Chapter 3 Costing Systems: Job Order Costing

1. Chapter 3Costing Systems: Job Order Costing Fall 2007 Crosson Use only with permission of Susan Crosson

2. Learning Objectives: How much does it cost? Types of Product Costing Systems Cost Flows in a Job Order Costing System in T-accounts and Journal entries Completing a Job Order Cost Card Computing a Job Order’s Product Unit Cost Use only with permission of Susan Crosson

3. In Chapter 2 the question was: How much does it cost? • Unit cost of a product or service under Normal Costing: Costs of Goods Manufactured* Units produced *Actual DM, Actual DL, Applied OH Use only with permission of Susan Crosson

4. Question refined:How much does a job cost? _______Cost of Job*_____ Number of Units Produced *DM+DL+OH Use only with permission of Susan Crosson

5. Types of Product Cost SystemsTable 1 • Job Order Costing • Process Costing Income Statement format the same Use only with permission of Susan Crosson

6. Financial Reporting of Costs • Manufacturing Income Statement Sales -Cost of Goods Sold (COGS) =Gross Margin -SAG =Net Income • Chapter 2 Exhibit 1 in text • Example: Chapter 2 E3 or E8. Use only with permission of Susan Crosson

7. What Do You Know? Chapter 3 E 7 Starke Company Use only with permission of Susan Crosson

8. What Do You Know? E 7 Starke Company Use only with permission of Susan Crosson

9. Financial Reporting of Costs Where do Manufacturing Income Statements come from? Use only with permission of Susan Crosson

10. Inventory Accounts and Job Order Cost Flows • Exhibit 1 • 3 Inventory Accounts: • Materials • Work in Process • Finished Goods • Cookie Example Use only with permission of Susan Crosson

11. The Materials Account:the account that summarizes all material purchases Material Inventory Use only with permission of Susan Crosson

12. The Work in Process Account: the account that summarizes of all in process Job Order Cards Current Manufacturing Costs WIP Inventory Info. for the I/S’s COGM comes from this account! Use only with permission of Susan Crosson

13. The Finished Goods Account: the account that summarizes all completed job order cards BB+COGM=COGAS Finished Goods Inventory Use only with permission of Susan Crosson

14. Material Inventory RECAP: Work in Process Inventory Info. for the I/S’s COGM comes from this account! Finished Goods Inventory Good follow up is SE 5, SE6, or P2. Look and listen to journal entries SE4. Use only with permission of Susan Crosson

15. What Do You Know? Now Do E 7 Starke Company using T-accounts Use only with permission of Susan Crosson

16. Material Inventory E 7 in T accounts: Work in Process Inventory Info. for the I/S’s COGM comes from this account! Finished Goods Inventory Use only with permission of Susan Crosson

17. Material Inventory E 7 in T accounts: Work in Process Inventory Info. for the I/S’s COGM comes from this account! Finished Goods Inventory Use only with permission of Susan Crosson

18. Material Inventory Try E 6 for June… Work in Process Inventory Info. for the I/S’s COGM comes from this account! Finished Goods Inventory Use only with permission of Susan Crosson

19. Material Inventory E 6 for June… Work in Process Inventory Info. for the I/S’s COGM comes from this account! Finished Goods Inventory Use only with permission of Susan Crosson

20. Material Inventory E 6 for July… Work in Process Inventory Info. for the I/S’s COGM comes from this account! Finished Goods Inventory *120% of 54,540 Use only with permission of Susan Crosson

21. Material Inventory Now Try P6… Know Journal entries and T-accounts!!! Work in Process Inventory Info. for the I/S’s COGM comes from this account! Finished Goods Inventory Hint: create a WIP account for each Job. Use only with permission of Susan Crosson

22. Where does Work in Process Information come from? Use only with permission of Susan Crosson

23. Chapter 3 Job Order Cost Card Format Job Order Cost Card Job Order #: Batch  Custom Customer:  Specifications: Date of Order:  Date of Completion:  Costs Charged to Job Previous Month Current Month Total Cost Totals Units Completed: Product Unit Cost: Profit Factor: Revenue Generated: Job Cost Card Use only with permission of Susan Crosson

24. Job Cost Card Format • Figure 2-Product • Figure 3-Service • Review Problem • Good follow up exercises are SE8, SE10, E12, E15. • Look and listen to SE8. Use only with permission of Susan Crosson

25. Chapter 3 Job Order Cost Card Format Job Order Cost Card Job Order #:2003-A7 Batch  Custom Customer: Arthur Farnsworth Specifications: Annual Individual Tax Return Date of Order:  3/24/x8 Date of Completion: 4/8/x8 Costs Charged to Job Previous Month Current Month Total Cost Client Interview Preparation of Return Delivery  Profit Factor:25% Revenue Generated: SE 10 Job Cost Card 10+50+20= 60+24= $ $ 16+12+240+120 $ 12 Totals $ $ $ $ Use only with permission of Susan Crosson

26. Chapter 3 Job Order Cost Card Format Job Order Cost Card Job Order #:2003-A7 Batch  Custom Customer: Arthur Farnsworth Specifications: Annual Individual Tax Return Date of Order:  3/24/x8 Date of Completion: 4/8/x8 Costs Charged to Job Previous Month Current Month Total Cost Client Interview Preparation of Return Delivery  Profit Factor:25% Revenue Generated: SE 10 Job Cost Card 10+50+20 60+24 $164 $388 16+12+240+120 $12 12 Totals $564 Profit= $141 $705 Use only with permission of Susan Crosson

27. Check figure: Contract Revenue $1,801.50 What Do You Know?: E 13 Use only with permission of Susan Crosson

28. Material Inventory Try P5 Job P-12… Know Job Cards and T-accounts!!! Work in Process Inventory Info. for the I/S’s COGM comes from this account! Finished Goods Inventory Homework Hint: create a WIP account for each Job. Use only with permission of Susan Crosson

29. Chapter 3 Job Order Cost Card Format Job Order Cost Card Job Order #: Batch  Custom Customer:  Specifications: Date of Order:  Date of Completion:  Costs Charged to Job Previous Month Current Month Total Cost Totals Units Completed: Product Unit Cost: Profit Factor: Revenue Generated: P5 Job Cost Card for P-12… Use only with permission of Susan Crosson

30. Homework:Problem 2 Use only with permission of Susan Crosson

31. Build Your Own Business with LEGOS • Form groups of 4 students • Obtain a 2 sets of Legos (return at end of BYOB) • Assign each student member a team role: • Manager (instructions and picture of product) • Employee (product builder) • Accountant (must have job cost card) • Customer (quality control) • Each team will build 2 products with accountant recording costs on job card • In your group, how much does one unit cost? • Compare results with other teams, do all the cost cards agree? Why not? Use only with permission of Susan Crosson

32. Put all Legos, instructions, picture, etc. back in the bag.Return bags to front of class. Before you leave….. Use only with permission of Susan Crosson

33. Example of Job Order Costing • http://inst.sfcc.edu/~scrosson/w2002/6E/Chilly, Group E Website/index.html Use only with permission of Susan Crosson