Upload
others
View
6
Download
0
Embed Size (px)
Citation preview
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 1
Job Order Costing
Chapter 4
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 2
Learning Objective 1
Describe the building-block
concepts of costing systems.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 3
Building-Block Concepts
of Costing Systems
Building-Block Concepts
of Costing Systems
Cost Assignment
Direct Costs
Indirect Costs
Cost Tracing
Cost Allocation
Cost Object
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Flow of Costs: A Conceptual
Overview
Flow of Costs: A Conceptual
Overview
Finished
Goods
Cost of
Goods
Sold
Selling and
Administrative Period Costs Selling and
Administrative
Manufacturing
Overhead
Work in
Process
Direct Labor
Balance Sheet
Costs Inventories
Income
Statement
Expenses Material Purchases Raw Materials Raw Materials
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 5
Learning Objective 2
Distinguish between job
costing and process costing.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 6
Job-Costing and
Process-Costing Systems
Job-Costing and
Process-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
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Job-Order Costing: An Overview Job-Order Costing: An Overview
JobJob--order costing systems are used order costing systems are used
1.1.
2.2.
3.3. The unique nature of each order requires tracing or The unique nature of each order requires tracing or
JobJob--order costing systems are used order costing systems are used when:when:
1.1. Many different products are produced each period.Many different products are produced each period.
2.2. Products are manufactured to order.Products are manufactured to order.
3.3. The unique nature of each order requires tracing or The unique nature of each order requires tracing or allocating costs to each job, and maintaining cost allocating costs to each job, and maintaining cost records for each job.records for each job.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Job No. 1 Job No. 1
Job No. 2 Job No. 2
Job No. 3 Job No. 3
Charge
material and
direct labor
costs to each
job as work
is performed.
Charge
direct
material and
direct labor
costs to each
job as work
is performed.
Job Costing – An Example Job Costing – An Example
Direct Materials Direct Materials
Direct Labor Direct Labor
Direct Costs
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Manufacturing Manufacturing
including including indirect indirect
indirect laborindirect labor, are , are
directly traced to directly traced to
Manufacturing Manufacturing
Overhead, Overhead,
including including indirect indirect
materialsmaterials and and
indirect laborindirect labor, are , are
allocated to all allocated to all
jobs rather than jobs rather than
directly traced to directly traced to
each job.each job.
Job Costing – An Example Job Costing – An Example
Direct Materials Direct Materials
Direct Labor Direct Labor
Job No. 1 Job No. 1
Job No. 2 Job No. 2
Job No. 3 Job No. 3 Manufacturing Manufacturing
Overhead
Direct Costs
Indirect Costs
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Direct
Direct
Materials
Direct Direct
Labor
Mfg.
Overhead
Mfg.
Overhead
Work-in- Work-in-
Process
Finished Finished
Goods
Cost-of
Goods Sold
Cost-of
Goods Sold
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
PearCo Job Cost Sheet
Job Number A - 143 Date Initiated 3-4-14
Date Completed
Department B3 Units Completed
Item Wooden cargo crate
Direct Materials Direct Labor Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours Rate Amount
Cost Summary Units Shipped
Direct Materials Date Number Balance
Direct Labor
Manufacturing Overhead
Total Cost
Unit Product Cost
The Job Cost Sheet The Job Cost Sheet
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
The predetermined overhead rate (POHR)
used to apply overhead to jobs is determined
before the period begins.
Manufacturing Overhead
Application
Manufacturing Overhead
Application
Estimated total manufacturing overhead cost for the coming period
Estimated total manufacturing overhead cost for the coming period
Estimated total units in the allocation base for the coming period
Estimated total units in the allocation base for the coming period
POHR = POHR =
Estimated total manufacturing overhead cost for the coming period
Estimated total units in the allocation base for the coming period
POHR =
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Predetermined overhead rates that rely upon
estimated data are often used because:
1. Actual overhead for the period is not
known until the end of the period, thus inhibiting
the ability to estimate job costs during the period.
2. Actual overhead costs can fluctuate seasonally,
thus misleading decision makers.
The Need for a POHR The Need for a POHR
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Quick Check Quick Check
Job No 53 at NW Fab, Inc. required $200 of direct
materials and 10 direct labor hours at $15 per hour.
Estimated total overhead for the year was $760,000 and
estimated direct labor hours were 20,000. What would
be recorded as the cost of job No 53?
a. $200.
b. $350.
c. $380.
d. $730.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Job No 53 at NW Fab, Inc. required $200 of direct
materials and 10 direct labor hours at $15 per hour.
Estimated total overhead for the year was $760,000 and
estimated direct labor hours were 20,000. What would be
recorded as the cost of job No53?
a. $200.
b. $350.
c. $380.
d. $730.
Quick Check Quick Check
POHR = $760,000/20,000 hours $38
Direct materials $200
Direct labor $15 x 10 hours $150
Manufacturing overhead $38 x 10 hours $380
Total cost $730
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 16
Learning Objective 3
Outline a seven-step
approach to job costing.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 17
Seven-Step Approach
to Job Costing
Seven-Step Approach
to 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.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 18
Seven-Step Approach
to Job Costing
Seven-Step Approach
to Job Costing
Step 5:
Compute the rate per unit.
Step 6:
Compute the indirect costs.
Step 7:
Compute the total cost of the job.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 19
General Approach to Job Costing 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
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 20
General Approach to Job Costing 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.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 21
General Approach to Job Costing 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
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 22
General Approach to Job Costing General Approach to Job Costing
Step 7:
Direct materials $50,000
Direct labor 19,000
Factory overhead 13,125
Total $82,125
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 23
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 the gross margin percentage?
$32,675 ÷ $114,800 = 28.5%
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 24
Source Documents Source Documents
Job cost record
Materials requisition record
Labor time record
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 25
Learning Objective 4
Distinguish actual costing
from normal costing.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 26
Costing system Production cost
Actual costing Actual direct materials + Actual
labour + Actual overhead
Normal costing Actual direct material + Actual
direct labour + Applied overhead
(I.e. Per-determined overhead
rate * actual level of productivity)
Standard costing Standard direct material +
standard direct labor + applied
overhead
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 27
Which one better? Which one better?
Normal product costing and standard
costing are preferable
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 28
Reasons Reasons
Under actual costing, the product cost will be delayed
until the end of the accounting period. However, the
product cost should be obtained beforehand for setting
selling price
Since monthly productivity may vary due to holiday
periods and seasonal variation, actual overhead is
fluctuating and cannot reflect normal production conditions
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 29
Learning Objective 5
Track the flow of costs
in a job-costing system.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 30
Transactions Transactions
Purchase of materials and other manufacturing inputs
Conversion into work in process inventory
Conversion into finished goods inventory
Sale of finished goods
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 31
Transactions Transactions
$80,000 worth of materials (direct and
indirect) were purchased on credit.
Materials Control 80,000
Accounts Payable 80,000
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 32
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?
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 33
Transactions Transactions
Work in Process Control:
Job No. 650 50,000
Job No. 651 10,000
Factory Overhead Control 15,000
Materials Control 75,000
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 34
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?
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 35
Transactions Transactions
Work in Process Control:
Job No. 650 19,000
Job No. 651 3,000
Manufacturing Overhead Control 5,000
Wages Payable 27,000
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 36
Transactions Transactions
Wages payable were paid.
Wages Payable Control 27,000
Cash Control 27,000
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 37
Transactions Transactions
Assume that depreciation for the
period is $26,000.
What is the journal entry?
Manufacturing Overhead Control 26,000
Accumulated Depreciation Control 26,000
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 38
Transactions Transactions
Assume the factory uses a predetermined overhead
rate of $25 per machine-hour. During the month,
500 machine-hours were worked on jobs.
Work in Process Control 12,500
Manufacturing Overhead Control 12,500 (500 machine-hours × $25 overhead rate per machine-hour)
What is the journal entry?
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 39
Transactions Transactions
During the period, Jobs 650 completed with
a total cost of $104,000.
What is the journal entry?
Finished Goods Control 104,000
Work in Process Control 104,000
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 40
Transactions Transactions
Job 650 was sold for $114,800.
What is the journal entry?
Accounts Receivable Control 114,800
Revenues/ Sales 114,800
Cost of Goods Sold 81,500
Finished Goods Control 81,500
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 41
Transactions Transactions
Assume that marketing and administrative
salaries were $9,000 and $10,000.
What is the journal entry?
Marketing and Administrative Costs 19,000
Salaries Payable Control 19,000
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Quick Check Quick Check
Beginning raw materials inventory was $32,000.
During the month, $276,000 of raw material was
purchased. A count at the end of the month revealed
that $28,000 of raw material was still present. What
is the cost of direct material used?
a. $276,000
b. $272,000
c. $280,000
d. $ 2,000
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
Beginning raw materials inventory was $32,000.
During the month, $276,000 of raw material was
purchased. A count at the end of the month revealed
that $28,000 of raw material was still present. What is
the cost of direct material used?
a. $276,000
b. $272,000
c. $280,000
d. $ 2,000
Quick Check Quick Check
Beg. raw materials 32,000$
+ Raw materials
purchased 276,000
= Raw materials available
for use in production 308,000$
– Ending raw materials
inventory 28,000
= Raw materials used
in production 280,000$
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster 4 - 44
End of Chapter 4