13632 Session 2-Job Costing
14/17
McGraw-Hill/Irwin
33--1414
Overapplied and Underapplied
Manufacturing Overhead
Actualoverhead
costs
$650,000
$30,000overapplied
OverheadAppliedto jobs
$680,000
UnadjustedBalance
RoseCosMfg. Overhead
for the ear
RoseCos Costof Goods Sold
for the ear
8/8/2019 13632 Session 2-Job Costing
15/17
McGraw-Hill/Irwin
33--1515
Overapplied and Underapplied
Manufacturing Overhead
Actualoverhead
costs
$650,000
$30,000overapplied
UnadjustedBalance
$30,000
$30,000
AdjustedBalance
OverheadAppliedto jobs
$680,000
RoseCosMfg. Overhead
for the ear
RoseCos Costof Goods Sold
for the ear
8/8/2019 13632 Session 2-Job Costing
16/17
McGraw-Hill/Irwin
33--1616Overapplied and Underapplied
Manufacturing Overhead -
SummaryAlternative 1 Alternative 2
If Manufacturing Close to Cost
Overhead is . . . Allocation of Goods Sold
UNDERA LIED INCREASE INCREASE
Work in rocess Cost of Goods Sold
(Applied OH is less Finished Goods
than actual OH) Cost of Goods Sold
OVERA LIED DECREASE DECREASEWork in rocess Cost of Goods Sold
(Applied OH is greater Finished Goods
than actual OH) Cost of Goods Sold
8/8/2019 13632 Session 2-Job Costing
17/17
McGraw-Hill/Irwin
33--1717
Actual and Normal Costing
Actual
DM & DL Costcombined with
Actual overhead.
Actual
DM & DL Costcombined with
Pre-Determined overhead.
Using a predetermined rate makes itUsing a predetermined rate makes itpossible topossible to estimateestimate total job coststotal job costs soonersooner..
Actual overhead for the period is notActual overhead for the period is notknown until the end of the period.known until the end of the period.