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Systems Design: Job-Order costing

LEARNING OBJECTIVES. 1.Distinguish between process costing and job-order costing and identify companies that would use each costing method.2.Identify the documents used in a job-order costing system.3.Compute predetermined overhead rates and explain why estimated overhead costs are used in the costing process.4. Record the journal entries that reflect the flow of costs in a job-order costing system..

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Systems Design: Job-Order costing

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    1. Systems Design: Job-Order costing

    2. LEARNING OBJECTIVES 1. Distinguish between process costing and job-order costing and identify companies that would use each costing method. 2. Identify the documents used in a job-order costing system. 3. Compute predetermined overhead rates and explain why estimated overhead costs are used in the costing process. 4. Record the journal entries that reflect the flow of costs in a job-order costing system.

    3. LEARNING OBJECTIVES 5. Apply overhead cost to Work in Process using a predetermined overhead rate. 6. Prepare the schedules of cost of goods manufactured and cost of goods sold that summarize the flow of costs. 7. Compute under- or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts. 8. (Appendix 3A) Explain the implications of basing the predetermined overhead rate on activity at capacity rather than on estimated activity for the period.

    5. Types of Costing Systems Used to Determine Product Costs

    6. Types of Costing Systems Used to Determine Product Costs

    7. Job-Order Costing

    8. Sequence of Events in a Job-Order Costing System

    9. Sequence of Events in a Job-Order Costing System

    10. Sequence of Events in a Job-Order Costing System

    11. Job-Order Cost Accounting The primary document for tracking the costs associated with a given job is the job cost sheet.

    12. Job-Order Cost Accounting

    13. Job-Order Cost Accounting

    14. Materials Requisition Form

    15. Materials Requisition Form

    16. Job-Order Cost Accounting

    17. Job-Order Cost Accounting

    18. Employee Time Ticket

    19. Job-Order Cost Accounting

    20. Job-Order Cost Accounting

    21. Job-Order Cost Accounting

    22. The predetermined overhead rate (POHR) used to apply overhead to jobs is determined before the period begins. Application of Manufacturing Overhead

    23. Application of Manufacturing Overhead

    24. Application of Manufacturing Overhead

    25. The Need for a Predetermined Manufacturing Overhead Rate Using a predetermined rate makes it possible to estimate total job costs sooner. Actual overhead for the period is not known until the end of the period.

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

    27. Overhead Application Example

    28. Overhead Application Example

    29. Overhead Application Example

    31. Job-Order Costing Document Flow Summary

    32. Job-Order Costing Document Flow Summary

    33. Job-Order Costing Document Flow Summary

    41. Overhead Application Example PearCo’s actual overhead for the year was $650,000 for a total of 170,000 direct labour 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 labour hour.

    42. Overhead Application Example PearCo’s actual overhead for the year was $650,000 for a total of 170,000 direct labour 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 labour hour.

    43. PearCo’s actual overhead for the year was $650,000 for a total of 170,000 direct labour 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 labour hour, Overhead Application Example

    44. Overapplied and Underapplied Manufacturing Overhead

    45. Overapplied and Underapplied Manufacturing Overhead

    46. Overapplied and Underapplied Manufacturing Overhead - Summary

    47. 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. Overhead Application Question 1

    48. 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. Overhead Application Question 1

    49. Tiger’s overhead was $50,000 underapplied. This amount would result in an adjustment that would decrease cost of goods sold by $50,000. a. True b. False Overhead Application Question 2

    50. Tiger’s overhead was $50,000 underapplied. This amount would result in an adjustment that would decrease cost of goods sold by $50,000. a. True b. False Overhead Application Question 2

    51. Job-Order Costing – Typical Accounting Entries

    52. Cost Flows – Material Purchases Raw material purchases are recorded in an inventory account.

    53. Direct materials issued to a job increase Work in Process and decrease Raw Materials. Indirect materials used are charged to Manufacturing Overhead and also decrease Raw Materials. Cost Flows – Material Usage

    54. Cost Flows – Labour The cost of direct labour incurred increases Work in Process and the cost of indirect labour increases Manufacturing Overhead.

    55. Cost Flows – Actual Overhead In addition to indirect materials and indirect labour, other manufacturing overhead costs are charged to the Manufacturing Overhead account as they are incurred.

    56. Cost Flows – Overhead Applied Work in Process is increased when Manufacturing Overhead is applied to jobs.

    57. Cost Flows – Period Expenses Non-manufacturing costs (period expenses) are charged to expense as they are incurred.

    58. Cost Flows – Cost of Goods Manufactured As jobs are completed, the cost of goods manufactured is transferred to Finished Goods from Work in Process.

    59. Cost Flows – Sales When finished goods are sold, two entries are required: (1) to record the sale; and (2) to record Cost of Goods Sold and reduce Finished Goods.

    60. Scrap and Rework Leads to

    61. Scrap The loss from scrap can be: 1. Allocated across all good units, or 2. Charged to overhead and in turn charged to all jobs. If scrap items are sold, the recovery can then be credited to : 1. The job, or 2. Manufacturing overhead.

    63. The Predetermined Overhead Rate and Capacity

    65. End of Chapter 3

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