PENGEKOSAN PRODUCTION OPERATION topic3 job costing

Topic 3Job Order Costing

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Learning Objective 1Distinguish between job order costing and

process costing

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Cost accounting systems accumulate cost information in order to measure how much it costs to produce each unit of product.

2 costing systems; Job order costing & Process costingBoth systems:i. Accumulate the costs incurred to make the

productii.Assign costs to the product

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Cost Accounting Systems

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Building-Block Concepts of Costing Systems

Cost Assignment

DirectCosts

IndirectCosts

Cost Tracing

Cost Allocation

CostObject

Cost Allocation Base

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Job-Costing andProcess-Costing Systems

Job-costingsystem

Process-costingsystem

Distinct unitsof a productor service

Produce many units of a Single product for

long period

Job Order vs. Process Costing

Job Order Costing Process Costing

For companies that manufacture batches of unique products or specialized services◦ Accounting firms◦ Music studios◦ Building contractors◦ Health-care providers

Accumulates cost per batch or job

More prevalent with service-based economies and ERP systems

For companies that produce identical units through a series of processes◦ Large producer of similar

goods Accumulates cost of

each process needed to complete the produce

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Seven-Step Approachto Job Costing

Step 1:Identify the chosen cost object.

Step 2:Identify the direct costs of the job.

Step 3:Select the cost-allocation bases.

Step 4:Identify the indirect costs.

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Seven-Step Approachto Job Costing

Step 5:Compute the overhead rate per unit.

Step 6:Compute the indirect costs.

Step 7:Compute the total cost of the job.

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General Approach to Job Costing

A manufacturing company is planning to sella batch of 25 special machines (Job 650) to a

retailer for $114,800.

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Step 3:The cost allocation base is machine-hours.

Job 650 used 500 machine-hours.2,480 machine-hours were used by all jobs.

Step 1:The cost object is Job 650.

Step 2:Direct costs are: Direct materials = $50,000

Direct manufacturing labor = $19,000

Step 4:Manufacturing overhead costs were $65,100.

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Step 5:Actual indirect cost rate is

$65,100 ÷ 2,480 = $26.25 per machine-hour.

Step 6:$26.25 per machine-hour × 500 hours = $13,125

Step 7:Direct materials $50,000Direct labor 19,000Factory overhead 13,125Total Cost $82,125

Learning Objective 2Record materials and labor in a job order

costing system

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A company uses job cost record to accumulate the costs of each job’s: Direct materials Direct labor Manufacturing overhead

A job cost record/sheet is a form prepared for a job that records the materials, labor and manufacturing overhead charged to that job.

How job costs flow through accounts

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Job Cost RecordJob No.Customer Name and AddressJob DescriptionDate Promised Date Started Date Completed

Direct Materials Direct Labor Overhead Costs Applied

DateRequisi-tion No. Amount

Time Ticket

No. Amount Date Rate Amount

Cost SummaryMaterialsLaborOverhead

Totals Total Job Cost

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Example format :Job Cost Record

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Flow of Costs

Direct materialsDirect laborManufacturingoverhead

Job 1Job Cost Record

Work in process inventory

Costs incurred in Job 1

Finished goods inventory

Costs of CompletedJob 1

Cost of goods sold

Costs of Job 1’s output when sold

Ledger accounts

Purchasing Materials

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GENERAL JOURNAL

DATE DESCRIPTION REF DEBIT CREDIT

Materials inventory

Accounts payable

Subsidiary Materials Ledger Card

Item No. ________ Description _________________________

Date Received Used Balance

Units Cost Total Units Cost Total Units Cost Total

Purchases

Using Materials

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GENERAL JOURNAL



Manufacturing overhead

Materials inventory

Subsidiary Materials Ledger Card

Item No. ________ Description _________________________

Date Received Used Balance

Units Cost Total Units Cost Total Units Cost Total

Requisitioned

Direct materials

Indirect materials


Item no. Item Quantity Unit cost Amount

MATERIALS REQUISITION NO. _____Date: _______ Job No. _____

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Materials Requisition Form Is a detailed source document that

specifies the type and quantity of materials as well as cost of materials used for particular job.

Used to authorize the use of materials on a job

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Materials inventoryMaterial

PurchasesDirect

MaterialsDirect

Materials

Cost flow for Materials

Indirect materials

Indirect Materials


Work in process

Job Cost RecordJob No.Customer Name and AddressJob DescriptionDate Promised Date Started Date Completed

Direct Materials Direct Labor Overhead Costs Applied

DateRequisi-tion No. Amount

Time Ticket

No. Amount Date Rate Amount

Cost SummaryMaterialsLaborOverhead

Totals Total Job Cost

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Example format :Job Cost Record

Accounting for Labor

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GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT

Manufacturing wages

Wages payable

Includes both direct and indirect labor


LABOR TIME RECORDEmployee ___________ No. ______Job _______

Time: Started: ___________ Rate: ____________ Stopped: __________ Cost of Labor Elapsed: __________ Charged to Job $___________

Employee: _J K ___________ Supervisor: M . M orley

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Labor Time Record

J. Khan K13J9738

80015007 hours

$11.25

$78.75



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GENERAL JOURNAL




Manufacturing wages

Zeroes out Manufacturing wages

accounts


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Work in processIncurred Direct

Materials

Manufacturing wages


Manufacturing overheadActual

OverheadCosts

Indirect Labor

DirectLabor

DirectLabor


Learning Objective 3Record overhead in a job order costing

system


Accounting for Manufacturing Overhead

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GENERAL JOURNAL



Accumulated depreciation


Cash


Property taxes payable Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Actual overhead costs are debited to the Manufacturing overhead account

Overhead costs are essential to production Must be assigned to specific jobs to

determine full cost A predetermined overhead rate is used

Assigning Manufacturing Overhead to Jobs


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Predetermined Manufacturing Overhead Rate

Total estimated manufacturing overhead costs

Total estimated quantity of the manufacturing overhead allocation base

Primary cost driver of overhead costs Examples:

Direct labor hours

Direct labor costMachine hours

Allocate Overhead Costs to Jobs

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Allocated manufacturing overhead cost

Actual quantity of allocation base used

on the job

Predetermined manufacturing

overhead application rate


Work in processDirectMaterials

Accounting for Manufacturing Overhead

Manufacturing overheadActualOverheadCosts

OverheadAllocated

Overhead Allocated

DirectLabor


Learning Objective 4Record completion and sales of finished goods and the adjustment for under- or

overallocated overhead

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Work in process• Direct

Materials

• Direct Labor

• Manufacturing Overhead

Finished goods

Cost of Goods

Manufactured

Cost of goods sold

Cost ofGoodsSold

Cost of Goods Sold

Accounting for Finished Goods

Cost of Goods

Manufactured

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Actual costs Applied to jobs

If actual costs are greater, overhead is

underallocated

If amount applied to jobs

is greater, overhead is

overallocated

Adjusting Under- or Overallocated Manufacturing Overhead

The underallocated or overallocated overhead amount is closed to Cost of goods sold

Adjusting Under- or Overallocated Manufacturing Overhead

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GENERAL JOURNALDATE DESCRIPTION DEBIT CREDIT

Cost of goods sold


If underallocated, Cost of goods sold

increases

GENERAL JOURNALDATE DESCRIPTION DEBIT CREDIT


Cost of goods sold

If overallocated, Cost of goods sold

decreases

Learning Objective 5Calculate unit costs for a service company

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Have no inventory Managers need to know the cost of jobs to

set prices

Service Companies

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Cost of Job X $1,000

Standard markup of 40% 400

Sale price of Job X $1,400

Often service companies largest cost is labor

Employees keep track of time spent on each client or job◦ Manually using a time record◦ Automated system

Assigning Labor Costs to Service Jobs

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Hourly rate to the employer

Employee’s annual salary

2,000 work hours per year

Exercise 2-23

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Hourly direct labor costs

Direct labor costs

Direct labor hours

$2,150,000

14,000 hours$153.57

Exercise 2-23 (continued)

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Predetermined indirect cost allocation rate

Expected indirect costs

Expected direct labor hoursOffice rent $260,00

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Support staff 850,000

Utilities 350,000

Total $1,460,000

$1,460,000

14,000 hours$104.29


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$153.57

Hourly direct labor

costs

Predetermined indirect

cost allocation

rate

$104.29

Service cost per

hour

$257.86

$257.86

260 hours

$67,044


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$67,044

155%

$103,918

Round to

$104,000

End of Topic 3

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