Job-Order Costing System by xiuliliaofz

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									Systems Design:
Job-Order Costing

                   UAA – ACCT 202
 Principles of Managerial Accounting
                    Dr. Fred Barbee


                          Chapter
   Cost
Measurement
                  Cost
              Accumulation
                                     Cost
                                  Assignment

 Direct
 Direct
Materials
Materials

 Direct
 Direct       Work-in-
              Work-in-     Finished
                           Finished    Cost-of
                                        Cost-of
 Labor
 Labor        Process
              Process       Goods
                             Goods    Goods Sold
                                      Goods Sold

  Mfg.
  Mfg.
Overhead
Overhead             Goal: Accurately costed
                     products.
The same basic purpose exists in both systems.

    Job-Order
    Costing Vs.                To assign direct
    Process           1        material, direct labor
    Costing -                  and manufacturing
                               overhead to products.
    Similarities

                                      t’s
          2                         Le
  To provide a mechanism for
  computing unit cost.
The same basic purpose exists in both systems.

    Job-Order
    Costing Vs.               Both systems maintain
    Process             3     and use the same
    Costing -                 manufacturing
                              accounts.
    Similarities

                                      t’s
            4                       Le
  The flow of costs through the
  accounts is basically the same.
     Cost Flows in a Manufacturing Firm
     Cost Flows in a Manufacturing Firm
Manufacturing Costs                                Balance Sheet
                            Unused
      DM
      DM                                              DM Inv.
                                                      DM Inv.
                   Use
                       d
               Used                  Unfinished
      DL
      DL                      WIP
                              WIP                     WIP Inv.
                                                      WIP Inv.
                  lied
               App                   Fini
                                         she
                                               d
     MOH
     MOH                                              FG Inv.
                                                      FG Inv.

              Sales
                -            COGS
                             COGS           Sold

 Income         =     Gross Margin
 Statement
                -             S&A
                              S&A
                =     Net Income
Differences arise from two factors . . .

 e t’s               These units are indistinguishable
L                    from one another.


                                          2

                                   Job-Order
    The flow of units in a
                                   Costing Vs.
    process costing
    system is more or less    1    Process
    continuous.                    Costing -
                                   Differences
            Job-Order Costing
                  Job 100


                                                 Cost of
DM                              Finished
                  Job 101                        Goods
 DL                              Goods            Sold
MOH


                  Job 102

Work in Process     Finished Goods   Cost of Goods Sold
      Process Costing System
        Process A


DM
           Process B
 DL
MOH
                           Finished     Cost of
               Process C    Goods     Goods Sold
Equivalent Units
                                   Total Cost
 of Production


                  Information
                    Information
                 provided by a
                    Provided by
                    Cost System
                 cost system.


 Cost of Units
                                  Cost Per Unit
   in WIP
 Usefulness of Cost Information

 Valuing                 Pricing
Inventory               Products

             Decision
             Making

Planning &              Financial
  Control               Reporting
  Unit Cost
                       Is based on an
                 1     averaging
                       process . . .


       2

. . . With the averaging process being
dependant on the system used.
     Flow of Documents in a Job-Order Costing System
     Flow of Documents in a Job-Order Costing System


                                    A sales order is prepared as
   Sales Order
   Sales Order                      a basis for issuing a . . .
A production order initiates
work on a job, whereby                Production Order
                                      Production Order
costs are charged through:


     Materials
     Materials            Direct Labor
                          Direct Labor            Predetermined
                                                   Predetermined
    Requisition
    Requisition           Time Ticket
                           Time Ticket            Overhead Rates
                                                  Overhead Rates
      Form
       Form


                               Job Cost
                                Job Cost
                                 Sheet
                                 Sheet
 Direct
 Direct
Materials
Materials

 Direct
 Direct     Work-in-
            Work-in-   Finished
                       Finished    Cost-of
                                    Cost-of
 Labor
 Labor      Process
            Process     Goods
                         Goods    Goods Sold
                                  Goods Sold

  Mfg.
  Mfg.
Overhead
Overhead
 Direct
 Direct
Materials
Materials

 Direct
 Direct     Work-in-
            Work-in-   Finished
                       Finished    Cost-of
                                    Cost-of
 Labor
 Labor      Process
            Process     Goods
                         Goods    Goods Sold
                                  Goods Sold

  Mfg.
  Mfg.
Overhead
Overhead
 Direct
 Direct
Materials
Materials

 Direct
 Direct     Work-in-
            Work-in-   Finished
                       Finished    Cost-of
                                    Cost-of
 Labor
 Labor      Process
            Process     Goods
                         Goods    Goods Sold
                                  Goods Sold

  Mfg.
  Mfg.
Overhead
Overhead
          Cost Assignment Dilemma
            Direct
            Materials

Traceable
                           Mfg. Process   Unit Cost
             Direct
                                          for Finished
             Labor         (Work in
                                          Goods
                           Process)


             Assigned
Problem      Overhead




  Costs must be assigned using some activity
  Costs must be assigned using some activity
  base and a predetermined overhead rate.
  base and a predetermined overhead rate.
          Cost Assignment Dilemma
             Direct
             Materials

Traceable
                                        Mfg. Process        Unit Cost
               Direct
                                                            for Finished
               Labor                    (Work in
                                                            Goods
                                        Process)


               Assigned
Problem        Overhead
                             Solution?


                      Estimated Overhead
                       Estimated Overhead
            POR = -------------------------------------------
            POR = -------------------------------------------
                  Estimated Units in Activity Base
                   Estimated Units in Activity Base
Simplify          Why
Record-    2             1   Timeliness
keeping
               Allocate?

                  3


                 Avoid
               Seasonal
                Factors
           Selecting an Allocation Base
Possible             Criterion: Cause-         POR
Drivers
                        and-Effect
                       Relationship

l   Units produced
l   Direct Labor Hours            Choice of activity
                                  base used in the
l   Direct Labor $
                                  calculation of the
l   Machine Hours                 Predetermined
l   Direct Materials
                                  Overhead Rate.
    Basic Concept of Applied Overhead

Applied overhead = Overhead rate x Actual production
                               activity
                                 Two points to
                                 consider in the
                                 application of MOH


    l   Applied overhead is the basis for computing per-
        unit overhead cost.
    l   Applied overhead is rarely equal to a period's
        actual overhead costs.
     Summary of Overhead Concepts
     Summary of Overhead Concepts


  Estimated        The amount of
                   The amount of
  Estimated     estimated overhead
Overhead Cost
Overhead Cost    estimated overhead
                       costs.
                        costs.

                  The amount of
                   The amount of
   Actual
    Actual        overhead costs
Overhead Cost      overhead costs     Difference
Overhead Cost   actually incurred.
                 actually incurred.   equals Unde
                                      - or Over-
                 The amount of        applied
  Applied
   Applied        The amount of
                 overhead costs       Overhead.
Overhead Cost
Overhead Cost     overhead costs
                 applied to WIP.
                  applied to WIP.
The Manufacturing Overhead Account
The Manufacturing Overhead Account

                            Amounts rarely agree
    Actual
    Actual
Overhead Costs
Overhead Costs


                    MOH
                 xxx     xxx

                 A “Clearing”
                   Account

                                 Overhead Applied
                                 Overhead Applied
                                      to WIP
                                       to WIP

								
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