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CHAPTER CHAPTER 1212
PowerPoint Author:LuAnn Bean, Ph.D., CPA, CIA, CFE
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
12-2
o Accumulates costs by individual products.
o Companies use job-order cost systems when they need to know the costs of individual products or batches of products.
o Accumulates costs by individual products.
o Companies use job-order cost systems when they need to know the costs of individual products or batches of products.
Cost Systems andCost Systems andType of ProductType of Product
Job-order cost systems may be used by:
1. Walt Disney Production to determine the cost of a particular film.
2. Rust Engineering to determine the cost of an office building constructed.
3. Boeing to determine the cost of an airplane manufactured.
Job-OrderJob-OrderCost SystemCost SystemJob-OrderJob-Order
Cost SystemCost SystemProcessProcess
Cost SystemCost SystemProcessProcess
Cost SystemCost System
12-3
Job-OrderJob-OrderCost SystemCost SystemJob-OrderJob-Order
Cost SystemCost SystemProcessProcess
Cost SystemCost SystemProcessProcess
Cost SystemCost System
o Allocates costs evenly to homogeneous products.
o Unit product cost is determined by dividing the total product cost by the number of units produced during the accounting period.
o Allocates costs evenly to homogeneous products.
o Unit product cost is determined by dividing the total product cost by the number of units produced during the accounting period.
Process cost systems may be used by:
1. Texaco in its oil refining operations.
2. Dow Chemical in the manufacture of chemicals.
3. General Mills in the manufacture of cereal.
Process cost systems may be used by:
1. Texaco in its oil refining operations.
2. Dow Chemical in the manufacture of chemicals.
3. General Mills in the manufacture of cereal.
Cost Systems andCost Systems andType of ProductType of Product
12-4
Begin Begin productionproductionReceive orders Receive orders
from customersfrom customers
OrderOrdermaterialsmaterials
Cost FlowsCost Flows
ScheduleScheduleworkwork
12-5
Job-Order Cost FlowJob-Order Cost FlowIncome
statementIncome
statement
Boat 101Materials
Labor & OH
Boat 101Materials
Labor & OHBoat 104Materials
Labor & OH
Boat 104Materials
Labor & OH
Boat 102Materials
Labor & OH
Boat 102Materials
Labor & OH
Cost ofgoodssold
Cost ofgoodssold
Boat 105Materials
Labor & OH
Boat 105Materials
Labor & OH
Boat 103Materials
Labor & OH
Boat 103Materials
Labor & OH
Productcosts
Productcosts
Work in process inventoryWork in process inventoryFinishedgoods
inventory
Finishedgoods
inventory
Cost ofgoods
availablefor sale
keptseparately
for allboats
Cost ofgoods
availablefor sale
keptseparately
for allboats
MaterialsLabor
Overhead
MaterialsLabor
Overhead
12-6
WIP WIPmixing packaging
WIP WIPmixing packaging
Process Cost FlowProcess Cost FlowProduct
costsProduct
costs
MaterialsLabor
Overhead
MaterialsLabor
Overhead
IncomestatementIncome
statement
Cost ofgoodssold
Cost ofgoodssold
Finishedgoods
inventory
Finishedgoods
inventory
MaterialsLabor
Overhead
Transferred-in costs
MaterialsLabor
Overhead
MaterialsLabor
Overhead Cost ofgoods
availablefor sale
Cost ofgoods
availablefor sale
12-7
Hybrid Accounting Hybrid Accounting SystemsSystems
A hybrid accounting system uses some features from both job-order and process cost systems.
Hybrid systems are commonly used in the manufacture of personal computers. Many
models are mass produced and sold as a package. Other
systems are custom built to the specifications of the customer. Custom built systems normally sell at a premium compared to
standard systems.
Hybrid systems are commonly used in the manufacture of personal computers. Many
models are mass produced and sold as a package. Other
systems are custom built to the specifications of the customer. Custom built systems normally sell at a premium compared to
standard systems.
12-8
Documentation in aDocumentation in aJob-Order Cost SystemJob-Order Cost System
The primary The primary document for document for tracking the tracking the
costs costs associated associated
with a given with a given job is thejob is the
job cost sheetjob cost sheet..
12-9
Documentation in aDocumentation in aJob-Order Cost SystemJob-Order Cost System
12-10
John SmythJohn Smyth
Documentation in aDocumentation in aJob-Order Cost SystemJob-Order Cost System
12-11
Documentation in aDocumentation in aJob-Order Cost SystemJob-Order Cost System
12-12
1,400 1,400 × $3.90 = $5,460× $3.90 = $5,4601,400 1,400 × $3.90 = $5,460× $3.90 = $5,460
Documentation in aDocumentation in aJob-Order Cost SystemJob-Order Cost System
12-13
Benchmore started the month of January, 2015,with the following account balances.
Debit CreditCash 73,000$ Raw materials inventory 7,000 Work in process inventory 34,000 Finished goods inventory 85,000 Production supplies 300 Manufacturing equipment 90,000 Accumulated depreciation 32,000$ Common stock 200,000 Retained earnings 57,300 Total 289,300$ 289,300$
Benchmore Boat CompanyTrial Balance
As of January 1, 2015Boat 103 14,000$ Boat 104 8,000 Boat 105 12,000
34,000$
Work in Process
Boat 101 50,000$ Boat 102 35,000
85,000$
Finished Goods
Job-Order CostJob-Order CostSystem IllustratedSystem Illustrated
12-14
Equivalent UnitsEquivalent UnitsEquivalent units are partially complete and are part
of work in process inventory. Partially completed products are expressed in terms of a smaller
number of fully completed units.
12-15
Equivalent UnitsEquivalent Units
Two half completed products are equivalent to one completed product.
Two half completed products are equivalent to one completed product.
So, 10,000 units 60% completeare equivalent to 6,000 complete units.
So, 10,000 units 60% completeare equivalent to 6,000 complete units.
+ = 1
12-16
Percent Actual Complete Equivalent
Units completed and transferred 500,000 100% 500,000 Ending inventory 85,000 40% 34,000
Total 585,000 534,000
A Janis engineer estimated the 85,000 units in ending work in process inventory were 40 percent complete. Janis computes the total equivalent units processed in the
extraction department as follows:
Equivalent UnitsEquivalent Units
12-17
End of Chapter 12End of Chapter 12