Manufacturing Overhead Control

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					CHAPTER 4


    Job Costing
  Basic Costing Terminology…
 Several key points from prior chapters:
   Cost Objects – including responsibility centers,
    departments, customers, products, etc.

     Direct Costs and Tracing – materials and labor

     Indirect Costs and Allocation – overhead



                                                   4-2
    …logically extended
 Cost Pool(成本库) – any logical grouping of
  related cost objects.
 Cost-allocation Base (成本分配基础)– a cost
  driver is used as a basis upon which to build a
  systematic method of distributing indirect costs
    For example, let’s say that direct labor hours
     cause indirect costs to change. Accordingly,
     direct labor hours will be used to distribute or
     allocate costs among objects based on their
     usage of that cost driver

                                                        4-3
   Costing Systems
 Job-Costing(分批成本系统): system accounting for
 distinct cost objects called Jobs(批次). Each job
 may be different from the next, and consumes
 different resources
     Wedding announcements, aircraft, advertising
 Process-Costing(分步成本系统): system accounting
 for mass production of identical or similar products
     Oil refining, orange juice, soda pop




                                                        4-4
  Costing Approaches
 Actual Costing (实际成本法):
   Indirect costs based on the actual indirect-cost
    rates times the actual activity consumption
 Normal Costing (一般成本法):
   Indirect costs based on the budgeted indirect-
    cost rates times the actual activity consumption
 Both methods allocate Direct costs to a cost
  object the same way: by using actual direct-cost
  rates times actual consumption

                                                       4-5
   Seven-step Job Costing
       —actual costing
1.Identify the Job to be costed

  source document(原始凭证)
   job cost record (job cost sheet批次成本记录):
      records and accumulates all the cost assigned
    to a specific job.




                                                      4-6
4-7
  Seven-step Job Costing

2.Identify the Direct Costs of the Job




                                         4-8
原材料领料单




         4-9
工人工时记录




         4-10
  Seven-step Job Costing

3.Select the Cost-allocation Bases(成本分配基础)
   to Use for Allocating Indirect Costs to the Job.

2008年,Robinson records 27,000 actual direct
  manufacturing labor-hours.




                                                      4-11
  Seven-step Job Costing
4. Identify the Indirect Costs Associated with Each
     Cost-Allocation Base.

 a single cost pool: manufacturing overhead costs
       -------actual manufacturing overhead costs
   total $1,215,000 in 2008.




                                                      4-12
     Seven-step Job Costing (continued)
5.    Calculate an Overhead Allocation Rate:
       •   Actual OH Costs ÷ Actual OH Allocation Base

                                   1 215 000
           actual OH Costs rate=
                                    27 000
              =$45 per direct manufacturing labor-hour




                                                         4-13
     Seven-step Job Costing (continued)
6.    Allocate Overhead Costs to the Job:
       •   OH Allocation Rate x Actual Base Activity For the Job
              45 x88 =$3960

7.    Compute Total Job Costs by adding all direct
      and indirect costs together




                                                                   4-14
4-15
4-16
       Job Costing Overview

                            Direct Materials:
                                  $100


                                                                        The Cost
                                                                         Object:
                              Direct Labor:
                                                                        Job #123
                                  $200
                                                                        DM    $100
                                                                        DL    $200
Indirect Cost Pool:                                        Overhead     OH     $50
                         Indirect             Overhead
 All Manufacturing    Cost-Allocation         Allocation   Applied to
       Costs                                               Job #123:    Total Cost:
                          Base:                 Rate:
                                                                          $250
                          Direct                                           $350
     $1,000           Manufacturing            $1,000 ÷    $10/DLhr
                       Labor-Hours            100 DLhrs        X
                                                  =         5 hours
                        100 hours             $10/DLhr      used in
                                                           Job #123
                                                               =
                                                              $50
                                                                                4-17
Journal Entries
 Journal entries are made at each step of the
  production process
 The purpose is to have the accounting
  system closely reflect the actual state of the
  business, its inventories and its production
  processes




                                                   4-18
The Role of Techonology
 EDI (Electronic Data Interchange电子数据交
  换)
 Bar Code Scanner(条形码扫描器)




                                          4-19
Time Period Used to Compute
Indirect-Cost Rates
 1.The numerator reason (indirect-cost pool)
     seasonal patterns, costs of maintenance
 2.The denominator reason (quantity of the
  cost-allocation base)
      the influence of fixed costs
 3.Other reasons




                                                4-20
Seven-step Job Costing
          —Normal Costing




                            4-21
     Seven-step Job Costing
         —Normal Costing
      step1.2.The same as actual costing


      step3.4:

                                            budget

Total manufacturing OH costs                   1,120,000

Total direct manufacturing LH                    28,000



                                                      4-22
  Seven-step Job Costing
      —Normal Costing
   Step 5:calculate the budgeted manufacturing
    overhead rate:
                  Total manufacturing
budgeted
                  OH costs                  1,120,000
manufacturing =                         =
overhead rate     Total direct               28,000
                  manufacturing LH

              =$40 per direct
              manufacturing labor-hour



                                                        4-23
 Seven-step Job Costing
     —Normal Costing
 Step 6:Allocate Overhead Costs to the Job:
  •   budgeted manufacturing overhead rate x Actual Base 40
      x88 =$3,520
 Step 7:Compute Total Job Costs under
  Normal Costing:




                                                              4-24
Normal Costing




                 $40   $ 3,520


                       $ 3,520
                       $ 9,705 4-25
A Normal Job-Costing System in
Manufacturing




                                 4-26
4-27
Journal Entries
 All Product Costs are accumulated in the
  Work-in-Process Control account
      Direct Materials used
      Direct Labor incurred
      Factory Overhead allocated or applied
 Actual Indirect Costs (overhead) are
  accumulated in the Manufacturing Overhead
  Control account


                                               4-28
Journal Entries, continued
 1.Purchase of Materials on credit:
     Materials Control          89 000
        Accounts Payable Control     89 000

 2.Requisition of Direct and Indirect Materials
  into production:
     Work-in-Process Control      81 000
      Manufacturing Overhead Control 4 000
        Materials Control                 85 000

                                                   4-29
  Journal Entries, continued

 3.Incurred Direct and Indirect Labor Wages
     Work-in-Process Control        39 000
      Manufacturing Overhead Control 15 000
        Wages Payable Control              54 000




                                                    4-30
  Journal Entries, continued
 4.Incurring or recording of various actual
  Indirect Costs:
     Manufacturing Overhead Control   75 000
        Salaries Payable Control                A
        Accounts Payable Control                B
        Accumulated Depreciation Control        C
        Prepaid Expenses Control                D




                                                    4-31
    Journal Entries, continued
   5.Allocation or application of Indirect Costs
    (overhead) to the Work-in-Process account is
    based on a predetermined overhead rate
     Work-in-Process    Control           80 000
            Manufacturing Overhead Allocated    80 000

           Note: actual overhead costs are never posted directly
            into Work-in-Process




                                                               4-32
 Journal Entries, continued
 6.Products are completed and transferred out
  of production in preparation for being sold
     Finished Goods Control       188 800
         Work-in-Process Control        188 800




                                                  4-33
Journal Entries, continued
 7.Products are sold to customers on credit
    Accounts Receivable Control       270 000
       Sales                                 270 000

 8.The associated costs are transferred to an expense
  (cost) account
      Cost of Goods Sold                       180 000
         Finished Goods Control                       180 000

           Note: The difference between the sales and cost of
            goods sold amounts represents the gross margin
            (profit) on this particular transaction



                                                                 4-34
4-35
4-36
  Budgeted Indirect Costs and End-of-
  Accounting-Year for Adjustments
 Recall that two different overhead accounts were
  used in the preceding journal entries:

     Manufacturing Overhead Control was debited for
      the actual overhead costs incurred.

     Manufacturing Overhead Allocated was credited
      for estimated (budgeted) overhead applied to
      production through the Work-in-Process account.


                                                     4-37
Budgeted Indirect Costs and End-of-
Accounting-Year for Adjustments
 Actual costs will almost never equal budgeted
  costs.
     If Overhead Control > Overhead Allocated,
      this is called Underallocated Overhead
     If Overhead Control < Overhead Allocated,
      this is called Overallocated Overhead




                                                  4-38
Three Methods for Adjusting the
Over/Underapplied Situations
 Adjusted Allocation Rate Approach – all allocations
  are recalculated with the actual, exact allocation rate

 Proration Approach – the difference is allocated
  between Cost of Goods Sold, Work-in-Process, and
  Finished Goods based on their relative sizes

 Write-Off Approach – the difference is simply written
  off to Cost of Goods Sold
     Cost of Goods Sold                 14 000
         Manufacturing Overhead Control     14 000


                                                            4-39
written off to Cost of Goods Sold




                                    4-40

				
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