Upload
sumona-hossain
View
219
Download
0
Embed Size (px)
Citation preview
7/23/2019 L-6 Job Order Costing
1/57
Systems Design:Job-Order Costing
7/23/2019 L-6 Job Order Costing
2/57
Types of Costing Systems Used toDetermine Product Costs
ProcessCosting
Job-orderCosting
Many different products are produced each period.
Products are manufactured to order.
Costs are traced or allocated to jobs.
Cost records must be maintained for each distinct product or job.
Many different products are produced each period.
Products are manufactured to order.
Costs are traced or allocated to jobs.
Cost records must be maintained for each distinct product or job.
Chapter 4
Chapter 4
7/23/2019 L-6 Job Order Costing
3/57
Job Order Costing System
ProcessCosting
Job-orderCosting
Typical job order cost applications:Special-order printing
uilding construction!lso used in the ser"ice industry#ospitals$a% firms
Typical job order cost applications:Special-order printing
uilding construction!lso used in the ser"ice industry#ospitals$a% firms
7/23/2019 L-6 Job Order Costing
4/57
Process Cost System
& Company produces many units of asingle product for long periods
& Examples: orange uice concentrate!paper! mixing and bottlingbe"erages! gasoline#
& Costs are accumulated by eac$department or operation in t$eprocess
& Total costs are di"ided by t$e number
of units produced to get unit product
7/23/2019 L-6 Job Order Costing
5/57
Job-Order Costing
Directmaterial
Directmaterial
Directlabor
Directlabor
Manufacturing
overhead (OH)
Applied to eachjob using a
predeterminedrate
Manufacturing
overhead (OH)Applied to each
job using apredetermined
rateTraceddirectlytoeachjob
Tracedd
irectly
toeach
job
The Job
The Job
7/23/2019 L-6 Job Order Costing
6/57
Manufacturing'"erhead
Manufacturing'"erhead
Job (o. )
Job (o. )
Job (o. *
Job (o. *
Job (o. +
Job (o. +
Chargedirect
material anddirect labor
costs to each
job as %or,is performed.
Chargedirect
material anddirect labor
costs to eachjob as %or,is performed.
Se%uence of E"ents in a Job-Order
Costing System
irect Materials
irect Materials
irect $abor
irect $abor
7/23/2019 L-6 Job Order Costing
7/57
!pplyo"erhead to
each jobusing a
predeter-mined rate.
!pply
o"erhead toeach jobusing a
predeter-mined rate.
Se%uence of E"ents in a Job-Order
Costing System
irect Materialsirect Materials
irect $aborirect $abor
Job (o. )Job (o. )
Job (o. *Job (o. *
Job (o. +Job (o. +Manufacturing'"erhead
Manufacturing'"erhead
7/23/2019 L-6 Job Order Costing
8/57
Job-Order Cost &ccounting
T$e primary document for trac'ing t$ecosts associated (it$ a gi"en ob is
t$eob cost s$eet#
$ets in"estigate
7/23/2019 L-6 Job Order Costing
9/57
PearCo Job Cost Sheet
Job (umber ! - )4+ ate /nitiated +-4-0)
ate Completed
epartment + 1nits Completed
/tem 2ooden cargo crate
irect Materials irect $abor Manufacturing '"erhead3e. (o. !mount Tic,et #ours !mount #ours 3ate !mount
Cost Summary 1nits Shippedirect Materials ate (umber alance
irect $abor
Manufacturing '"erhead
Total Cost
1nit Product Cost
Job-Order Cost &ccounting
7/23/2019 L-6 Job Order Costing
10/57
Job-Order Cost &ccounting
PearCo Job Cost Sheet
Job (umber ! - )4+ ate /nitiated +-4-0)
ate Completed
epartment + 1nits Completed
/tem 2ooden cargo crate
irect Materials irect $abor Manufacturing '"erhead3e. (o. !mount Tic,et #ours !mount #ours 3ate !mount
Cost Summary 1nits Shipped
irect Materials ate (umber alance
irect $abor
Manufacturing '"erhead
Total Cost
1nit Product Cost
$ets see one
! materials reuisition
form is used to authori5ethe use of materials on a
job.
7/23/2019 L-6 Job Order Costing
11/57
)aterials *e%uisition +orm
PearCo Materials Reuisition !orm
Reuisition "o# $% & '* Date +&,&*-
.ob "o# A & -,+
Department /+
Description 0uantit1 2nit Cost 3otal Cost
4 5 ,6 -4 feet -4 +#**7 +'#**7
- 5 '6 -4 feet 4* ,#** *#**
--'#**7
Authori8ed
9ignature ,ill E# Delite
7/23/2019 L-6 Job Order Costing
12/57
PearCo Materials Reuisition !orm
Reuisition "o# $% & '* Date +&,&*-
.ob "o# A & -,+
Department /+
Description 0uantit1 2nit Cost 3otal Cost
4 5 ,6 -4 feet -4 +#**7 +'#**7
- 5 '6 -4 feet 4* ,#** *#**
--'#**7
Authori8ed
9ignature
)aterials *e%uisition +orm
,ill E# Delite
Type6 uantity6 and total cost ofmaterial charged to job !-)4+.
Type6 uantity6 and total cost ofmaterial charged to job !-)4+.
Cost of material is charged to job!-)4+.
Cost of material is charged to job!-)4+.
7/23/2019 L-6 Job Order Costing
13/57
PearCo .ob Cost 9heet
.ob "umber A & -,+ Date :nitiated +&,&*-
Date Completed
Department /+ 2nits Completed
:tem ;ooden cargo crate
Direct Materials Direct
7/23/2019 L-6 Job Order Costing
14/57
PearCo .ob Cost 9heet
.ob "umber A & -,+ Date :nitiated +&,&*-
Date Completed
Department /+ 2nits Completed
:tem ;ooden cargo crate
Direct Materials Direct
7/23/2019 L-6 Job Order Costing
15/57
Employee Time Tic'et
PearCo >mplo1ee 3ime 3ic=et
3ime 3ic=et "o# +' Date +?@?*-
>mplo1ee :# M# 9=illed 9tation ,4
9tarting >nding Hours Hourl1
3ime 3ime Completed Rate Amount .ob "o#
*** -'** #** --#**7 #**7 A&-,+
3otals #** --#**7 #**7 A&-,+
9upervisor C. M. Workman
7/23/2019 L-6 Job Order Costing
16/57
Job-Order Cost &ccounting
PearCo .ob Cost 9heet
.ob "umber A & -,+ Date :nitiated +&,&*-
Date Completed
Department /+ 2nits Completed
:tem ;ooden cargo crate
Direct Materials Direct
7/23/2019 L-6 Job Order Costing
17/57
Job-Order Cost &ccounting
PearCo .ob Cost 9heet
.ob "umber A & -,+ Date :nitiated +&,&*-
Date Completed +&@&*-
Department /+ 2nits Completed 4
:tem ;ooden cargo crate
Direct Materials Direct
7/23/2019 L-6 Job Order Costing
18/57
Job-Order Cost &ccounting
PearCo .ob Cost 9heet
.ob "umber A & -,+ Date :nitiated +&,&*-
Date Completed +&@&*-
Department /+ 2nits Completed 4
:tem ;ooden cargo crate
Direct Materials Direct
7/23/2019 L-6 Job Order Costing
19/57
stimated total manufacturingo"erhead cost for the coming period
stimated total units in theallocation base for the coming period
P'#3 ;
The predetermined overheadrate (POHR) used to apply
overhead to jobs is determinedbeore the period be!ins.
&pplication of )anufacturing
O"er$ead
/deally6 the allocation base isa cost dri"er that causes
o"erhead.
/deally6 the allocation base isa cost dri"er that causes
o"erhead.
7/23/2019 L-6 Job Order Costing
20/57
!ctual amount of the allocationbase such as units produced6direct labor hours6 or machine
hours incurred during the period.
!ctualamount of the allocationbasesuch as units produced6direct labor hours6 or machine
hours incurred during the period.
ased on estimates6 anddetermined before the
period begins.
ased onestimates6 anddetermined before the
period begins.
&pplication of )anufacturingO"er$ead
'"erhead applied ; P'#3 < !ctual acti"ity
7/23/2019 L-6 Job Order Costing
21/57
&pplication of )anufacturing
O"er$eadPearCo .ob Cost 9heet
.ob "umber A & -,+ Date :nitiated +&,&*-
Date Completed +&@&*-
Department /+ 2nits Completed 4
:tem ;ooden cargo crate
Direct Materials Direct
7/23/2019 L-6 Job Order Costing
22/57
"sin! a predetermined rate makes itpossible to estimate total job #osts sooner.
$#tual overhead or the period is notkno%n until the end o the period.
T$e eed for a Predetermined)anufacturing O"er$ead *ate
7
7/23/2019 L-6 Job Order Costing
23/57
PearCo applies overhead basedon dire#t labor hours. Total
estimatedoverhead or the year is
&'*. Totalestimatedlabor#ost is &+** and totalestimatedlabor hours are
+'*.
What is Pear Co.,s predetermined
overhead rate per hour-
O"er$ead &pplicationExample
7/23/2019 L-6 Job Order Costing
24/57
!or each direct labor hour or=ed on ajob6 7,#** of factor1 overhead ill be
applied to the job#
!or each direct labor hour or=ed on ajob6 7,#** of factor1 overhead ill be
applied to the job#
O"er$ead &pplicationExample
P'#3 ; 74.00 per $#
7=406000
)=06000 direct labor hours 8$#9P'#3 ;
stimated total manufacturingo"erhead cost for the coming period
stimated total units in theallocation base for the coming period
P'#3 ;
7/23/2019 L-6 Job Order Costing
25/57
PearCo .ob Cost 9heet
.ob "umber $ & +4 Date :nitiated +&&*-
Date Completed +&--&*-
Department /+ 2nits Completed '
:tem ;ooden cargo crate
Direct Materials Direct
7/23/2019 L-6 Job Order Costing
26/57
PearCo .ob Cost 9heet
.ob "umber $ & +4 Date :nitiated +&&*-
Date Completed +&--&*-
Department /+ 2nits Completed '
:tem ;ooden cargo crate
Direct Materials Direct
7/23/2019 L-6 Job Order Costing
27/57
.uic' C$ec'
Job ,*/0 at , +ab! 1nc# re%uired2344 of direct materials and 54direct labor $ours at 25/ per $our#
Estimated total o"er$ead for t$eyear (as 2674!444 and estimateddirect labor $ours (ere 34!444# ,$at(ould be recorded as t$e cost of ob
,*/08a# 2344#
b# 20/4#
c# 2094#
Job ,*/0 at , +ab! 1nc# re%uired2344 of direct materials and 54direct labor $ours at 25/ per $our#Estimated total o"er$ead for t$eyear (as 2674!444 and estimateddirect labor $ours (ere 34!444# ,$at(ould be recorded as t$e cost of ob
,*/08a# 2344#
b# 20/4#
c# 2094#
Pred. o"hd. rate 7>=06000?*06000hours 7+@
-irect materials 7*00
-irect labor 7)A B )0 hours 7)A0Manufacturing o"erhead 7+@ B )0 hours 7+@0
Total cost 7>+0
7/23/2019 L-6 Job Order Costing
28/57
&llocation ase
& & Cost Dri"er is a factor t$at directlycauses o"er$ead costs to be incurred
& T$e Cost Dri"er must be common toall company products and ser"ices
& Cost Dri"ers include mac$ine-$ours!direct labor! computer time! direct
material cost! etc#
& Selection of an appropriate CostDri"er is essential to proper
o"er$ead allocation
7/23/2019 L-6 Job Order Costing
29/57
$ets summari5ethe document flo%
in a job-ordercosting system.
Job-Order Costing
Document +lo( Summary
7/23/2019 L-6 Job Order Costing
30/57
Job-Order Costing
Document +lo( Summary
.ob Cost9heets
.ob Cost9heets
MaterialsReuisition
MaterialsReuisition
ManufacturingOverhead Account
ManufacturingOverhead Account
Directmaterials
:ndirectmaterials
Materials usedmay be either
direct orindirect.
Materials usedmay be either
direct orindirect.
7/23/2019 L-6 Job Order Costing
31/57
Job-Order Costing
Document +lo( Summary
.ob Cost9heets
.ob Cost9heets
>mplo1ee 3ime3ic=et
>mplo1ee 3ime3ic=et
ManufacturingOverhead Account
ManufacturingOverhead Account
!n employeestime may be eitherdirect or indirect.
!n employeestime may be eitherdirect or indirect.
Direct
7/23/2019 L-6 Job Order Costing
32/57
Job-Order Costing
Document +lo( Summary
Manufacturing'"erhead !ccount
Manufacturing'"erhead !ccount
OtherActual OHCharges
OtherActual OHCharges
Job CostSheets
Job CostSheets
!pplied
'"erhead
MaterialsReuisition
MaterialsReuisition
>mplo1ee3ime 3ic=et
>mplo1ee3ime 3ic=et
:ndirect
Material
:ndirect
7/23/2019 L-6 Job Order Costing
33/57
Job-Order System Cost+lo(s
$ets eBamine thecost flo%s in a job-
order costingsystem..
7/23/2019 L-6 Job Order Costing
34/57
3a% Materials MaterialPurchases
Mfg. '"erhead
2or, in Process8Job Cost Sheet9 irect
Materials irectMaterials
/ndirectMaterials
/ndirect
Materials
Actual Applied
Job-Order System Cost+lo(s
7/23/2019 L-6 Job Order Costing
35/57
Mfg. '"erhead
Salaries and2ages Payable
2or, in Process8Job Cost Sheet9 irect
Materials
'"erhead!pplied
'"erhead!pplied to 2or,
inProcess
irect$abor
irect$abor
/ndirect$abor6 !ll
'ther
/ndirect$abor
/ndirectMaterials
Actual Applied
/f actual and appliedmanufacturing o"erheadare not eual6 a year-endadjustment is reuired.
/f actual and appliedmanufacturing o"erheadare not eual6 a year-endadjustment is reuired.
Job-Order System Cost+lo(s
7/23/2019 L-6 Job Order Costing
36/57
inished Doods
Cost ofDoodsMfd.
Cost ofDoods
Mfd.
Cost of Doods Sold
2or, in Process8Job Cost Sheet9 irect
Materials
irect$abor
'"erhead!pplied
Cost ofDoodsSold
Cost ofDoodsSold
Job-Order System Cost+lo(s
7/23/2019 L-6 Job Order Costing
37/57
Job-Order System Cost+lo(s
$ets return to PearCoand see %hat %e %ill do
if actual and applied
o"erhead are not eual.
7/23/2019 L-6 Job Order Costing
38/57
PearCo;s actual o"er$ead for t$e year(as 27/4!444 for a total of 564!444
direct labor $ours#
7/23/2019 L-6 Job Order Costing
39/57
2or, inProcess
inishedDoods
Cost ofDoods Sold
7+06000may be allocated
to these accounts.
O"erapplied and Underapplied)anufacturing O"er$ead
7+06000 may beclosed directly to
cost of goods sold.
Cost ofDoods Sold
PearCos Method
'3
7/23/2019 L-6 Job Order Costing
40/57
O"erapplied and Underapplied)anufacturing O"er$ead
PearCos
Mfg. '"erhead!ctual
o"erheadcosts
7=A06000
7+06000o"erapplied
PearCos Cost
of Doods Sold2nadjusted
/alance
7+06000
7+*6***
Adjusted/alance
'"erhead!pplied
to jobs
7=@06000
7/23/2019 L-6 Job Order Costing
41/57
O"erapplied and Underapplied)anufacturing O"er$ead - Summary
Alternative - Alternative 4
:f Manufacturing Close to Cost
Overhead is # # # of Foods 9old Allocation
2"D>RAPPD :"CR>A9> :"CR>A9>
Cost of Foods 9old ;or= in Process
(Applied OH is less !inished Foods
than actual OH) Cost of Foods 9old
OG>RAPPD D>CR>A9> D>CR>A9>Cost of Foods 9old ;or= in Process
(Applied OH is greater !inished Foods
than actual OH) Cost of Foods 9old
PearCosMethod
7/23/2019 L-6 Job Order Costing
42/57
Over/"nder si!ni0#ant*$llo#ate 1et%een $##ounts
& Determine t$e amount of o"er$eadapplied to ,1P! +inis$ed >oods andCO>S
& Calculate t$e ? of total O"er$eadapplied to eac$ account
& )ultiply t$e O"er@Under amount
times t$e ?;s and allocate to eac$account
& See example
7/23/2019 L-6 Job Order Costing
43/57
7/23/2019 L-6 Job Order Costing
44/57
Cost +lo(s A )aterialPurc$ases
*a( material purc$ases are recorded in anin"entory account#
F>">RA< .O2R"A< Page +
Date Description
Post#
Ref# Debit Credit
Ra Materials $$$$$
Accounts Pa1able $$$$$
7/23/2019 L-6 Job Order Costing
45/57
Direct materials issued to a ob increase ,or' inProcess and decrease *a( )aterials# 1ndirectmaterials used are c$arged to )anufacturing
O"er$ead and also decrease *a( )aterials#
Cost +lo(s A )aterial Usage
F>">RA< .O2R"A< Page +
Date Description
Post#
Ref# Debit Credit
;or= in Process $$$$$
Manufacturing Overhead $$$$$
Ra Materials $$$$$
7/23/2019 L-6 Job Order Costing
46/57
Cost +lo(s A Babour
T$e cost of direct labour incurred increases,or' in Process and t$e cost of indirect
labour increases )anufacturing O"er$ead#
F>">RA< .O2R"A< Page +
Date Description
Post#
Ref# Debit Credit
;or= in Process $$$$$
Manufacturing Overhead $$$$$
9alaries and ;ages Pa1able $$$$$
C t +l & t l
7/23/2019 L-6 Job Order Costing
47/57
Cost +lo(s A &ctualO"er$ead
F>">RA< .O2R"A< Page +
Date Description
Post#
Ref# Debit Credit
Manufacturing Overhead $$$$$
Accounts Pa1able $$$$$
Propert1 3a5es Pa1able $$$$$
Prepaid :nsurance $$$$$
Accumulated Depreciation $$$$$
1n addition to indirect materials and indirectlabour! ot$er manufacturing o"er$ead costsare c$arged to t$e )anufacturing O"er$ead
account as t$ey are incurred#
C t +l O $ d
7/23/2019 L-6 Job Order Costing
48/57
Cost +lo(s A O"er$ead&pplied
,or' in Process is increased ($en)anufacturing O"er$ead is appliedto obs#
F>">RA< .O2R"A< Page +
Date Description
Post#
Ref# Debit Credit
;or= in Process $$$$$
Manufacturing Overhead $$$$$
C t +l P i d
7/23/2019 L-6 Job Order Costing
49/57
Cost +lo(s A PeriodExpenses
on-manufacturing costs period expensesare c$arged to expense as t$ey are incurred#
F>">RA< .O2R"A< Page +
Date Description
Post#
Ref# Debit Credit
9alaries >5pense $$$$$
9alaries and ;ages Pa1able $$$$$
Advertising >5pense $$$$$
Accounts Pa1able $$$$$
7/23/2019 L-6 Job Order Costing
50/57
Cost +lo(s A Cost of >oods
)anufactured
&s obs are completed! t$e cost of goodsmanufactured is transferred to +inis$ed
>oods from ,or' in Process#
F>">RA< .O2R"A< Page +
Date Description
Post#
Ref# Debit Credit
!inished Foods $$$$$
;or= in Process $$$$$
7/23/2019 L-6 Job Order Costing
51/57
Cost +lo(s A Sales
,$en nis$ed goods are sold! t(o entriesare re%uired: 5 to record t$e saleF and 3
to record Cost of >oods Sold and reduce
+inis$ed >oods#F>">RA< .O2R"A< Page +
Date Description
Post#
Ref# Debit Credit
Accounts Receivable $$$$$
9ales $$$$$
Cost of Foods 9old $$$$$
!inished Foods $$$$$
7/23/2019 L-6 Job Order Costing
52/57
Scrap and *e(or'
n#reased
2uality
n#rease
dPro0tabi
lity
Beads to
mprovin! 3uality redu#es the #osts asso#iated%ith re%ork* delays in produ#tion* %arranty #ost*and poor #ustomer relations.
7/23/2019 L-6 Job Order Costing
53/57
Scrap
T$e loss from scrap can be:5# &llocated across all good units! or
3# C$arged to o"er$ead and in turn
c$arged to all obs#1f scrap items are sold! t$e reco"erycan t$en be credited to:
5# T$e ob! or
3# )anufacturing o"er$ead#
7/23/2019 L-6 Job Order Costing
54/57
Re%ork
2hen some re%or, is underta,en6 thematerials and labour in"ol"ed in there%or, could be charged to:
). The job6 or*. Manufacturing o"erhead and spread
o"er all the jobs.
7/23/2019 L-6 Job Order Costing
55/57
T$e PredeterminedO"er$ead *ate and
Capacity
Appendix
0&
7/23/2019 L-6 Job Order Costing
56/57
The Capa#ity ssue
2hen estimated acti"ity is less than acti"ityat capacity6 t%o problems arise:
). 1nit product costs %ill fluctuate
depending on the budgeted le"el ofacti"ity for the period. !s budget le"elsdecrease6 o"erhead cost per unit 8and unit product costs9 %ill increase.
*. Products %ill be charged for resources
they did not use.
7/23/2019 L-6 Job Order Costing
57/57
T$e End