13632 session 2-job costing

8/8/2019 13632 Session 2-Job Costing

1/17

McGraw-Hill/Irwin

33--11

Job Costing

ch3


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.


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


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


5/17

McGraw-Hill/Irwin

33--55

Job-Order Costing

Document Flow Summary

MaterialsLedger Cards



MaterialsRequisition

Directmaterial

s


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


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


Job CostSheets

Job CostSheets

Job-Cost

Records

DirectLabor

IndirectLabor

Emplo ee TimeTicket

Emplo ee TimeTicket

Emplo ee TimeTicket

Emplo ee TimeTicket

Job-Order Costing



7/17

McGraw-Hill/Irwin

33--77

Job-Order Costing



Emplo eeTime Ticket

Job-CostRecords


OtherActual OHCharges

Indirect

Material

Indirect

Labor Overhead

Appliedwith

OHR

=

Actual

Driver

Qt

x

OHR


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


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


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.


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??


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?


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


14/17

McGraw-Hill/Irwin

33--1414



Actualoverhead

costs

$650,000

$30,000overapplied

OverheadAppliedto jobs

$680,000

UnadjustedBalance

RoseCosMfg. Overhead

for the ear

RoseCos Costof Goods Sold

for the ear


15/17

McGraw-Hill/Irwin

33--1515



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


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


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.

13632 session 2-job costing

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