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					L.O.1 Explain what job and job shop mean.

              Job - activity within the company that can be measured by revenues and costs

                     unit of measurement (customer order) in which revenues and costs can be attributed to

                           something we can get paid for
                                       Customer order
                           A task that can be easily identified

                           Activity that presents value to revenue or product

              Job shop - a company that classifies production based upon jobs

                    GENERAL steps (see page 239)
                      1 select an allocation base
  d   o
  o e n        LO 3   2 estimate overhead for each cost pool
  n   c e             3 calculate POHR
  done for    LO 2    4 record direct costs (materials and labor)
  each job            5 Apply overhead
               LO 3
done once             6 (At end of year) write off under or overapplied overhead


L.O.2 Assign costs in a job cost system.

              Inventory accounts to use:
              Direct materials
              Direct labor
              Manufacturing overhead

L.O.3 Account for overhead using predetermined rates.

              Predetermined O/H rate

              Application of cost to jobs
                    Journal entries in total
                    Job cost sheet, per job detail of direct materials, labor, O/H and revenues

              Overhead under or over applied ( Year-End)
                   Overhead application is just an estimate (see formula for POHR)
                   Overhead incurred (actual) may be different from applied
                   What to do with balance…
                        Write off to COGS (based on flow all inventory cost evenutally end up as COGS)
                        Allocate to appropriate inventory accounts (WIP, FG and COGS)

              How much to apply
                   Normal (estimated O/H divided estimated base) X actual activity
                   Actual (actual o/h divided by actual base) X actual activity
                   Standard (estimated o/h divided by estimated base) X standard activity
              Two stage allocation

L.O.4 Apply job costing methods in service organizations.

              aka, time and billing
              no, raw materials, but supplies can be present (e.g., photocopying, postage)

L.O.5 Understand the ethical issues in job costing.

              Misstating stage of completion - see if project is within "budget"
              Charging cost to wrong job
              Misrepresenting the cost of jobs

L.O.6 Describe the difference between jobs and projects.

              Project (longer term than job to complete)
              uncertain as overhead is over several years
s can be attributed to
a
    1 Materials Inventory                  16,000
          Accounts Payable                          16,000
    2 Manufacturing Overhead Control         800
          Materials Inventory                         800
    3 Materials Inventory                  11,200
          Accounts Payable                          11,200
    4 Accounts Payable                     16,000
          Cash                                      16,000
    5 WIP                                  13,600
          Materials Inventory                       13,600
    6 WIP                                  20,000
          P/R Payable                               20,000
    7 Manufacturing Overhead Control       21,200
          Cash                                      21,200
    8 WIP                                  25,000
          Manufacturing Overhead Control            25,000
    9 Manufacturing Overhead Control       10,000
          A/D—PPE                                   10,000

                                                             b           Material Inv
                                                             bb        29,640           800   2 bb
                                                               1       16,000      13,600     5    5
                                                               3       11,200                      6
                                                                       42,440                      8




                                                                             FG
                                                             bb        33,200      52,680 z       bb
                                                             y         48,120                     z
                                                                       28,640




                                                                   bb + inflows - outflows = eb
                                                                   33200 + inflow -52680 = 28640
                                                                   inflows = 28640 - 33200 +52680
                                                                          48120
                          WIP                  Manf O/H Control                 Accounts Payable
                      6,600     48,120 y   2      800     25,000   8   16,000
                     13,600                7   21,200
                     20,000                9   10,000
                     25,000                     7,000                                Cash
                     17,080



                         COGS                                                   Wages Payable
                        -
                     52,680
                     52,680




640 - 33200 +52680
Accounts Payable        Accumulated Depreciation—
          16,000   1   Property, Plant, and Equipment
          11,200   3                10,000

     Cash
         16,000    4
         21,200    7

Wages Payable
        20,000     6
cumulated Depreciation—
perty, Plant, and Equipment
                        9
a                          these are estimates
    application rate     =90000 / 200000          0.45

                DL        POHR    OH applied
    Job 301     50000        0.45     22,500              72,500
    Job 302     75000        0.45     33,750             108,750
    Job 303    100000        0.45     45,000             145,000
            total applied           101,250              326,250
b Actual manufacturing O/H            97,000
                                       4,250 overapplied

    Think about the T-accounts
             Material Inv                                WIP                              Manf O/H
    bb ?                            bb               32,600
     1   11,000                     1 (dm)           86,200                        1    16,400   264,000   3
                                         2           176000                        2    26,000
                                         3           264000      374,400      5    7   198,480
                                         8            6,270                        6    48,200    25,080   8
    eb    56,400                    eb              190,670                       eb



           Wage Payable                                  cash                          Sales Revenues
                             bb     bb       ?                   113,600      1                  725,400
                     202,000 2                                   198,480      7

                               eb   eb       ?




1   split purchase between inv, wip, o/h
2   determine labor based upon w/p, dl, il and o/h allocation
3   application of o/h to wip
4   cogs/fg 725,000/1.8
5   since net FG is $28,600 subtract from outflow to get inflow
6   depreciation
7   other manufacturing o/h
8   allocation of o/h = 25,080 *.25 to wip, 25,080 * .15 to FG rest to COGS
             FG
bb ?
 5     374,400      403,000   4



 8       3,762
eb     104,762



            COGS
 4     403,000
 8      15,048

       418,048



              A/D
 6      48,200
a        Material Inv                           WIP                        Variable Manf O/H
                 137,200     1   1      324,200        761,100    5         62,000      29,900   3   5
                   93,000    1   2     1,000,000       521,100    6                     27,500   3   6
                   94,000    1   3        62,000                                         4,600   3
                                 4       209,200                                -




       Wages Payable                        COGS                           Fixed Manf O/H
               490,000       2                                             209,200   104,000     4   7
               312,400       2                                                        88,200     4
               197,600       2                                                        17,000     4
                                                                               -



b Total direct labor costs             4,000,000
  Unit direct labor cost                       20
  total direct labor hours               200,000

    Variable                1,040,000 X .30             312000
    PVOHR                   312,000 / 200,000              1.56

    Fixed                   1,040,000 X .70             728000
    PFOHR                   728,000 / 200,000              3.64

c        Material Inv                           WIP                        Variable Manf O/H
                 137,200     1   1      324,200        754,600    5   9     62,000      38,220   3   5
                   93,000    1   2     1,000,000       486,624    6                     24,367   3   6
                   94,000    1   3        78,000                                        15,413   3
                                 4       182,000                      8     16,000




       Wages Payable                        COGS                           Fixed Manf O/H
               490,000       2                                        9    209,200    89,180     4   7
               312,400       2                                                        56,857     4
               197,600       2                                                        35,963     4
                                                                                      27,200     8



d                                     Actual           Normal
               Sales revenues         1,400,000       1,400,000
               COGS                   1,282,200       1,241,224           1,252,424
               GM                       117,800         158,776
               over/under                    -           11,200
               Mkt & admin              112,000         112,000
           Op profit         5,800   35,576

Why is there a difference?
        FG
 761,100
 521,100   1,282,200   7




       COGS
1,282,200




        FG
 754,600
 486,624   1,241,224   7




       COGS                    O/H over/underapplied
1,241,224                  8     27,200     16,000
a   Chuck should refuse to charge the U.S. Department of Defense for work for General
    Motors.

b   The fact that the consulting firm is being reimbursed for the government job and not the
    General Motors job gives the manager an incentive to try and shift costs to the
    government job. (If both jobs were fixed price, the total profits would remain the same
    regardless of the assignment of the costs.)
                                             assets                                 = liabilities   O/E
         cash           rm           wip        fg        a/d           o/h           a/p           net inc
bb
     1                       8000                                                    =       8000
     2                       -400                                                400 =
     3                       5600                                                    =       5600
     4          -8000                                                                =      -8000
     5                       -6800          6800                                     =
     6                                     10000                                     =     10000
     7      -10600                                                             10600 =
     8                                     12500                              -12500
                                                                -5000           5000
eb          -18600           6400          29300      0         -5000           3500 0     15600              0
rcd purch on account
transfer rm to o/h
rcd purch on account
rcd pay of a/p
using rm for production
rcd labor for wip
payment of factory rent
application of o/h

				
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