Hho8e Ch15 Stud

7/23/2019 Hho8e Ch15 Stud

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Chapter15-1


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Chapter15-2

CHAPTER 15CHAPTER 15

JOB ORDERJOB ORDER

COSTINGCOSTING

Accounting, Fourth Edition


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Chapter15-3

Chapter PreviewChapter Preview


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Chapter15-4

1. Explain the characteristics and purposes of costaccounting.

2. Describe the flow of costs in a job order costing

system.3. Explain the nature and importance of a job cost

sheet.

4. Indicate how the predetermined oerhead rate isdetermined and used.

Study ObjectivesStudy Objectives



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Chapter15-5



!. "repare entries for jobs completed andsold.

#. Distinguish between under$ and oer$

applied manufacturing oerhead.


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Chapter15-6

Job Order CostinJob Order Costin

Job Order CostinJob Order Costin

Job order costJob order cost

systemsystem

Process costProcess cost

systemsystem

AccumulatingAccumulating

manufacturing costsmanufacturing costs

Assigning manufacturingAssigning manufacturing

costs to work in processcosts to work in process

Assigning costs to finishedAssigning costs to finished

goodsgoods

Assigning costs to cost ofAssigning costs to cost ofgoods soldgoods sold

Job order costing forJob order costing for

service companiesservice companies

Summary of job order costSummary of job order cost

flowsflows

Advantages/disadvantagesAdvantages/disadvantages

of job order costingof job order costing

CostCost

Accout!"Accout!"

S#ste$sS#ste$s

CostCost

Accout!"Accout!"

S#ste$sS#ste$s

Jo% Or&erJo% Or&er

Cost '(o)Cost '(o)

Jo% Or&erJo% Or&er

Cost '(o)Cost '(o)Report!" Jo%Report!" Jo%

Cost DataCost Data

Report!" Jo%Report!" Jo%

Cost DataCost Data

Cost of goodsCost of goods

manufacturedmanufactured

scheduleschedule

Income statementIncome statement

presentationpresentation

nder! ornder! or

overappliedoverappliedmanufacturingmanufacturing

overheadoverhead


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Chapter15-*

Preview o! ChapterPreview o! ChapterPreview o! ChapterPreview o! Chapter

%ccurate product costing is critica"to acompany&s success'

(or accurate bids on new

jobs.

(or identifyingprofitability of completed

jobs.(or determining potentialprofitability of new jobs.


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Chapter15-+

Cost Accountin Syste#sCost Accountin Syste#sCost Accountin Syste#sCost Accountin Syste#s

)ost accounting inoles the'$easurin%$easurin%

Recordin%Recordin%andReportin o! product costs&Reportin o! product costs&

(rom accumulated data* companies determine both the totalcost and the unit cost of each product.

+he accuracy of the product cost information is critical tocompany success.

"roduct cost information helps determine which product toproduce* the amount to produce* and what price to charge.

,ital for effectie ealuation of employee performance.

SO 1' E(p"ain the characteristics and purposes o! cost accountin&SO 1' E(p"ain the characteristics and purposes o! cost accountin&


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Chapter15-,


)onsists of accounts for the arious manufacturingcosts.

-uch accounts are fully integrated into the generalledger system.

An i#portant !eature is the use o!

a perpetua" inventory syste#toprovide i##ediate% up)to)date in!or#ation on

the cost o! a product&



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Chapter15-1


+here are two basic types of cost accounting systems'



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Chapter15-11

Job Order Cost Syste#Job Order Cost Syste#Job Order Cost Syste#Job Order Cost Syste#

)osts are assigned to eachjob orbatch of goods.

ob' /a0ing a moie by Disneyatch' 22! wedding initations for /ary

% job may be for a specific order or for inentory.

% 0ey feature'

Each job or batch has its owndistinguishing characteristics .



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Chapter15-12


+he objectie' to compute the cost per job.

/easures costs for each job completed notforset time periods.


Illustration 1!$1


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Chapter15-13

Process Cost Syste#Process Cost Syste#Process Cost Syste#Process Cost Syste#

sed when a large olume of similar products aremanufactured $

)ereal* %utomobiles* )ompact Discs* "aint.

"roduction is continuous.

)osts are accumulated for aspecifictime period % wee0 or a month .

)osts are assigned to departments or processesfor a set period of time.

SO 1 E(p"ain the characteristics and purposes o! cost accountin&SO 1 E(p"ain the characteristics and purposes o! cost accountin&


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Chapter15-14

Process Cost Syste#Process Cost Syste#Process Cost Syste#Process Cost Syste#


Illustration 1!$2


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Chapter15-15

)ost accounting inoles the measuring*)ost accounting inoles the measuring*recording* and reporting of'recording* and reporting of'

a.a. "roduct costs"roduct costs.

b. (uture costs.

c. /anufacturing processes.d. /anagerial accounting decisions.

Review *uestionReview *uestion




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Chapter15-16

Job Order Cost +"owsJob Order Cost +"owsJob Order Cost +"owsJob Order Cost +"ows

+he flow of costs direct materials* direct labor*manufacturing oerhead $ parallels the physicalflow of the materials as they are conerted into

finished goods/anufacturing costs are assigned to or0 in "rocess. %n%sset %ccount

)ost of completed jobs is transferred to (inished 5oods. %n

%sset %ccount

hen units are sold* the cost is transferred to )ost of 5oods-old. %n Expense %ccount.

SO , -escribe the !"ow o! costs in a job order costin syste#&SO , -escribe the !"ow o! costs in a job order costin syste#&


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Chapter15-1*

Job Order Cost +"ows ) OverviewJob Order Cost +"ows ) OverviewJob Order Cost +"ows ) OverviewJob Order Cost +"ows ) Overview


Illustration 1!$3


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Chapter15-1+



Illustration 1!$4


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Chapter15-1,

Job Order Cost +"owJob Order Cost +"owJob Order Cost +"owJob Order Cost +"ow

%ccumulatethe manufacturing costs incurred'

6aw /aterials*(actory 7abor* and

/anufacturing 8erhead.

%ssignthe accumulated costs to the wor0 done.

Two $ajor Steps in +"ows o! Costs



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Chapter15-2

Accu#u"atin $anu!acturin CostAccu#u"atin $anu!acturin CostAccu#u"atin $anu!acturin CostAccu#u"atin $anu!acturin Cost

6aw /aterials are debited to 6aw /aterials Inentorywhenpurchased.

%t this point* the cost of materials are notassigned to

specific jobs or orders.

Raw $ateria"s Costs

SO , E(p"ain the !"ow o! costs in a job order costin syste#&SO , E(p"ain the !"ow o! costs in a job order costin syste#&

Example'

8n anuary 4* allace /anufacturing )ompany purchases 2*999 handles at :! per unit;:19*999< and =99 modules at :49 per unit ;:32*999< for a total cost of :42*999.


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Chapter15-21


)onsists of'

5ross earnings of factory wor0ers*Employer payroll taxes on such earnings* and

(ringe benefits incurred by the employer.

)ompanies debit labor costs to (actory 7aborasthey incur these costs.

+actory .abor Costs

SO ,' E(p"ain the !"ow o! costs in a job order costin syste#&SO ,' E(p"ain the !"ow o! costs in a job order costin syste#&


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Chapter15-22


+actory .abor Costs /Continued0

SO ,' E(p"ain the !"ow o! costs in a job order costin syste#s&SO ,' E(p"ain the !"ow o! costs in a job order costin syste#s&

Example'allace /anufacturing incurs :32*999 of factory labor costs* of which :2>*999relates to wages payable and :!*999 relates to payroll taxes payable in anuary.


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Chapter15-23


/any types of oerhead costs(or example* machinery repairs* indirect materials*

and indirect labor.

Debit to /anufacturing 8erheadDaily as incurred or"eriodically through adjusting entries.

$anu!acturin Overhead Costs



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Chapter15-24


$anu!acturin Overhead Costs ) Continued


Example'+he following is a summary entryto record the totals from multiple

transactions that occurred during anuary for the allace /anufacturing)ompany&


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Chapter15-25

hen incurred* factory labor costs arehen incurred* factory labor costs aredebited to'debited to'

a.a. or0 in "rocessor0 in "rocess.

b. (actory ages Expense.

c. (actory 7abor.d. (actory ages "ayable.


Accu#u"atin $anu!acturin CostsAccu#u"atin $anu!acturin CostsAccu#u"atin $anu!acturin CostsAccu#u"atin $anu!acturin Costs



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Chapter15-26

Assinin $anu!acturin Costs to or2 3n ProcessAssinin $anu!acturin Costs to or2 3n ProcessAssinin $anu!acturin Costs to or2 3n ProcessAssinin $anu!acturin Costs to or2 3n Process

/anufacturing costs are assigned to or0 in "rocesswith'

Debits to or0 in "rocess Inentory

)redits to 6aw /aterials Inentory(actory 7abor/anufacturing 8erhead

%n essential accounting record in assigning costs to

jobs is ajob cost sheet.

SO 4 E(p"ain the nature and i#portance o! a job cost sheet&SO 4 E(p"ain the nature and i#portance o! a job cost sheet&


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Chapter15-2*


Job cost sheet

sed to record costs of a specific job.

sed to determine the total and unit costs

of a completed job.

"ostings to job cost sheets are made daily.

+he job cost sheet is thesubsidiary ledger for thecontrol account or0 in "rocess.

Each entry to a or0 in "rocess Inentorymust beaccompanied by a corresponding posting to one ormore job cost sheets.



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Assinin $anu!acturin Costs to Job Cost SheetAssinin $anu!acturin Costs to Job Cost SheetAssinin $anu!acturin Costs to Job Cost SheetAssinin $anu!acturin Costs to Job Cost Sheet


Illustration 1!$!


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Chapter15-2,


Assinin Raw $ateria"s Cost

%ssigned to a job when materials areissued.

% materials re?uisition slip.ritten authori@ation forissuing raw materials.

/ay be directly issued to use on a job

$ direct materials./ay be considered indirect materials

part of manufacturing oerhead.



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$ateria"s Reuisition S"ip


Illustration 1!$#


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Assinin Raw $ateria"s Cost

/ay use any of the inentory costing methods ;(I(8* 7I(8*%erage )ost< in costing the re?uisitions to the job cost sheets.

"osted dailyto indiidual job cost sheets and periodicallyjournali@ed.


Example'%ssume that :24*999 of direct materials and :#*999 of indirect materials are used byallace /anufacturing in anuary.


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Chapter

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AssininRaw $ateria"s Cost

The su# o! thedirect #ateria"s

co"u#ns o! the job

cost sheets shou"deua"the direct

#ateria"s debited toor2 in Process

3nventory&

Illustration 1!$>


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Assinin +actory .abor Cost

%ssigned to jobs on the basis of time tic0ets.

+ime tic0ets are prepared when the wor0 is performed.

+ime tic0ets indicate'

Employee*

Aours wor0ed*

%ccount and job charged* and

+otal labor cost.



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Assinin +actory .abor

+ime tic0ets are sent to payroll to be sorted* totaled*and journali@ed.

4or0 in "rocessis debited for direct labor costs.

/anufacturing 8erheadis debited for indirect

labor costs.(actory labor is left with a @erobalance.


Example'%ssume that total factory labor cost is :32*999 of total factory labor cost which

consists of :2=*999 of direct labor cost and :4*999 of indirect labor cost.


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Ti#e Tic2et


Illustration 1!$=


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Chapter

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Job Cost SheetsA!ter Postin

The su# o! thedirect "abor

co"u#ns o! the jobcost sheets shou"deua"the direct"abor debited toor2 in Process

3nventory&

Illustration 1!$B


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Chapter

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+he source documents for assigning material and+he source documents for assigning material andfactory labor costs to job cost sheets are'factory labor costs to job cost sheets are'

a.a. Inoices and time tic0etsInoices and time tic0ets.

b. Inoices and payroll register.

c. /aterials re?uisition slips and payroll register.d. /aterials re?uisition slips and time tic0ets.


Assinin $anu!acturin CostsAssinin $anu!acturin Coststo or2 in Processto or2 in Process

Assinin $anu!acturin CostsAssinin $anu!acturin Coststo or2 in Processto or2 in Process



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Assinin $anu!acturin Overhead

nli0e direct materials and direct labor*manufacturing oerhead relates to productionoperations as a whole.

)annot be assigned to specific jobs based onactual costs incurred but must be assigned towor0 in process and to specific jobs on anestimated basisthrough the use of a C

SO 6 3ndicate how the predeter#ined overhead rate is deter#ined and used&SO 6 3ndicate how the predeter#ined overhead rate is deter#ined and used&

Predetermined Overhead Rate


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Chapter

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ased on the relationship between estimatedannualoerhead costs and expected annual operatingactiity.

Expressed in terms of an actiity basesuch as'

Direct labor costs*

Direct labor hours*

/achine hours* and%ny other actiity that is an e?uitable base forapplying oerhead costs to jobs.


Predeter#ined Overhead Rate


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Chapter

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Predeter#ined Overhead Rate

Established at the beginningof the year.

/ay use a single* company$wide predetermined rate.

7arge companies often use a different rate for eachdepartment in the company.

(ormulafor computing the predetermined oerhead rate is


Illustration 1!$19


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Chapter

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Assinin $anu!acturin Overhead

%ssigned to or0 in "rocess during the period to get timelyinformation about the cost of a completed job.

)urrent trend is to use machine hours as the actiity base due toincreased automation in manufacturing operations.


Illustration 15-11

A i i $ ! t i C t t 2 3 PA i i $ ! t i C t t 2 3 P


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Example'

allace /anufacturing uses direct labor costas the actiity base.

Estimated annual costs'8erhead costs :2=9*999Direct labor costs :3!9*999

+he predetermined oerhead rate is :2=9*999 :3!9*999 =9F.

8erhead applied is :22*499;:2=*999 anuary direct labor costs G =9F*999 cash. %:4*!99 and later sells it for :>*999 cash. %correct entry is'correct entry is'

a. Debit (inished 5oods Inentory :>*999 and credit or0in "rocess Inentory :>*999.

b. Debit )ost of 5oods -old :>*999 and credit (inished5oods Inentory :>*999.

c. Debit (inished 5oods Inentory :4*!99 and credit or0in "rocess Inentory :4*!99.

d. Debit %ccounts 6eceiable :>*999 and credit -ales:>*999.


Entries to Report Job Cost -ataEntries to Report Job Cost -ataEntries to Report Job Cost -ataEntries to Report Job Cost -ata

SO 5 Prepare entries !or jobs co#p"eted and so"d&SO 5 Prepare entries !or jobs co#p"eted and so"d&

d " d $ ! h d8 d O "i d $ ! i O h d

8nd r r Ov r pp"i d $ nu! cturin Ov rh d8nder or Overapp"ied $anu!acturin Overhead


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Chapter

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8nder) or Overapp"ied $anu!acturin Overhead8nder) or Overapp"ied $anu!acturin Overhead8nder) or Overapp"ied $anu!acturin Overhead8nder) or Overapp"ied $anu!acturin Overhead

% debit balancein manufacturing oerhead means that oerhead is

underapplied.

8erhead assigned to wor0 in process is lessthanoerhead incurred.

% credit balancein manufacturing oerhead means that oerheadis oerapplied.

8erhead assigned to wor0 in process isgreaterthanoerhead incurred.

SO 9 -istinuish between under) and overapp"ied #anu!acturin overhead&SO 9 -istinuish between under) and overapp"ied #anu!acturin overhead&

Illustration 1!$29

8 d O "i d $ ! i O h d8 d O "i d $ ! t i O h d

8nder or Overapp"ied $anu!acturin Overhead8nder or Overapp"ied $anu!acturin Overhead


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Chapter

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%ny year end balancein manufacturing oerheadis eliminated by adjusting cost of goods sold.

3nderapplied oerhead is debitedto )5-.

8erapplied oerhead is creditedto )5-&

SO 9 -istinuish between under) and overapp"ied #anu!acturin overhead&SO 9 -istinuish between under) and overapp"ied #anu!acturin overhead&

Example'

allace /anufacturing )ompany has a :2*!99 credit balance in /anufacturing8erhead at December 31. +he adjusting entry for the oerapplied oerhead is'


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/anufacturing oerhead is underapplied if'/anufacturing oerhead is underapplied if'

a. %ctual oerhead is less than applied.b. %ctual oerhead is greater than applied.

c. +he predetermined rate e?uals the actual rate.

d. %ctual oerhead e?uals applied oerhead.



SO 9 -istinuish between under) and overapp"ied #anu!acturin overhead &SO 9 -istinuish between under) and overapp"ied #anu!acturin overhead &

Ch R i i ! E i 15 9Ch t R i i ! E i 15 9

Ch pt R vi i ! E( cis 15 9Chapter Review rie! E(ercise 15 9


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ase )alculation

-. Cost :;


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or0 in "rocess Inentory 1#*299

6aw /aterials Inentory 1#*299

or0 in "rocess Inentory 12*999 (actory 7abor 12*999

or0 in "rocess Inentory 14*299

/anufacturing 8erhead 14*299

/ilner )ompany is wor0ing on two job orders. +he job cost/ilner )ompany is wor0ing on two job orders. +he job costsheets shows the following'sheets shows the following'

8 2918 291 8 2928 292Direct /aterialsDirect /aterials : >*299 :B*999: >*299 :B*999

Direct 7aborDirect 7abor : 4*999 :=*999: 4*999 :=*999

/anufacturing 8erhead/anufacturing 8erhead :!*299 :B*999:!*299 :B*999

"repare the three summary entries to record the assignment of"repare the three summary entries to record the assignment ofthe costs to or0 in "rocess from the data on the job costthe costs to or0 in "rocess from the data on the job costsheets.sheets.

Chapter Review B -o 3tD 15),Chapter Review B -o 3tD 15),Chapter Review B -o 3tD 15),Chapter Review B -o 3tD 15),


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Ch t

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