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19 - 1 PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon...

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19 - 1 PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 19 Job Order Cost Accounting
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19 - 1

PowerPoint Authors:Susan Coomer Galbreath, Ph.D., CPACharles W. Caldwell, D.B.A., CMAJon A. Booker, Ph.D., CPA, CIACynthia J. Rooney, Ph.D., CPA

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 19

Job Order Cost Accounting

19 - 2

ProcessCosting

JobCosting

Used for production of large, unique, or high-cost items.

Built to order rather than mass produced.

Many costs can be directly traced to each job.

Used for production of large, unique, or high-cost items.

Built to order rather than mass produced.

Many costs can be directly traced to each job.

Cost Accounting Systems

Chapter 20

C 1

19 - 3

ProcessCosting

JobCosting

Typical job order cost applications: Special-order printing Building construction

Also used in service industry Hospitals Law firms

Typical job order cost applications: Special-order printing Building construction

Also used in service industry Hospitals Law firms

Chapter 20

Job Order ProductionC 1

19 - 4

Receive order from

customer.

Predict cost to complete

job.

Negotiate a sales price and decide whether to

pursue the job.

Schedule production of

the job.

Events in Job Order CostingC 1

19 - 5

Goods in Process

Cost of GoodsSold

Labor

Materials

Ind

irec

tIn

dir

ect

FinishedGoods

FactoryOverhead

Direct

Direct

Allocate

Job Order Production ActivitiesC 1

19 - 6

Road Warriors Job Cost Sheet

Customer Carroll Connor Job No. B15Address 1542 High Point Dr. Malibu, CaliforniaJob Description Level I Alarm System on Ford Expedition Date promised 3/15/13 Date started 3/3/13 Date completed

Direct Materials Direct Labor Factory OverheadDate Req. Cost Date Ticket Cost Date Rate Cost

3/7/13 R-4705 225$ 3/8/13 L-3479 60$ 3/08/13 160% 96$

Total 225$ Total 60$ Total 96$

Remarks Cost SummaryDirect Materials 225$ Direct Labor 60 Factory Overhead 96$ Total Cost 381$

Job Cost SheetP 3

19 - 7

Road Warriors uses a predetermined overhead rate (POHR) based on direct labor cost to apply overhead to jobs.

Estimated total manufacturingoverhead cost for the coming period

Estimated total direct labor costsfor the coming period

POHR =

POHR = = 160% of direct labor $$200,000

$125,000

Predetermined Overhead RateP 3

19 - 8

Materials Ledger CardsMaterials

Ledger CardsMaterials Ledger CardsMaterialsRequisition

Direct materials

The materials requisition

indicates the cost of direct materials

to charge tojobs

and the cost of indirect materials

to charge to overhead.

Indirect materials

Job Cost Sheets

Job Cost Sheets

Job Cost Sheets

Job Cost Sheets

Factory Overhead Account

Material Cost Flows and DocumentsP 1

19 - 9

Employee time tickets indicate

the cost of direct laborto charge to

jobsand the cost

of indirect labor to charge to

overhead.

Job Cost Sheets

Factory Overhead Account

Job Cost Sheets

Job Cost Sheets

Job Cost Sheets

Direct Labor

Indirect Labor

Employee Time TicketEmployee Time

TicketEmployee Time TicketEmployee Time

Ticket

Labor Cost Flows and DocumentsP 2

19 - 10

MaterialPurchases

DirectMaterial

DirectMaterial

Raw Materials

Factory Overhead

ActualOverhead

Costs

Indirect Material

Dr Cr

Dr Cr

Summary of Cost FlowsP 1

Goods in Process Dr Cr

19 - 11

Incurred DirectMaterial

Actual Applied factory factoryoverhead overhead

=/an adjustment is needed.

We will look at how to accomplish this later.

When

Goods in ProcessFactory Payroll

Factory Overhead

DirectLabor

DirectLabor

Indirect Labor

ActualOverhead

Costs

Overhead

OverheadApplied to

Work inProcess

Dr Cr

Dr Cr Dr Cr

Summary of Cost FlowsP 2

P 3

19 - 12

DirectMaterialDirectLabor

Overhead

Cost ofGoodsMfd.

Cost ofGoodsMfd.

Cost ofGoodsSold

Cost ofGoodsSold

Goods in Process Finished Goods

Cost of Goods Sold Dr Cr

Dr Cr Dr Cr

Summary of Cost FlowsP 3

19 - 13

Overhead Application

Overhead is notincurred uniformly

during the year.

Actual overhead rateActual overhead ratemight vary from might vary from month to month.month to month.

Predetermined ratemakes it possible to

estimate job costs sooner.

Reasons for using a POHRReasons for using a POHR(predetermined overhead rate)(predetermined overhead rate)

P 4

19 - 14

Overhead is overapplied.

Overheadapplied to

Work in Process

(POHR × Activity)

Actualoverhead

costsincurred

Adjustment of Overapplied or Underapplied Overhead

P 4

19 - 15

Overhead is underapplied.

Actualoverhead

costsincurred

Overheadapplied to

Work in Process

(POHR × Activity)

Adjustment of Overapplied or Underapplied Overhead

P 4

19 - 16

Cost of Goods

Overhead is: Sold is: Adjustment will:

Actual overhead > applied overhead

Underapplied Too lowIncrease Cost of Goods Sold

Actual overhead < applied overhead

Overapplied Too highDecrease Cost of Goods Sold

Adjusting Cost of Goods Sold for underapplied or overapplied overhead

Adjustment of Overapplied or Underapplied Overhead

P 4

19 - 17

End of Chapter 19


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