1 / 51

Job Order Costing

Job Order Costing. Chapter 4. Overview—Job Costing. Job Costing Job versus Process costing Job costing example Costing Systems (4) Normal costing example Flow of Costs & J.E.s EOP Adj. J.E. to fix over/under allocated MOH. Building-Block Concepts of Costing Systems. Cost Assignment.

rory
Download Presentation

Job Order Costing

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Job Order Costing Chapter 4

  2. Overview—Job Costing • Job Costing • Job versus Process costing • Job costing example • Costing Systems (4) • Normal costing example • Flow of Costs & J.E.s • EOP Adj. J.E. to fix over/under allocated MOH

  3. Building-Block Conceptsof Costing Systems Cost Assignment Direct Costs Cost Object Cost Tracing Indirect Costs Cost Allocation Cost Allocation Base

  4. Job-Costing andProcess-Costing Systems Job-costing system Process-costing system Distinct units of a product or service Masses of identical or similar units of a product or service

  5. Seven-Step Approachto Job Costing Step 1: Identify the chosen cost object. Step 2: Identify the direct costs of the job. Step 3: Select the cost-allocation bases. Step 4: Identify the indirect costs.

  6. Seven-Step Approachto Job Costing Step 5: Compute the rate per unit. Step 6: Compute the indirect costs. Step 7: Compute the total cost of the job.

  7. General Approach to Job Costing A manufacturing company is planning to sell a batch of 25 special machines (Job 650) to a retailer for $114,800. Step 1: The cost object is Job 650. Step 2: Direct costs are: Direct materials = $50,000 Direct manufacturing labor = $19,000

  8. General Approach to Job Costing Step 3: The cost allocation base is machine-hours. Job 650 used 500 machine-hours. 2,480 machine-hours were used by all jobs. Step 4: Manufacturing overhead costs were $65,100.

  9. General Approach to Job Costing Step 5: Actual indirect cost rate is $65,100 ÷ 2,480 = $26.25 per machine-hour. Step 6: $26.25 per machine-hour × 500 hours = $13,125

  10. General Approach to Job Costing Step 7: Direct materials $50,000 Direct labor 19,000 Factory overhead 13,125 Total $82,125

  11. General Approach to Job Costing What is the gross margin of this job? Revenues $114,800 Cost of goods sold 82,125 Gross margin $ 32,675 What is thegross margin percentage? $32,675 ÷ $114,800 = 28.5%

  12. Actual costing Normal costing Extended-normal Standard Different Costing Systems:

  13. Different Costing Systems

  14. Normal Costing--example Assume that the manufacturing company budgets $60,000 for total manufacturing overhead costs and 2,400 machine-hours. What is the budgeted indirect-cost rate? $60,000 ÷ 2,400 = $25 per hour How much indirect cost was allocated to Job 650? 500 machine-hours × $25 = $12,500

  15. Normal Costing What is the cost of Job 650 under normal costing? Direct materials $50,000 Direct labor 19,000 Factory overhead 12,500 Total $81,500

  16. The flow of costs in a job-costing system.

  17. Transactions(flow of costs in job costing) Purchase of materials and other manufacturing inputs Conversion into work in process inventory Conversion into finished goods inventory Sale of finished goods

  18. Transactions $80,000 worth of materials (direct and indirect) were purchased on credit. Materials Control Accounts Payable Control 1. 80,000 1. 80,000

  19. Transactions Materials costing $75,000 were sent to the manufacturing plant floor. $50,000 were issued to Job No. 650 and $10,000 to Job 651. $15,000 of indirect materials were issued. What is the journal entry?

  20. Transactions Work-in-Process Control: Job No. 650 50,000 Job No. 651 10,000 Factory Overhead Control 15,000 Materials Control 75,000

  21. Transactions Materials Control 1. 80,000 2. 75,000 Work in Process Control 2. 60,000 Manufacturing Overhead Control 2. 15,000 Job 650 2. 50,000

  22. Transactions Total manufacturing payroll for the period was $27,000. Job No. 650 incurred direct labor costs of $19,000 and Job No. 651 incurred direct labor costs of $3,000. $5,000 of indirect labor was also incurred. What is the journal entry?

  23. Transactions Work in Process Control: Job No. 650 19,000 Job No. 651 3,000 Manufacturing Overhead Control 5,000 Wages Payable 27,000

  24. Transactions Wages Payable Control 3. 27,000 Work in Process Control 2. 60,000 3. 22,000 Manufacturing Overhead Control 2. 15,000 3. 5,000 Job 650 2. 50,000 3. 19,000

  25. Transactions Wages payable were paid. Wages Payable Control 27,000 Cash Control 27,000 Wages Payable Control Cash Control 4. 27,000 3. 27,000 4. 27,000

  26. Transactions Assume that depreciation for the period is $26,000. Other manufacturing overhead incurred amounted to $19,100. What is the journal entry?

  27. Transactions Manufacturing Overhead Control 45,100 Accumulated Depreciation Control 26,000 Various Accounts 19,100 What is the balance of the Manufacturing Overhead Control account?

  28. Transactions $62,000 of overhead was allocated to the various jobs of which $12,500 went to Job 650. Work-in-Process Control 62,000 Manufacturing Overhead Control 62,000 What are the balances of the control accounts?

  29. Transactions MOH-control WIP-control 2. 60,000 3. 22,000 6. 62,000 Bal. 144,000 2. 15,000 3. 5,000 5. 45,100 Bal. 3,100 6. 62,000

  30. Transactions The cost of Job 650 is: Job 650 2. 50,000 3. 19,000 6. 12,500 Bal. 81,500

  31. Transactions Jobs costing $104,000 were completed and transferred to finished goods, including Job 650. What effect does this have on the control accounts?

  32. Transactions WIP-control FG-control 7. 104,000 2. 60,000 3. 22,000 6. 62,000 Bal. 40,000 7. 104,000

  33. Transactions Job 650 was sold for $114,800. What is the journal entry? Accounts Receivable Control 114,800 Revenues 114,800 Cost of Goods Sold 81,500 Finished Goods Control 81,500

  34. Transactions What is the balance in the Finished Goods Control account? $104,000 – $81,500 = $22,500 Assume that marketing and administrative salaries were $9,000 and $10,000. What is the journal entry?

  35. Transactions Marketing and Administrative Costs 19,000 Salaries Payable Control 19,000

  36. Transactions Direct Materials Used $60,000 + Direct Labor and Overhead $84,000 – Cost of Goods Manufactured $104,000 = Ending WIP Inventory $40,000

  37. Transactions Cost of Goods Manufactured $104,000 – Ending Finished Goods Inventory $22,500 = Cost of Goods Sold $81,500

  38. Account for end-of-period underallocated or overallocated indirect costs using alternative methods. EOP Adj. J.E.

  39. End-Of-Period Adjustments MOH-control MOH-applied Bal. 65,100 Bal. 62,000 Underallocated indirect costs Overallocated indirect costs

  40. End-Of-Period Adjustments How was the allocated overhead determined? 2,480 machine-hours × $25 budgeted rate = $62,000 $65,100 – $62,000 = $3,100 (underallocated)

  41. End-Of-Period Adjustments Actual manufacturing overhead costs of $65,100 are more than the budgeted amount of $60,000. Actual machine-hours of 2,480 are more than the budgeted amount of 2,400 hours. Budgeted MOH rate = $60,000 / 2,400 MH = $25 / MH Actual MOH rate = $65,100 / 2,480 MH = $26.25 / MH

  42. End-Of-Period Adjustments Approaches to disposing underallocated or overallocated overhead: 1. Adjusted allocation rate approach 2. Proration approaches (2 ways) 3. Immediate write-off to Cost of Goods Sold approach

  43. Adjusted AllocationRate Approach Actual manufacturing overhead ($65,100) exceeds manufacturing overhead allocated ($62,000) by 5%. 3,100 ÷ 62,000 = 5% Actual manufacturing overhead rate is $26.25 per machine-hour ($65,100 ÷ 2,480) rather than the budgeted $25.00.

  44. Adjusted AllocationRate Approach The manufacturing company could increase the manufacturing overhead allocated to each job by 5%. Manufacturing overhead allocated to Job 650 under normal costing is $12,500. $12,500 × 5% = $625 $12,500 + $625 = $13,125, which equals actual manufacturing overhead.

  45. Proration Approach Basis to prorate under- or overallocated overhead: • ending $ amount of MOH in WIP, FG, and • CoGS balances (before proration) B. ending $ balances of Work-in-Process, Finished Goods, and Cost of Goods Sold

  46. Proration Approach “A” Assume the following manufacturing overhead component of year-end balances (before proration): Work in Process $20,000 25.0% Finished Goods 10,000 12.5% Cost of Goods Sold 50,000 62.5% Total $80,000 100 %

  47. Proration Approach “A” Manufacturing Overhead Finished Goods 65,100 62,000 22,500 3,100 388 0 22,888 Cost of Goods Sold Work-in-Process 81,500 40,000 1,938 775 83,438 40,775

  48. Proration Approach “B” Ending $ balances of Work-in-Process, Finished Goods, and Cost of Goods Sold Work in Process $ 40,000 27.8% Finished Goods 22,500 15.6% Cost of Goods Sold 81,500 56.6% Total $144,000 100 %

  49. Proration Approach “B” Manufacturing Overhead Finished Goods 65,100 62,000 22,500 3,100 484 0 22,984 Cost of Goods Sold Work in Process 81,500 40,000 1,755 862 83,255 40,862

  50. Manufacturing Overhead 65,100 62,000 3,100 0 Cost of Goods Sold 81,500 3,100 84,600 Immediate Write-off to Cost of Goods Sold Approach

More Related