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Chapter 3 Job Order Costing
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Chapter 3 Job Order Costing. Types of Product Costing Systems Process Costing Job-order Costing A company produces many units of a single product.

Dec 21, 2015

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  • Slide 1
  • Chapter 3 Job Order Costing
  • Slide 2
  • Types of Product Costing Systems Process Costing Job-order Costing A company produces many units of a single product. One unit of product is indistinguishable from other units of product. The identical nature of each unit of product enables assigning the same average cost per unit. A company produces many units of a single product. One unit of product is indistinguishable from other units of product. The identical nature of each unit of product enables assigning the same average cost per unit.
  • Slide 3
  • Types of Product Costing Systems Process Costing Job-order Costing A company produces many units of a single product. One unit of product is indistinguishable from other units of product. The identical nature of each unit of product enables assigning the same average cost per unit. A company produces many units of a single product. One unit of product is indistinguishable from other units of product. The identical nature of each unit of product enables assigning the same average cost per unit. Example companies: 1. Weyerhaeuser (paper manufacturing) 2. Reynolds Aluminum (refining aluminum ingots) 3. Coca-Cola (mixing and bottling beverages) Example companies: 1. Weyerhaeuser (paper manufacturing) 2. Reynolds Aluminum (refining aluminum ingots) 3. Coca-Cola (mixing and bottling beverages)
  • Slide 4
  • Types of Product Costing Systems Process Costing Job-order Costing Many different products are produced each period. Products are manufactured to order. The unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job. Many different products are produced each period. Products are manufactured to order. The unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job.
  • Slide 5
  • Types of Product Costing Systems Process Costing Job-order Costing Many different products are produced each period. Products are manufactured to order. The unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job. Many different products are produced each period. Products are manufactured to order. The unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job. Example companies: 1. Boeing (aircraft manufacturing) 2. Bechtel International (large scale construction) 3. Walt Disney Studios (movie production) Example companies: 1. Boeing (aircraft manufacturing) 2. Bechtel International (large scale construction) 3. Walt Disney Studios (movie production)
  • Slide 6
  • Pop Quiz Which of the following companies would be likely to use job-order costing rather than process costing? a. Scott Paper Company for Kleenex. b. Architects. c. Heinz for ketchup. d. Caterer for a wedding reception. e. Builder of commercial fishing vessels. Which of the following companies would be likely to use job-order costing rather than process costing? a. Scott Paper Company for Kleenex. b. Architects. c. Heinz for ketchup. d. Caterer for a wedding reception. e. Builder of commercial fishing vessels.
  • Slide 7
  • Materials Requisition Form
  • Slide 8
  • Employee Time Ticket
  • Slide 9
  • Job Cost Sheet
  • Slide 10
  • Application of Overhead (From Word Document)
  • Slide 11
  • Practice with Overhead Actual manufacturing overhead$340,000 Budgeted machine hours 10,000 Budgeted direct labor hours 20,000 Budgeted direct labor rate $14 Budgeted manufacturing oh $364,000 Actual machine hours 11,000 Actual direct labor hours 18,000 Actual direct labor rate $15 POHR - Machine hours POHR - direct labor hours POHR - direct labor dollars
  • Slide 12
  • Pop Quiz Job WR53 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 WR53? a. $200. b. $350. c. $380. d. $730. Job WR53 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 WR53? a. $200. b. $350. c. $380. d. $730.
  • Slide 13
  • Fisher Company (From Word Document)
  • Slide 14
  • Problems of Overhead Application The difference between the overhead cost applied to Work in Process and the actual overhead costs of a period is referred to as either underapplied or overapplied overhead. Underapplied overhead exists when the amount of overhead applied to jobs during the period using the predetermined overhead rate is less than the total amount of overhead actually incurred during the period. Overapplied overhead exists when the amount of overhead applied to jobs during the period using the predetermined overhead rate is greater than the total amount of overhead actually incurred during the period.
  • Slide 15
  • RoseCo applies overhead based on direct- labor hours. Total estimated overhead for the year is $640,000. Total estimated labor cost is $1,400,000 and total estimated labor hours are 160,000. What is RoseCos predetermined overhead rate? Overhead Application Example
  • Slide 16
  • RoseCos actual overhead for the year was $650,000 and a total of 170,000 direct-labor hours were worked. Using RoseCos predetermined overhead rate of $4.00 per direct- labor hour, how much overhead was applied to all of RoseCos jobs during the year?
  • Slide 17
  • RoseCos actual overhead for the year was $650,000 and a total of 170,000 direct-labor hours were worked. Using RoseCos predetermined overhead rate of $4.00 per direct- labor hour, how much overhead was applied to all of RoseCos jobs during the year? Overhead Application Example SOLUTION Applied Overhead = POHR Actual Direct Labor Hours Applied Overhead = $4.00 per DLH 170,000 DLH = $680,000 RoseCo has overapplied overhead for the year by $30,000. What will RoseCo do?
  • Slide 18
  • Overapplied and Underapplied Manufacturing Overhead Work in Process Finished Goods Cost of Goods Sold $30,000 may be allocated to these accounts. $30,000 may be closed directly to cost of goods sold. Cost of Goods Sold RoseCos Method OR
  • Slide 19
  • Overapplied and Underapplied Manufacturing Overhead - Summary
  • Slide 20
  • 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. Tigers manufacturing overhead is a. $50,000 overapplied. b. $50,000 underapplied. c. $60,000 overapplied. d. $60,000 underapplied. 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. Tigers manufacturing overhead is a. $50,000 overapplied. b. $50,000 underapplied. c. $60,000 overapplied. d. $60,000 underapplied. Pop Quiz
  • Slide 21
  • May be more complex but... Multiple Predetermined Overhead Rates To this point, we have assumed that there is a single predetermined overhead rate called a plantwide overhead rate. Large companies often use multiple predetermined overhead rates. May be more accurate because it reflects differences across departments.