27-1. job order cost accounting section 1: cost accounting chapter 27 section objectives 1.explain...
TRANSCRIPT
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Job OrderCost Accounting
Job OrderCost Accounting
Section 1: Cost Accounting
Chapter
27
Section Objectives
1. Explain how a job order cost accounting system operates.
McGraw-Hill © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
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Job Order Cost Accounting
Process Cost Accounting
Standard Cost Accounting
Types of Cost Accounting Systems
Standard cost accounting may be used with either the job order cost system or the process cost system.
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A job order cost accounting system is used by businesses that produce special orders or produce more than one product in batches.
A process cost accounting system is used when standard products are manufactured using a continuous process.
A standard cost accounting system, in which standard costs of production are measured, can be used with a job order or a process cost system.
Types of Cost Accounting Systems
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Cost Flows in a Job Order Cost System
Procurement
Production
Warehousing
Selling
Explain how a job order cost accounting system operates
Objective 1
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Raw MaterialsInventory
Work in Process Inventory
Finished Goods Inventory
Cost of Goods Sold
Purchases Issued Materials
Labor
Overhead
Transferred out
Transferred in
Transferred out
Transferred in
WagesPayable
Charged to Work in Process
Manufacturing Overhead
Indirect Materials
Indirect Labor
Other
Applied to Work in Process
Procurement Production Warehousing Selling
Flow of Costs through a Job Order Cost Accounting System
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The perpetual inventory system tracks
inventories on hand at all times.
The following accounts are involved in a
perpetual inventory system: Raw Materials Inventory
Wages Payable
Manufacturing Overhead
Work in Process Inventory
Finished Goods Inventory
Cost of Goods Sold
Perpetual Inventory System
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QUESTION:
How is the balance of the Raw Materials Inventory account computed?
Total available foruse xx
Deduct materials used during year xx
Raw Materials Inventory
Beg. inventory ofraw materials xx
Add purchases during period xx
Ending inventory of raw materials xx
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Computing the Balance of the Work in Process Inventory
Beginning inventory of work in process xx
Ending inventory of work in process xx
Reflects the cost of partially completed units
Deduct cost of goods completed xx
Add direct materials, direct labor, and manufacturing overhead charged to production xx xx
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Computing the Balance ofFinished Goods Inventory
Beginning inventory of finished goods xx
Ending inventory of finished goods xx
Represents the cost of finished goods on hand.
Deduct cost of goods sold xx
Add cost of goods manufactured xx xx
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Just-in-Time Inventory Systems
Used by companies who wish to eliminate raw materials inventory.
Raw materials ordered to arrive just in time to be placed into production.
Costs of arriving materials placed immediately into Work in Process Inventory.
Reduces amount of capital tied up in inventory.
Reduces inventory storage space.
Reduces costs for storeroom personnel, insurance, and recordkeeping.
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Supply Dependability: Unless the supply sources are dependable, manufacturing operations are at risk.
Interruption in Production: Late deliveries or damaged materials cause a halt in production.
Risks of Just-in-Time Inventory Systems
Job OrderCost Accounting
Job OrderCost Accounting
Section 2: Job Order Cost
Accounting System
Chapter
27
Section Objectives
2. Journalize the purchase and issuance of direct and indirect materials.
3. Maintain perpetual inventory records.4. Record labor costs incurred and charge labor into production.5. Compute overhead rates and apply overhead to jobs.6. Compute overapplied or underapplied overhead and report it in
the financial statements.
McGraw-Hill © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
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Job Order Cost AccountingSystem
Record the costs incurred.
Record the costs of items placed into production.
Record the transfer of products to finished goods.
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Raw Materials Inventory
20,000
Accounts Payable
20,000
Purchases of Raw Materials
20--Apr 30 Raw Materials Inventory 20,000.00
Accounts Payable 20,000.00 Cost of materials and supplies purchased during April
Reflects all transactions related to raw materials and supplies.
Journalize the purchase and issuance of direct and indirect materials
Objective 2
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UNITS PRICE AMOUNT UNITS PRICE AMOUNT UNITS PRICE AMOUNT
20-- Bal 0
Apr 4 PO-3 200 1.00 200.00 200 1.00 200.00
8 R-24 100 1.00 100.00 100 1.00 100.00
12 PO-14 150 1.10 165.00 100 1.00
150 1.10 265.00
17 R-51 100 1.00
50 1.10 155.00 100 1.10 110.00
24 PO-32 100 1.16 116.00 100 1.10
100 1.16 226.00
27 R-90 100 1.10 110.00 100 1.16 116.00
RAW MATERIALS LEDGER CARD
(FIFO Cost Method)
ITEM: Brace NUMBER: BRC02
Date REF.
RECEIVED ISSUED BALANCE
Raw Materials Ledger Card
Job Number
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Materials Requisition
Identifies job or purpose
Signed by authorized employee
Materials requisition describes the item and quantity needed.
Braces BRC02
April 8, 2010
Maintain perpetual inventory records
Objective 3
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On a weekly basis, a journal entry should be made to reflect all materials requisitions.
20--
Apr 30 Work in Process Inventory 10,200.00
Manufacturing Overhead 400.00
Raw Materials Inventory 10,600.00
Cost of materials and supplies issued during month.
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When pricing the raw materials inventory, three common methods are used:
FIFO LIFO Average Cost
Each method reflects a different valuation of raw materials inventory.
Each company determines its own pricing policy.
Cost Basis
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Work in Process Inventory
XX
Manufacturing Overhead
Accounting for Labor
Factory Labor Costs (Direct Labor)
Factory Labor Costs (Indirect Labor)
XX
Record labor costs incurred and charge labor into production
Objective 4
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Labor Costs
Workers complete a separate time ticket for each job.
The total charged to all cost sheets must agree with direct labor debited to Work in Process Inventory.
All labor time tickets are sorted by job, summarized at end of the payroll period, and entered on job order cost sheets.
David Whitt________________
April 8__________
12.00__________28.00__________
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Recording Labor Costs
Payroll Direct Indirect Total Period Labor Labor
Apr 8 $1,700 $ 300 $2,000 15 1,600 240 1,840 22 1,400 260 1,660 27 1,200 200 1,400Totals $5,900 $1,000 $6,900
20--
Apr 30 Work in Process Inventory (Direct Labor) 5,900.00 Manufacturing Overhead (Indirect Labor) 1,000.00 Social Security Tax Payable 427.80 Medicare Tax Payable 100.05 Employee Income Tax Payable 1,035.00 Salaries and Wages Payable 5,337.15 (Total labor costs for Apr.)
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Includes all manufacturing costs except direct materials and direct labor.
Examples:
Indirect materials
Indirect labor
Depreciation
Insurance
Utilities
Rent
Manufacturing Overhead
Compute overhead rates and apply overhead to jobs
Objective 5
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Overhead costs are applied to specific jobs based on an overhead application rate.
Several methods can be used to develop the overhead application rate:
Based on direct labor costs.
Based on direct labor hours.
Based on estimates of overhead and labor costs.
Applying Overhead to Jobs
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Coastal Manufacturing Corporation uses direct labor costs as the base for applying overhead.
QUESTION:
How is Coastal’s overhead application rate computed?
Estimated overhead costs
Estimateddirect labor costsEstimated costs ÷ Base
$ 90,000
$120,000= 75%
Computing the Overhead Application Rate
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Applying Overhead to Specific Jobs
Apr 30 Work in Process Inventory 4,425.00
Manufacturing Overhead Applied 4,425.00 Overhead applied to jobs in
April at 75% of direct labor costs.
Overhead Application x Direct Labor = Overhead Rate Costs Applied
75% x $5,900 = $4,425
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At month-end, compare the total credits in Manufacturing Overhead Applied to the total debits in Manufacturing Overhead.
If credits in Manufacturing Overhead Applied are less than debits in Manufacturing Overhead, overhead has been underapplied.
If debits in Manufacturing Overhead are less than credits in Manufacturing Overhead Applied, overhead has been overapplied.
Compute overapplied or underapplied overhead and report it in the financial statements
Objective 6
Determining Overapplied or Underapplied Overhead
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Manufacturing Overhead
400
Manufacturing Overhead Applied
4,425
Computing Overapplication or Underapplication of Overhead
1,000
Indirect materials and supplies
Indirect labor
Other Overhead 2,425
3,825
Actual – Applied
$3,825 – $4,425 = ($600)
Overhead was overapplied by $600.
Job OrderCost Accounting
Job OrderCost Accounting
Section 3: Accounting for
Job Orders
Chapter
27
Section Objectives
7. Maintain job order cost sheets.
8. Record the cost of jobs completed and the cost of goods sold under a perpetual inventory system.
McGraw-Hill © 2009 The McGraw-Hill Companies, Inc. All rights reserved.
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Each job started in production has its own job order cost sheet.
The cost sheets constitute the subsidiary ledger for the Work in Process account. The job cost sheet totals should equal the general ledger account balance.
The cost sheet shows: Direct materials Direct labor Overhead
Maintain job order cost sheetsObjective 7
Job Order Cost Sheet
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Apply overhead using predetermined rate.
Total the costs when the job is completed.
Job Order Cost SheetJob Order Cost Sheet
Enter materials used.
Enter labor costs.
__Apr. 3, 2010_______Apr. 15, 2010_______
__J-8
_Date Apr. 15, 2007
225.50__
169.13__
644.63__
25.785__
Stang Tables__________
Apr. 8 150.00 Apr 8 150.50 Apr 8 75% 112.88
100.00 Apr. 15 100.00 Apr 15 75.00 Apr 15 75% 56.25
250.00 225.50 169.13
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Transfer Goods from Work in Process to Finished Goods
Transfer Goods from Work in Process to Finished Goods
Work in Process Inventory 15,000.00
Finished Goods Inventory 15,000.0020-- Apr 30
Cost of jobs completed during April.
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Record the cost of jobs completed and the cost of goods sold under a perpetual inventory system.
Objective 8
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Cost of Goods SoldCost of Goods Sold
Recall that in a periodic inventory system, the cost of goods sold is determined by using the Purchases and Inventory accounts.
A perpetual inventory system uses an actual Cost of Goods Sold general ledger account.
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Cost of Goods Sold (Perpetual Inventory)Cost of Goods Sold (Perpetual Inventory)
As goods are sold, sales invoices are prepared for customers.
The cost information for the invoice comes from the finished goods ledger card.
A journal entry is made to transfer the items from Finished Goods Inventory to Cost of Goods Sold.
On the income statement, the Cost of Goods Sold account is adjusted for underapplied or overapplied overhead.
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Recording Cost of Goods Sold
Finished Goods Inventory
9,000
Cost of Goods Sold
9,000
Finished Goods Inventory 9,000.00April 30 Cost of Goods Sold 9,000.00
Cost of goods soldduring April.
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Cost of Goods Sold (Perpetual Inventory)Cost of Goods Sold (Perpetual Inventory)
Sales $20,000Cost of Goods Sold (per ledger account) $9,000Add Underapplied Manufacturing Overhead 600Cost of Goods Sold (adjusted) 9,600Gross Profit on Sales $10,400
Instead of showing overapplied or underapplied overhead on the income statement, the accountant might prefer to show actual manufacturing costs on the statement of cost of goods manufactured.
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Cost Flow Through Inventory Accounts
Raw MaterialsInventory
Work in ProcessInventory
Finished Goods Inventory
Cost of Goods Sold
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Thank Youfor using
College Accounting, 12th Edition
Price • Haddock • Brock