Docstoc

COST ACCOUNTING NORMAL JOB COSTING

Document Sample
COST ACCOUNTING NORMAL JOB COSTING Powered By Docstoc
					Job Costing System
   Actual Costing
       Traces direct costs to a cost object by using the actual direct cost-
        rates times the actual quantities of the direct-cost inputs.
   Normal Costing
       Traces direct costs to a cost object by using the actual direct-cost
        rates times the actual quantities of the direct cost-inputs and that
        allocates indirect cost based on the budgeted indirect-cost rates
        times the actual quantities of the cost-allocation bases.
Normal Job Costing
Job Costing System
                 Actual Costing                Normal costing


Direct Costs     Actual Direct Cost Rates x    Actual Direct Cost Rates x
                 Actual Quantities of Direct   Actual Quantities of Direct
                 Cost Inputs                   Cost Inputs
Indirect Costs   Actual Indirect Cost Rates x Budgeted Indirect Cost
                 Actual Quantities of Cost    Rates x
                 Allocation Bases             Actual Quantities of Cost
                                              Allocation Bases
General Approach To Normal Job Costing
 Step1  : Identify the Job That is Chosen Cost Object
 Step 2 : Identify the Direct Cost of the Object

 Step 3 : Select the Cost-Allocation Bases To Use For
  Allocating Indirect Costs to the Job
 Step 4 : identify the Indirect Costs Associated with Each
  Cost-Allocation Base
General Approach To Normal Job Costing
 Step5  : Compute the Rate per Unit of Each Cost-Allocation
  Base Used to Allocate Indirect Costs to the Job
 Step 6 : Compute the indirect costs Allocated To The Job

 Step 7 : Compute the Total Cost of the job by Adding All
  Direct and Indirect Costs Assigned To The Job
Time period Used To Compute Indirect Cost Rates
 There are two reasons for using longer periods, such as year, to
  calculate indirect cost rates.
 1. The numerator reason(indirect-cost pool) : The shorter the
  period, the greater the influence of seasonal patterns on the
  amount of costs.
 2. The denominator reason(quantity of the cost allocation
  base) : Some indirect costs may be variable each month with
  respect to the cost allocation base(for example, supplies).
Budgeted Indirect Costs and End-of-Accounting
Year Adjustments
 Because of the numerator and denominator reasons, we do not
  expect actual overhead costs incurred each month to equal
  overhead costs allocated each month.
 Underallocated Indirect Costs occur when the allocated
  amount of indirect costs in an accounting period is less than the
  actual(incurred) amount.
 Overallocated Indirect Costs occur when the allocated amount
  of indirect costs in an accounting period is greater than the
  actual(incurred) amount.
Budgeted Indirect Costs and End-of-Accounting
Year Adjustments (Cont’d)
 There are three main approaches to accounting for the
  underallocated or overallocated overhead caused by
  underestimated or overestimated the quantity of cost
  allocation base. These are :
 1. Adjusted Allocation-Rate Approach
 2. Proration Approach
 3. Write-off to Cost of Goods Sold Approach
1. Adjusted Allocation-Rate Approach
 Restates all overhead entries in the general ledger and
  subsidiary ledgers using actual rates rather than budgeted
  cost rates.
 Yields the benefits of both the timeliness and convenience
  of normal costing during the year and the accuracy of
  actual costing at year-end.
2. Proration Approach
 Spreads    underallocated overhead or overallocated
  overhead among ending work in process, finished goods,
  and cost of goods sold.
 Based on ending balances is frequently justified as being
  an expedient way of approximating the more-accurate
  results from using indirect costs allocated.
3. Write-Off to Cost of Goods Sold Approach
 The total under or overallocated overhead is included in
 this year’s Cost of Goods Sold.
   Example:
   Allocation of Costs (Direct Method)
                                 SERVICE DEPARTMENTS           PRODUCING DEPARTMENTS
                           Department X,     Department Y,    Department A,   Department B,
                            Building and    General Factory    Machinery        Assembly
                              Ground         Administration
                            Maintenance
Total Budgeted Costs        $10,000            $7,500          $36,500         $44,600
Allocated To Producing       (10,000)                          2,500 (1)       7,500 (2)
Departments A and B
                                               (7,500)         5,250 (3)       2,250 (4)
Balance after Allocation     $      0          $     0         $44,250         $54,350

Factory Overhead
Application Rates (per
direct labor hour)                                            $24.58 (5)      $57.21 (6)
Example:
Allocation of Costs (Direct Method) Cont’d
           of Department X, Building and Ground
 Allocation
  Maintenance :


                                             Square Feet x Rate Per Square Foot
(1)To Department A, Machinery   $2,500 (1)   (1,000      x $2.50)
(2)To Department B, Assembly     7,500 (2)   (3,000      x 2.50)
Total                           $10,000
Example:
Allocation of Costs(Direct Method) Cont’d
 Allocationof Department Y, General Factory
  Administration:


                                            Total Labor Hours x Rate Per Total Labor Hours

(3)To Department A, Machinery   $5,250 (3) (2,800           x $1.875)
(4)To Department B, Assembly     2,250 (4) (1,200          x    1.875)
Total                            $7,500
Example:
Allocation of Costs (Direct Method) Cont’d
 Factory  Overhead Application rate (on the basis of direct
   labor hours) for producing departments
                                               Total Cost After Allocation / Direct Labor Hours


(5)For Department A, Machinery   $24.58/dlh   (44,250                    / 1,800)


(6)For Department B, Assembly    $57.21/dlh   (54,430                    /      950)
Example: Allocation of Actual Service Department
Costs To Producing Departments (Cont’d)
 Total   Actual Costs
   Service Departments:
          Department X – Building    $11,000
          and Ground Maintenance
          Department Y – General       7,900
          Factory Administration
   Producing Departments :
          Department A - Machinery    38,400
          Department B - Assembly     43,700
 Example: Allocation of Actual Service Department
 Costs To Producing Departments (Cont’d)
  Additional         Information
DEPARTMENT                ACTUAL DIRECT   ACTUAL SQUARE   ACTUAL TOTAL
                          LABOR HOURS          FEET       LABOR HOURS
X – Building and Ground         -              650           1,400
Maintenance
Y – General Factory             -              550             900
Administration
A – Machinery                1,700            1,300          3,000

B – Assembly                 1,000            2,600          1,500

Total                        2,700            5,100          6,800
Example : Allocation of Actual Service Department
Costs To Producing Departments(Cont’d)
 Additional     Information
   Factory overhead control -   Factory overhead applied -
           machinery                    machinery
    $38,400                                    $41,786*
     3,667
     5,267
                                              *24.58/DLH x 1,700 actual DLH
    47,334
Example: Allocation of Actual Service Department
Costs To Producing Departments (Cont’d)
 Additional    Information

   Factory overhead control -   Factory overhead applied-
           assembly                      assembly
    $43,700                                    $57,210*
      7,333
     2,633                                   *57.21/DLH x 1,000 actual DLH

    53,666
Example : Allocation of Actual Service Department
Costs To Producing Departments(Cont’d)
 Additional    Information

    Building and Grounds          General Factory
   maintenance cost control   administration Cost Control
   $11,000                     $7,900
   Example : Allocation of Actual Service Department
   Costs To Producing Departments(Cont’d)

                                 SERVICE DEPARTMENTS           PRODUCING DEPARTMENTS
                           Department X,     Department Y,    Department A,   Department B,
                            Building and    General Factory    Machinery        Assembly
                              Ground         Administration
                            Maintenance
Total Actual Costs          $11,000            $7,900          $38,400         $43,700
Allocated To Producing       (11,000)                          3,667 (1)       7,333 (2)
Departments A and B
                                               (7,900)         5,267 (3)       2,633 (4)
Balance after Allocation     $      0          $     0         $47,334         $53,666
Example : Allocation of Actual Service Department
Costs To Producing Departments (Cont’d)

           of Department X, Building and Ground
 Allocation
  Maintenance :


                                             Square Feet x Rate Per Square Foot

(1)To Department A, Machinery   $3,667 (1)   (1,300      x $2.82)

(2)To Department B, Assembly     7,333 (2)   (2,600      x 2.82)

Total                           $11,000
  Example : Allocation of Actual Service Department
  Costs To Producing Departments(Cont’d)

   Allocation    of Department Y, General Factory
        Administration :


                                             Total Labor Hour x Rate Per Total Labor hours
(3)To Department A, Machinery   $5,267 (3)   (3,000           x $1.75)
(4)To Department B, Assembly     2,633 (4)   (1,500           x 1.75)
Total                            $7,900
Example : Allocation of Actual Service Department
Costs To Producing Departments(Cont’d)

 The Computation of under – or overapplied factory
  overhead as follows:
                                     MACHINERY   ASSEMBLY
 End of period balance in factory     $47,334    $53,666
 overhead control after allocation
 End of period balance in factory      41,786     57,210
 overhead applied
 Underapplied factory overhead          5,548
 Overapplied factory overhead                      3,544
Example : Allocation of Actual Service Department
Costs To Producing Departments(Cont’d)

 The   recording of underapplied factory overhead :
Factory overhead applied – machinery..............          41,786
Underapplied factory overhead – machinery...                 5,548
     Factory overhead control – machinery................            47,334
($38,400 + $3,667 + $5,267 = $47,334)
Example : Allocation of Actual Service Department
Costs To Producing Departments(Cont’d)

 The   recording of overapplied factory overhead :
Factory overhead applied – assembly..............          57,210
     Overapplied factory overhead – assembly...                      3,544
     Factory overhead control – assembly................            53,666
($43,700 + $7,333 + $2,633 = $53,666)
Accounting For the Difference Between Applied and
Actual Factory Overhead

 Assuming    that we have the following information :
Units sold.................................................... 1,000
        Type A....   750 & Type B.....   250
Units in finished goods inventory............                  200
        Type A....   150 & Type B.....   50
Units in Work-In process Inventory.........                    400
        Type A....   300 & Type B.....   100
  Accounting For the Difference Between Applied and
  Actual Factory Overhead(Cont’d)

     Prorating         the underapplied factory overhead cost $5,548:
                                                              DOLLARS   PERCENTAGE   PRORATION
                                                                          of TOTAL    of $5,548
Cost of goods sold (750x $24,58/dlh x 0.9dlh/unit) TA         $24,580      62,5%      $3,467.5
                   (250x $24,58/dlh x 1.3dlh/unit) TB
Finished Goods Inventory (150 x 24,58/dlh x 0.9dlh/unit) TA     4,916      12,5%        693.5
                         (50 x 24,58/dlh x 1.3dlh/unit) TB
Work-In-Process Inventory (300x 24,58/dlh x 0.9dlh/unit) TA     9,832       25%         1,387
                          (100x 24,58/dlh x 1.3dlh/unit) TB

TOTAL                                                         $39,328      100%        $5,548
   Accounting For the Difference Between Applied and
   Actual Factory Overhead(Cont’d)

        After proration of underapplied factory overhead cost $5,548
         to machinery department:
                                                                BEFORE    PRORATION      AFTER
                                                              PRORATION    of $5,548   PRORATION

Cost of goods sold (750x $24,58/dlh x 0.9dlh/unit) TA          $24,580     $3,467.5    $28,047.5
                   (250x $24,58/dlh x 1.3dlh/unit) TB
Finished Goods Inventory (150 x 24,58/dlh x 0.9dlh/unit) TA      4,916       693.5        5609.5
                         (50 x 24,58/dlh x 1.3dlh/unit) TB
Work-In-Process Inventory (300x 24,58/dlh x 0.9dlh/unit) TA      9,832       1,387       11,219
                          (100x 24,58/dlh x 1.3dlh/unit) TB
TOTAL                                                          $39,328      $5,548      $44,876
 Accounting For the Difference Between Applied and
 Actual Factory Overhead(Cont’d)

    Prorating         the overapplied factory overhead cost $3,544:
                                                              DOLLARS   PERCENTAGE   PRORATION
                                                                          of TOTAL    of $3,544
Cost of goods sold (750x $24,58/dlh x 0.9dlh/unit) TA         $24,580      62,5%       $2,215
                   (250x $24,58/dlh x 1.3dlh/unit) TB
Finished Goods Inventory (150 x 24,58/dlh x 0.9dlh/unit) TA     4,916      12,5%         443
                         (50 x 24,58/dlh x 1.3dlh/unit) TB
Work-In-Process Inventory (300x 24,58/dlh x 0.9dlh/unit) TA     9,832       25%          886
                          (100x 24,58/dlh x 1.3dlh/unit) TB

TOTAL                                                         $39,328      100%        $3,544
  Accounting For the Difference Between Applied and
  Actual Factory Overhead(Cont’d)

     So   after proration of overapplied factory overhead cost
        $3,544 to assembly department:
                                                                BEFORE    PRORATION      AFTER
                                                              PRORATION    of $3,544   PRORATION
Cost of goods sold (750x $24,58/dlh x 0.9dlh/unit) TA          $24,580      $2,215      $22,365
                   (250x $24,58/dlh x 1.3dlh/unit) TB
Finished Goods Inventory (150 x 24,58/dlh x 0.9dlh/unit) TA      4,916        443         4,473
                         (50 x 24,58/dlh x 1.3dlh/unit) TB
Work-In-Process Inventory (300x 24,58/dlh x 0.9dlh/unit) TA      9,832        886         8,946
                          (100x 24,58/dlh x 1.3dlh/unit) TB
TOTAL                                                          $39,328      $3,544      $35,784
Example : Allocation of Actual Service Department
Costs To Producing Departments(Cont’d)
 Additional     Information
   Factory overhead control -   Factory overhead applied -
           machinery                    machinery
    $38,400                                    $41,786*
     3,667                                      5,548**
     5,267                                       47,334
    47,334                                    * 24.58/DLH x 1,700 actual DLH
                                              ** Proration of Underapplied cost
Example: Allocation of Actual Service Department
Costs To Producing Departments (Cont’d)
 Additional    Information

   Factory overhead control -   Factory overhead applied-
           assembly                      assembly
    $43,700                      3,544**       $57,210*
      7,333                                     53,666
     2,633
                                             * 57.21/DLH x 1,000 actual DLH
    53,666                                   ** Proration of Uverapplied Cost

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:7
posted:8/9/2012
language:
pages:33