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8/9/2019 Chap 002 COST
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PowerPoint Authors:Susan Coomer Galbreath, Ph.D., CPACharles W. Caldwell, D.B.A., CMAJon A. Booker, Ph.D., CPA, CIA
Cnthia J. !oone, Ph.D., CPAMcGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies Inc! "ll rights reser#e$!
Job"#rder Costin$Cha%ter &'
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Job"#rder Costin$: An #(er(iew
Job-order costing systems areJob-order costing systems areused when:used when:
1.1.Many different products are produced eachMany different products are produced eachperiod.period.
2.2.Products are manufactured to order.Products are manufactured to order.
3.3.The unique nature of each order requiresThe unique nature of each order requirestracing or aocating costs to each !ob" andtracing or aocating costs to each !ob" andmaintaining cost records for each !ob.maintaining cost records for each !ob.
Job-order costing systems areJob-order costing systems areused when:used when:
1.1.Many different products are produced eachMany different products are produced eachperiod.period.
2.2.Products are manufactured to order.Products are manufactured to order.
3.3.The unique nature of each order requiresThe unique nature of each order requirestracing or aocating costs to each !ob" andtracing or aocating costs to each !ob" andmaintaining cost records for each !ob.maintaining cost records for each !ob.
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Job"#rder Costin$: An #(er(iew
)*am%les o+ om%anies that)*am%les o+ om%anies that
would use -ob"order ostin$ inlude:would use -ob"order ostin$ inlude:..Boein$ /airra+t manu+aturin$0Boein$ /airra+t manu+aturin$0'.'.Behtel International /lar$e"sale onstrution0Behtel International /lar$e"sale onstrution0
1.1.Walt Disne Studios /mo(ie %rodution0Walt Disne Studios /mo(ie %rodution0
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Job #o. 1
Job #o. 2
Job #o. 3
$hargedirect
materia anddirect abor
costs to
each !ob aswor% is
performed.
Job"#rder Costin$ 2 An )*am%le
&irect Materias
&irect 'abor
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Manu+aturin$Manu+aturin$#(erhead,#(erhead,
inludin$inludin$
indirectindirect
materialsmaterialsandandindirect laborindirect labor,,are alloatedare alloated
to all -obsto all -obsrather thanrather than
diretl traeddiretl traed
to eah -ob.to eah -ob.
Job"#rder Costin$ 2 An )*am%le
&irect Materias
&irect 'abor
Job #o. 1
Job #o. 2
Job #o. 3Manufacturing()erhead
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Pear$o Job $ost *heet
Job #umber + - 1,3 &ate nitiated 3-,-11
&ate $ompeted
&epartment 3 /nits $ompeted
tem 0ooden cargo crate&irect Materias &irect 'abor Manufacturing ()erhead
eq. #o. +mount Tic%et ours +mount ours ate +mount
$ost *ummary /nits *hipped
&irect Materias &ate #umber aance
&irect 'abor
Manufacturing ()erhead
Tota $ost
/nit Product $ost
3he Job Cost Sheet
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Measurin$ Diret Materials Cost
Will E. Delite
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Measurin$ Diret Materials Cost
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Measurin$ Diret 4abor Costs
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Job"#rder Cost Aountin$
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4earnin$ #b-eti(e
$ompute a
predetermined o)erheadrate.
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Wh 5se an Alloation Base6
An alloation base, suh as diret labor"hours,An alloation base, suh as diret labor"hours,
diret labor dollars, or mahine"hours, is used todiret labor dollars, or mahine"hours, is used toassi$n manu+aturin$ o(erhead to indi(idual -obs.assi$n manu+aturin$ o(erhead to indi(idual -obs.
We use an alloation base beause:
a.It is im%ossible or di++iult to trae o(erhead osts to %artiular-obs.
b.Manu+aturin$ o(erhead onsists o+ man di++erent items ran$in$
+rom the $rease used in mahines to the %rodution mana$er7ssalar.
.Man t%es o+ manu+aturin$ o(erhead osts are +i*ed e(enthou$h out%ut +lutuates durin$ the %eriod.
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Manu+aturin$ #(erhead
A%%liation 3he %redetermined o(erhead rate /P#8!0 used to a%%lo(erhead to -obs is determined be+ore the %eriod be$ins.
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Com%utin$ Predetermined #(erhead
!ates3he %redetermined o(erhead rate is om%uted be+ore the %eriod be$insusin$ a +our"ste% %roess..)stimate the total amount o+ the alloation base /the denominator0that will be re;uired +or ne*t %eriod7s estimated le(el o+ %rodution.'.)stimate the total +i*ed manu+aturin$ o(erhead ost +or the omin$%eriod and the (ariable manu+aturin$ o(erhead ost %er unit o+ thealloation base.1.5se the +ollowin$ e;uation to estimate the total amount o+manu+aturin$ o(erhead:
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4earnin$ #b-eti(e '
+ppy o)erhead cost to
!obs using apredetermined o)erheadrate.
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#(erhead A%%liation !ate
P( 4,.55 per direct abor-hour
46,5"555 estimated tota manufacturing o)erhead
165"555 estimated direct abor-hours 7&'8P(
PearCo estimates that it will re;uire >&,&&& diret labor"hours to meet theomin$ %eriod7s estimated %rodution le(el. In addition, the om%anestimates total +i*ed manu+aturin$ o(erhead at ?'&&,&&&, and (ariablemanu+aturin$ o(erhead osts o+ ?'.@ %er diret labor"hour.
= a b = ?'&&,&&& /?'.@ %er diret labor"hour E >&,&&& diret labor"hours0 = ?'&&,&&& ?
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Job"#rder Cost Aountin$
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4earnin$ #b-eti(e 1
$ompute the tota costand a)erage cost per
unit of a !ob.
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Job"#rder Cost Aountin$
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Job"#rder Cost Aountin$
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Fuik Chek
Job W!1 at 9W ab, In. re;uired ?'&& o+ diretmaterials and & diret labor"hours at ? %er hour.)stimated total o(erhead +or the ear was ?@>&,&&&and estimated diret labor"hours were '&,&&&. What
would be reorded as the ost o+ -ob W!16
a. ?'&&.
b. ?1&.
. ?1H&.d. ?@1&.
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4earnin$ #b-eti(es < and
'earning (b!ecti)e , is tounderstand the fow of costs in
the !ob-order costing system and
prepare appropriate !ournaentries to record costs.
'earning (b!ecti)e 9 is to useT-accounts to show the fow of
costs in a !ob-order costing
system.
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e De+initions
1. aw materiasinlude an materials that $ointo the +inal %rodut.
2. 0or% in process onsists o+ units o+ %rodutionthat are onl %artiall om%lete and will re;uire+urther work be+ore the are read +or sale toustomers.
3. inished goods onsist o+ om%leted units o+
%rodut that ha(e not been sold to ustomers.,. $ost of goods manufactured inlude themanu+aturin$ osts assoiated with the $oodsthat were +inished durin$ the %eriod.
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low o+ Costs: A Cone%tual #(er(iew
inished;oods
$ost of
;oods*od
*eing and
+dministrati)e
Period Costs*eing and
+dministrati)e
Manufacturing()erhead
0or% inProcess
&irect 'abor
Balane Sheet Costs In(entories
InomeStatement)*%enses
Materia Purchases aw Materias
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Job"#rder Costin$: 3he low o+ Costs
The transactions7in T-account and
!ourna entry form8
that capture thefow of costs in a
!ob-order costingsystem are
iustrated on thefoowing sides.
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aw MateriasMateria
Purchases
Mfg. ()erhead
0or% in Process7Job $ost *heet8
Actual Applied
&irectMaterias &irect
Materias
ndirectMaterias
ndirectMaterias
3he Purhase and Issue o+ !aw
Materials: 3"Aount orm
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Cost lows 2 Material Purhases
#n #tober , Smith Cor%oration had ?,&&& in rawmaterials on hand. Durin$ the month, the om%an%urhased ?
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Issue o+ Diret and Indiret
Materials#n #tober 1, Smith had ?
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Mfg. ()erhead
*aaries and0ages Payabe
0or% in Process7Job $ost *heet8&irect
Materias&irect'abor
&irect'abor
ndirectMaterias
Actual Applied
ndirect
'abor
ndirect'abor
4abor Costs
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4abor Costs
Durin$ the month the em%loee time tikets inluded?1,&&& o+ diret labor and ?',&&& +or indiret labor.
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Mfg. ()erhead
*aaries and0ages Payabe
0or% in Process7Job $ost *heet8&irect
Materias&irect'abor
&irect'abor
ndirectMaterias
Actual Applied
ndirect'abor
ndirect'abor
!eordin$ Atual Manu+aturin$
#(erhead
(ther
()erhead
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!eordin$ Atual Manu+aturin$
#(erheadDurin$ the month the om%an inurred the +ollowin$atual o(erhead osts:
. 5tilities /heat, water, and %ower0 ?,@&&
'. De%reiation o+ +ator e;ui%ment ?',&&
1. Pro%ert ta*es %aable on +ator ?,&&&
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Mfg. ()erhead
*aaries and0ages Payabe
0or% in Process7Job $ost *heet8&irect
Materias&irect'abor
&irect'abor
ndirectMaterias
Actual Applied
ndirect'abor
ndirect'abor
A%%lin$ Manu+aturin$ #(erhead
(ther()erhead
()erhead+ppied
()erhead+ppied to
0or% in
Process
f actua and appiedmanufacturing o)erheadare not equa" a year-endad!ustment is required.
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A%%lin$ Manu+aturin$ #(erhead
Smith uses a %redetermined o(erhead rate o+ ?1.& %ermahine"hour. Durin$ the month, ,&&& mahine"hourswere worked on -obs.
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Aountin$ +or 9onmanu+aturin$ Cost
9onmanu+aturin$ osts are not assi$ned toindi(idual -obs, rather the are e*%ensed in the
%eriod inurred.
)*am%les:)*am%les:.. Salar e*%ense o+ em%loeesSalar e*%ense o+ em%loees
who work in a marketin$, sellin$,who work in a marketin$, sellin$,
or administrati(e a%ait.or administrati(e a%ait.'.'. Ad(ertisin$ e*%enses are e*%ensedAd(ertisin$ e*%enses are e*%ensed
in the %eriod inurred.in the %eriod inurred.
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Aountin$ +or 9onmanu+aturin$ Cost
Durin$ the month, Smith inurred but has not %aid salessalaries o+ ?',&&&, and ad(ertisin$ e*%ense o+ ?@&.
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inished ;oods0or% in Process7Job $ost *heet8&irect
Materias&irect
'abor()erhead
+ppied
$ost of
;oodsMfd.
$ost of;oodsMfd.
3rans+errin$ Com%leted 5nits
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3rans+errin$ Com%leted 5nits
Durin$ the %eriod, Smith om%leted -obs with a total ost o+?'@,&&&.
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inished ;oods
$ost of ;oods *od
0or% in Process7Job $ost *heet8&irect
Materias&irect'abor
()erhead+ppied
$ost of;oodsMfd.
$ost of
;oodsMfd.
$ost of;oods*od
$ost of;oods*od
3rans+errin$ 5nits Sold
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3rans+errin$ 5nits Sold
Smith sold the ?'@,&&& in +inished $oods in(entor toustomers +or ?
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4earnin$ #b-eti(e >
Prepare schedues of
cost of goodsmanufactured and costof goods sod and an
income statement.
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Shedule o+ Cost o+ GoodsManu+atured: e Cone%ts
This schedue contains threetypes of costs" namey directmaterias" direct abor" and
manufacturing o)erhead.
It alulates the ost o+ raw
material and diret labor used in%rodution and the amount o+manu+aturin$ o(erheadappied to %rodution.
t cacuates themanufacturing
costs associatedwith goods thatwere finished
during theperiod.
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+s items are remo)ed from rawmaterias in)entory and paced into
the production process" they arecaed direct materias.
Produt Cost lows
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$on)ersioncosts are costs
incurred tocon)ert the
direct materiainto a finished
product.
Produt Cost lows
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Produt Cost lows
+ manufacturing costs added toproduction during the period areadded to the beginning baance of
wor% in process.
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Produt Cost lows
$osts associated with the goods thatare competed during the period are
transferred to finished goods
in)entory.
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Produt Cost lows
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Fuik Chek
Be$innin$ raw materials in(entor was ?1',&&&.Durin$ the month, ?'@>,&&& o+ raw material
was %urhased. A ount at the end o+ the
month re(ealed that ?'H,&&& o+ raw materialwas still %resent. What is the ost o+ diretmaterial used6
a. ?'@>,&&&
b. ?'@',&&&. ?'H&,&&&
d. ? ',&&&
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Be$innin$ raw materials in(entor was ?1',&&&.Durin$ the month, ?'@>,&&& o+ raw material
was %urhased. A ount at the end o+ the
month re(ealed that ?'H,&&& o+ raw materialwas still %resent. What is the ost o+ diretmaterial used6
a. ?'@>,&&&
b. ?'@',&&&. ?'H&,&&&
d. ? ',&&&
Fuik Chek
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Fuik Chek
Diret materials used in %rodution totaled?'H&,&&&. Diret labor was ?1@,&&&, and?H&,&&& o+ manu+aturin$ o(erhead was added
to %rodution +or the month. What were totalmanu+aturin$ osts inurred +or the month6a. ?,&&&b. ?H1,&&&
. ?>,&&&d. Cannot be determined.
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Diret materials used in %rodution totaled?'H&,&&&. Diret labor was ?1@,&&&, and?H&,&&& o+ manu+aturin$ o(erhead was addedto %rodution +or the month. What were total
manu+aturin$ osts inurred +or the month6a. ?,&&&b. ?H1,&&&. ?>,&&&
d. Cannot be determined.
Fuik Chek
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Fuik Chek
Be$innin$ work in %roess was ?',&&&.Manu+aturin$ osts added to %rodution +or themonth were ?H1,&&&. 3here were ?'&&,&&& o+%artiall +inished $oods remainin$ in work in
%roess in(entor at the end o+ the month.What was the ost o+ $oods manu+atureddurin$ the month6
a. ?,>&,&&&
b. ? &,&&&. ? @>&,&&&d. Cannot be determined.
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Be$innin$ work in %roess was ?',&&&.Manu+aturin$ osts added to %rodution +or themonth were ?H1,&&&. 3here were ?'&&,&&& o+%artiall +inished $oods remainin$ in work in
%roess in(entor at the end o+ the month.What was the ost o+ $oods manu+atureddurin$ the month6
a. ?,>&,&&&b. ? &,&&&. ? @>&,&&&d. Cannot be determined.
Fuik Chek
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Fuik Chek
Be$innin$ +inished $oods in(entor was?1&,&&&. 3he ost o+ $oods manu+atured +or themonth was ?@>&,&&&. And the endin$ +inished$oods in(entor was ?&,&&&. What was the ost
o+ $oods sold +or the month6a. ? '&,&&&b. ?@&,&&&
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Be$innin$ +inished $oods in(entor was?1&,&&&. 3he ost o+ $oods manu+atured +or themonth was ?@>&,&&&. And the endin$ +inished$oods in(entor was ?&,&&&. What was the ost
o+ $oods sold +or the month6a. ? '&,&&&b. ?@&,&&&
Fuik Chek
?1&,&&& ?@>&,&&& = ?H&,&&&?H&,&&& " ?&,&&& = ?@
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4earnin$ #b-eti(e @
$ompute underappiedor o)erappied o)erhead
cost and prepare the!ourna entry to cose thebaance in
Manufacturing ()erheadto the appropriate
accounts.
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5ndera%%lied and #(era%%lied#(erheadKA Closer 4ook3he di++erene between the o(erhead ost a%%lied toWork in Proess and the atual o(erhead osts o+ a
%eriod is re+erred to as either undera%%lied or
o(era%%lied o(erhead.Underapplied overhead
e*ists when the amount o+o(erhead a%%lied to -obs
durin$ the %eriod usin$ the%redetermined o(erheadrate is less thanthe total
amount o+ o(erhead atuallinurred durin$ the %eriod.
Underapplied overheade*ists when the amount o+o(erhead a%%lied to -obs
durin$ the %eriod usin$ the%redetermined o(erheadrate is less thanthe total
amount o+ o(erhead atuallinurred durin$ the %eriod.
Overapplied overheadOverapplied overheade*ists when the amount o+e*ists when the amount o+o(erhead a%%lied to -obso(erhead a%%lied to -obs
durin$ the %eriod usin$ thedurin$ the %eriod usin$ the%redetermined o(erhead%redetermined o(erhead
rate israte is greater thangreater thanthe totalthe totalamount o+ o(erhead atuallamount o+ o(erhead atuallinurred durin$ the %eriod.inurred durin$ the %eriod.
Overapplied overheadOverapplied overheade*ists when the amount o+e*ists when the amount o+
o(erhead a%%lied to -obso(erhead a%%lied to -obs
durin$ the %eriod usin$ thedurin$ the %eriod usin$ the%redetermined o(erhead%redetermined o(erhead
rate israte is greater thangreater thanthe totalthe totalamount o+ o(erhead atuallamount o+ o(erhead atuall
inurred durin$ the %eriod.inurred durin$ the %eriod.
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#(erhead A%%liation )*am%le
()erhead +ppied &uring the Period
+ppied ()erhead P( < +ctua &irect 'abor-ours
+ppied ()erhead 4,.55 per &' < 1=5"555 &' 46>5"555
PearCoPearCo7s7s actual overheadactual overhead+or the ear was+or the ear was$650,000$650,000with a total o+with a total o+ 170,000170,000diret labor"hoursdiret labor"hours
worked on -obs.worked on -obs.
8ow muh total o(erhead was a%%lied to PearCo8ow muh total o(erhead was a%%lied to PearCo
7s7s
-obs durin$ the ear6 5se PearCo7s-obs durin$ the ear6 5se PearCo7s%redetermined o(erhead rate o+ ?
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PearCoPearCo7s7s actual overheadactual overhead+or the ear was+or the ear was$650,000$650,000with a total o+with a total o+ 170,000170,000diret labor"hoursdiret labor"hours
worked on -obs.worked on -obs.
8ow muh total o(erhead was a%%lied to PearCo8ow muh total o(erhead was a%%lied to PearCo
7s7s
-obs durin$ the ear6 5se PearCo7s-obs durin$ the ear6 5se PearCo7s%redetermined o(erhead rate o+ ?
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Fuik Chek
3i$er, In. had atual manu+aturin$ o(erheadosts o+ ?,'&,&&& and a %redeterminedo(erhead rate o+ ?&,&&& o(era%%lied.
d. ?>&,&&& undera%%lied.
3i$er, In. had atual manu+aturin$ o(erheadosts o+ ?,'&,&&& and a %redeterminedo(erhead rate o+ ?&,&&& o(era%%lied.
d. ?>&,&&& undera%%lied.
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3i$er, In. had atual manu+aturin$ o(erheadosts o+ ?,'&,&&& and a %redeterminedo(erhead rate o+ ?&,&&& o(era%%lied.
d. ?>&,&&& undera%%lied.
3i$er, In. had atual manu+aturin$ o(erheadosts o+ ?,'&,&&& and a %redeterminedo(erhead rate o+ ?&,&&& o(era%%lied.
d. ?>&,&&& undera%%lied.
Fuik Chek
()erhead +ppied
4,.55 per hour < 2?5"555 hours 41"165"555
/nderappied ()erhead 41"215"555 - 41"165"555 495"555
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Dis%osition o+ 5nder" or #(era%%lied#(erhead
Pear$o@sMfg. ()erhead
+ctuao)erhead
costs
4695"555435"555
o)erappied
Pear$o@s $ostof ;oods *od
/nad!ustedaance
+d!ustedaance
435"555
435"555
()erheadappiedto !obs
46>5"555
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Fuik Chek
0hat effect wi the o)erappied o)erheadha)e on Pear$o@s net operating incomeA
a. 9et o%eratin$ inome will inrease.b. 9et o%eratin$ inome will be una++eted.
. 9et o%eratin$ inome will derease.
0hat effect wi the o)erappied o)erheadha)e on Pear$o@s net operating incomeA
a. 9et o%eratin$ inome will inrease.b. 9et o%eratin$ inome will be una++eted.
. 9et o%eratin$ inome will derease.
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0hat effect wi the o)erappied o)erheadha)e on Pear$o@s net operating incomeA
a. 9et o%eratin$ inome will inrease.b. 9et o%eratin$ inome will be una++eted.
. 9et o%eratin$ inome will derease.
0hat effect wi the o)erappied o)erheadha)e on Pear$o@s net operating incomeA
a. 9et o%eratin$ inome will inrease.b. 9et o%eratin$ inome will be una++eted.
. 9et o%eratin$ inome will derease.
Fuik Chek
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Ma be more om%le*Ma be more om%le*
but . . .but . . .Ma be more om%le*Ma be more om%le*
but . . .but . . .
Multi%le Predetermined #(erhead!ates
3o this %oint, we ha(e assumed that there is a sin$le3o this %oint, we ha(e assumed that there is a sin$le%redetermined o(erhead rate alled a %lantwide%redetermined o(erhead rate alled a %lantwide
o(erhead rate.o(erhead rate.
3o this %oint, we ha(e assumed that there is a sin$le3o this %oint, we ha(e assumed that there is a sin$le%redetermined o(erhead rate alled a %lantwide%redetermined o(erhead rate alled a %lantwide
o(erhead rate.o(erhead rate.
4ar$e om%anies4ar$e om%anies
o+ten use multi%leo+ten use multi%le%redetermined%redeterminedo(erhead rates.o(erhead rates.
4ar$e om%anies4ar$e om%anieso+ten use multi%leo+ten use multi%le
%redetermined%redeterminedo(erhead rates.o(erhead rates.
Ma be more aurate beauseMa be more aurate beauseit re+lets di++erenes arossit re+lets di++erenes aross
de%artments.de%artments.
Ma be more aurate beauseMa be more aurate beauseit re+lets di++erenes arossit re+lets di++erenes aross
de%artments.de%artments.
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Job"#rder Costin$ in Ser(ieCom%anies
Job"order ostin$ is used in man di++erentJob"order ostin$ is used in man di++erent
t%es o+ ser(ie om%anies.t%es o+ ser(ie om%anies.Job"order ostin$ is used in man di++erentJob"order ostin$ is used in man di++erent
t%es o+ ser(ie om%anies.t%es o+ ser(ie om%anies.
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)nd o+ Cha%ter &'