1 / 25

Systems Design: Job-Order costing

Chapter 3. Systems Design: Job-Order costing. Types of Costing Systems Used to Determine Product Costs. Process Costing. Job-order Costing. Chapter 4. Many different products are produced each period. Products are manufactured to order. Cost are traced or allocated to jobs.

fred
Télécharger la présentation

Systems Design: Job-Order costing

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Chapter3 Systems Design:Job-Order costing

  2. Types of Costing Systems Used to Determine Product Costs ProcessCosting Job-orderCosting Chapter 4 • Many different products are produced each period. • Products are manufactured to order. • Cost are traced or allocated to jobs. • Cost records must be maintained for each distinct product or job.

  3. Types of Costing Systems Used to Determine Product Costs ProcessCosting Job-orderCosting • Typical job order cost applications: • Special-order printing • Building construction • Also used in the service industry • Hospitals • Law firms

  4. THE JOB Job-Order Costing Manufacturingoverhead (OH) Applied to eachjob using apredeterminedrate Directmaterial Traced directly to each job Traced directly to each job Direct labor

  5. Sequence of Events in a Job-Order Costing System Receive orders from customers Begin production Schedulejobs Ordermaterials

  6. Sequence of Events in a Job-Order Costing System Charge direct material and direct labor costs to each job as work is performed. Direct Materials Job No. 1 Direct Labor Job No. 2 Manufacturing Overhead Job No. 3

  7. Sequence of Events in a Job-Order Costing System Direct Materials Apply overhead to each job using a predeter-mined rate. Job No. 1 Direct Labor Job No. 2 Manufacturing Overhead Job No. 3

  8. Materials usedmay be eitherdirect orindirect. Job-Order CostingDocument Flow Summary Job Cost Sheets Direct materials MaterialsRequisition Manufacturing Overhead Account Indirect materials

  9. An employee’stime may be eitherdirect or indirect. Job-Order CostingDocument Flow Summary Job Cost Sheets Direct Labor Employee Time Ticket Manufacturing Overhead Account Indirect Labor

  10. Job-Order CostingDocument Flow Summary IndirectLabor EmployeeTime Ticket OtherActual OHCharges Manufacturing Overhead Account AppliedOverhead Job Cost Sheets MaterialsRequisition IndirectMaterial

  11. Application of Manufacturing Overhead The predetermined overhead rate (POHR) used to apply overhead to jobs is determined before the period begins. Estimated total manufacturingoverhead cost for the coming period POHR = Estimated total units in theallocation base for the coming period Ideally, the allocation base is a cost driver that causes overhead.

  12. Based onestimates, and determined before the period begins. Overhead applied = POHR × Actual activity Actualamount of the cost driver such as units produced, direct labor hours, or machine hours. Incurred during the period. Application of Manufacturing Overhead

  13. The Need for a Predetermined Manufacturing Overhead Rate Using a predetermined rate makes itpossible toestimatetotal job costs sooner. Actual overheadfor the period is notknown until the end of the period. $

  14. Overhead Application Example PearCo applies overhead based on direct labor hours. Totalestimated overhead for the year is $640,000. Totalestimatedlabor cost is $1,400,000 and total estimated labor hours are 160,000.What is PearCo’s predetermined overhead rate per hour?

  15. Overhead Application Example PearCo’s actual overhead for the year was $650,000 for a total of 170,000 direct labor hours. How much total overhead was applied to PearCo’s jobs during the year? Use PearCo’s predetermined overhead rate of $4.00 per direct labor hour.

  16. Overhead applied = POHR × Actual activity Overhead applied = $4 per DLH × 8 DLH = $32 Application of Manufacturing Overhead

  17. Job-Order System Cost Flows Work in Process(Job Cost Sheet) Raw Materials • Direct Materials • Direct Materials • Material • Purchases • Indirect Materials Mfg. Overhead Actual Applied • Indirect Materials

  18. Job-Order System Cost Flows Work in Process(Job Cost Sheet) Salaries and Wages Payable • Direct Labor • Direct Materials • IndirectLabor • Direct Labor • Overhead Applied Mfg. Overhead Actual Applied If actual and applied manufacturing overheadare not equal, a year-end adjustment is required. • Indirect Materials • OverheadApplied to Work inProcess • IndirectLabor

  19. Job-Order System Cost Flows Work in Process(Job Cost Sheet) Finished Goods • Direct Materials • Cost ofGoodsMfd. • Cost ofGoodsMfd. • Cost ofGoodsSold • Direct Labor • Overhead Applied Cost of Goods Sold • Cost ofGoodsSold

  20. Overhead Application Example PearCo’s actual overhead for the year was $650,000 for a total of 170,000 direct labor hours. How much total overhead was applied to PearCo’s jobs during the year? Use PearCo’s predetermined overhead rate of $4.00 per direct labor hour, PearCo hasoverappliedoverhead for the yearby $30,000. What willPearCo do? SOLUTION Applied Overhead = POHR × Actual Direct Labor Hours Applied Overhead = $4.00 per DLH × 170,000 DLH= $680,000

  21. Overapplied and Underapplied Manufacturing Overhead PearCo’s Method $30,000may be allocatedto these accounts. $30,000 may beclosed directly to cost of goods sold. OR Work inProcess FinishedGoods Cost of Goods Sold Cost of Goods Sold

  22. Overapplied and Underapplied Manufacturing Overhead PearCo’sMfg. Overhead PearCo’s Costof Goods Sold Unadjusted Balance Actualoverheadcosts $650,000 OverheadAppliedto jobs $680,000 $30,000 $30,000 AdjustedBalance $30,000 overapplied

  23. Overapplied and Underapplied Manufacturing Overhead - Summary PearCo’s Method

  24. Overhead Application Question 1 Tiger, Inc. had actual manufacturing overhead costs of $1,210,000 and a predetermined overhead rate of $4.00 per machine hour. Tiger, Inc. worked 290,000 machine hours during the period. Tiger’s manufacturing overhead is a. $50,000 overapplied.b. $50,000 underapplied.c. $60,000 overapplied.d. $60,000 underapplied.

  25. Overhead Application Question 2 Assume that Tiger’s overhead was $60,000 underapplied. This amount would result in an adjustment that would decreasecost of goods sold by $60,000. a. True b. False

More Related