Loading presentation...

Present Remotely

Send the link below via email or IM

Copy

Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.

DeleteCancel

Make your likes visible on Facebook?

Connect your Facebook account to Prezi and let your likes appear on your timeline.
You can change this under Settings & Account at any time.

No, thanks

JOB ORDER COSTING

No description
by

Nesya Erica

on 10 May 2015

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of JOB ORDER COSTING

JOB ORDER COSTING
JOB ORDER COSTING SYSTEM ARE USED WHEN:
1. MANY DIFFERENT PRODUCTS ARE PRODUCED EACH PERIOD
2. PRODUCTS ARE MANUFACTURED TO ORDER
3. THE UNIQUE NATURE OF EACH ORDER REQUIRES TRACING OR ALLOCATING COSTS TO EACH JOB AND MAINTAINING COST RECORDS FOR EACH JOB
COMPUTE A PREDETERMINED OVERHEAD RATE
LEARNING OBJECTIVE 4-1
EXAMPLE OF COMPANIES THAT WOULD USE JOB ORDER COSTING
1. BOEING (AIRCRAFT MANUFACTURING)
2. BECHTEL INTERNATIONAL (LARGE SCALE CONSTRUCTION)
3. WALT DISNEY STUDIOS (MOVIE PRODUCTION)
WHY USE AN ALLOCATION BASE ?
an allocation base, such as direct labor hours, direct labor dollars, or machine hours, is used to assign manufacturing overhead to products
we use an allocation base because:
it is impossible or difficult to trace overhead costs to particular jobs
manufacturing overhead consists of many different items ranging from the grease used in machines to the production manager's salary
many types of manufacturing overhead costs are fixed even though output fluctuates during the period
MANUFACTURING OVERHEAD APPLICATION
the predetermined overhead rate (POHR)
used to apply overhead to jobs is determined before the period begins
LEARNING OBJECTIVE 4-2
APPLY OVERHEAD COST TO JOBS USING A PREDETERMINED OVERHEAD RATE
OVERHEAD APPLICATION RATE
PearCo estimates that it will require 160.000 direct labor-hours to meet the coming period’s estimated production level. In addition, the company estimates total fixed manufacturing overhead at $200.000, and variable manufacturing overhead costs of $2,75 per direct labor hour.

Y = a + bX
Y = $200.000 + ($2,75 per direct labor-hour × 160.000 direct labor-hours)
Y = $200.000 + $440.000
Y = $640.000

APPLYING MANUFACTURING OVERHEAD
COMPUTE THE TOTAL COST AND AVERAGE COST PER UNIT OF A JOB
LEARNING OBJECTIVE 4-3
eight direct labor hours were worked on job
the predetermined overhead rate is $ 4 per direct labor hour


FLOW OF COSTS: A CONCEPTUAL OVERVIEW
cost
balance sheet costs
income statement expenses
material purchase
raw materials
direct labor
work in process
manufacturing
overhead
finished goods
selling and administrative goods
period costs
include any materials that go into the final product
consists of units of production that are only partially complete and will require further work before they are ready for sale
consist of completed units of product that have not been sold to customers
include the manufacturing costs associated with the goods that were finished during the period
Selling and Administrative
Cost of Goods Sold
JOB ORDER COSTING
Job A, a special minting of 1,000 gold medallions. Job A’s cost sheet included $30,000 of manufacturing costs that were recorded in a prior period and will be completed in April.
Job B, an order for 10,000 silver medallions, will be the only job started in April and it will be completed in a subsequent month.
JOB ORDER COSTING: RAW MATERIALS COST FLOW
During April, $52,000 in raw materials were requisitioned from the storeroom for use in production. These raw materials included:
$28,000 of direct materials for Job A.
$22,000 of direct materials for Job B.
$2,000 of indirect materials (has not been assigned to either of the 2 Jobs).
JOB ORDER COSTING: LABOR COST FLOWS
In April, Rand Company incurred:
$40,000 of direct labor cost for Job A.
$20,000 of direct labor for Job B.
$15,000 of indirect labor cost (has not been assigned to either of the 2 Jobs).
JOB ORDER COSTING: MANUFACTURING OVERHEAD COST FLOWS
assume that Rand Company incurred the following manufacturing overhead costs during April:
JOB ORDER COSTING: APPLYING MANUFACTURING OVERHEAD TO JOBS
Assume that Rand Company’s predetermined overhead rate is $6 per machine-hour for Job A & B.
During April, 10,000 machine-hours were worked on Job A and 5,000 machine-hours were worked on Job B.
LEARNING OBJECTIVE 4-4
COMPUTE UNDERAPPLIED OR OVERAPPLIED OVERHEAD COST
KEY TERMINOLOGY
The difference between the manufacturing overhead cost applied to jobs and the actual manufacturing overhead costs of a period is called either
underapplied
or
overapplied
overhead
Underapplied
overhead exists when the amount of overhead applied to production is
less than
the actual manufacturing overhead costs.
Overapplied
overhead exists when the amount of overhead applied to production is
greater than
the actual manufacturing overhead costs.
QUICK CHECK
Rand Company had actual manufacturing overhead costs of $95,000 and a predetermined overhead rate of $6.00 per machine hour for Job A &B. Rand Company worked 10,000 machine hours for Job A and 5,000 machine hours for Job B during the period. Tiger’s manufacturing overhead is:

a. $5,000 overapplied
b. $5,000 underapplied
c. $6,000 overapplied
d. $6,000 underapplied.
Overhead Applied
Job A
$6.00 per hour × 10,000 hours = $60,000
Job B
$6.00 per hour × 5,000 hours = $30,000
Underapplied Overhead
$95,000 - $90,000 = $5,000
Rand Company had actual manufacturing overhead costs of $95,000 and a predetermined overhead rate of $6.00 per machine hour for Job A &B. Rand Company worked 10,000 machine hours for Job A and 5,000 machine hours for Job B during the period. Tiger’s manufacturing overhead is:
a. $5,000 overapplied
b. $5,000 underapplied
c. $6,000 overapplied
d. $6,000 underapplied.
DISPOSITION OF UNDERAPPLIED OR OVERAPPLIED OVERHEAD BALANCES
Any difference between the Manufacturing Overhead Incurred and manufacturing overhead applied, such as Rand Company. $5,000 of underapplied overhead, is disposed of in one of two ways:
It can be closed out to
Cost of Goods Sold
.
It can be allocated between
Work in Process, Finished Goods, and Cost of Goods Sold
in proportion to the overhead applied during the current period that is in the ending balances of these accounts
DISPOSITION OF UNDERAPPLIED OR OVERAPPLIED OVERHEAD BALANCES
We will always assume that underapplied or overapplied overhead is closed out to Cost of Goods Sold.
Overapplied
overhead is
deducted
from Cost of Goods Sold.
Underapplied
overhead is
added
to Cost of Goods Sold.

QUICK CHECK
Recall that Rand Company had $50,000 underapplied manufacturing overhead.
The disposition of this overhead will:
a. Increase Cost of Good Sold
b. Decrease Cost of Good Sold
c. Have no impact on Cost of Goods Sold.
Recall that Rand Company had $50,000 underapplied manufacturing overhead.
The disposition of this overhead will:
a. Increase Cost of Good Sold
b. Decrease Cost of Good Sold
c. Have no impact on Cost of Goods Sold.
LEARNING OBJECTIVE 4-5
USE THE DIRECT METHOD TO DETERMINE COST OF GOODS SOLD
THE DIRECT METHOD OF DETERMINING COST OF GOODS SOLD
Let’s recollect some key facts from the Rand Company example:
Job A, which consisted of 1,000 gold medallions, was completed during April.
Job B was not completed.
The unit product cost for each of the 1,000 gold medallions included in Job A was $158 ($158,000 ÷ 1,000 units).
The overhead for April was underapplied by $5,000.
AN ADDITIONAL ASSUMPTION
Let’s assume that 750 of the 1,000 gold medallions included in Job A were shipped to customers by the end of April.
The cost of the medallions sold to customers would be $118,500 (750 units × $158 per unit).
COMPUTING COST OF GOODS SOLD
LEARNING OBJECTIVE 4-6
USE THE INDIRECT METHOD TO DETERMINE COST OF GOODS SOLD
COMPUTING COST OF GOODS MANUFACTURED
COMPUTING COST OF GOODS SOLD
COMPUTING NET OPERATING INCOME
To complete the income statement, let’s assume that Rand Company’s total sales revenue and selling and administrative expenses for April were $225,000 and $87,000, respectively.
Full transcript