review of chapter 14. completed products for sale. materials waiting to be processed. can be direct...
TRANSCRIPT
REVIEW ofChapter 14
Completedproductsfor sale.
Materialswaiting to beprocessed.
Can be director indirect.
Partially completeproducts.
Material to whichsome labor and/oroverhead havebeen added.
Balance Sheet of a Manufacturer
RawMaterials
FinishedGoods
Goods inProcess
C 4
14-17
Beginning Merchandise Inventory
BeginningFinished Goods Inventory
Cost of Goods Purchased
Cost of GoodsManufactured
Ending Merchandise Inventory
EndingFinished Goods Inventory
Cost of Goods Sold
Merchandiser Manufacturer
+
_
+
==
_
The major difference
Income Statement of a Manufacturer
C4
14-18
Manufacturing Company
Cost of goods sold: Beg. finished goods inv. $11,200 + Cost of goods manufactured 170,500 = Goods available for sale 181,700 - Ending finished goods inventory (10,300) = Cost of goods sold 171,400$
Merchandising Company
Cost of goods sold: Beg. merchandise inventory 14,200$ + Purchases 234,150 = Goods available for sale 248,350$ - Ending merchandise inventory (12,100) = Cost of goods sold 236,250$
Cost of goods sold for manufacturers differs only slightly from cost of goods sold for merchandisers.
Income Statement of a Manufacturer
P1
14-19
Summarizes the types and amounts of costsIncurred in a company’s manufacturing process.
Direct Materials Used + Direct Labor + Factory Overhead = Total Manufacturing Costs + Beginning Work in Process – Ending Work in Process = Cost of Goods Manufactured
Manufacturing StatementP2
14-25
Chapter 15
Job Order Costing and Analysis
ProcessCosting
JobCosting
Soda
Cereal
Gravel
Cement
Soap
Soda
Cereal
Gravel
Cement
Soap
Chapter 16 Chapter 16
C 1
Job Order Manufacturing
15-7
Car repair
Custom home
Custom suit
Home repair
Airplane maker
Car repair
Custom home
Custom suit
Home repair
Airplane maker
ProcessCosting
JobCosting
Used for production of large, unique, or high-cost items.
Built to order rather than mass produced.
Many costs can be directly traced to each job.
Used for production of large, unique, or high-cost items.
Built to order rather than mass produced.
Many costs can be directly traced to each job.
Job Order ProductionC 1
15-8
ProcessCosting
JobCosting
Typical job order cost applications: Special-order printing Building construction
Also used in service industry Hospitals Law firms
Typical job order cost applications: Special-order printing Building construction
Also used in service industry Hospitals Law firms
C 1
Job Order Manufacturing
15-9
ProcessCosting
JobCosting
Soda
Cereal
Gravel
Cement
Soap
Soda
Cereal
Gravel
Cement
Soap
C 1
Job Order Manufacturing
15-10
Car repair
Custom home
Custom suit
Home repair
Airplane mfg
Car repair
Custom home
Custom suit
Home repair
Airplane mfg
Receive order from
customers
Predict cost to complete
job
Negotiate a sales price and decide whether to
pursue the job.
Schedule the production of job
Events in Job Order CostingC1
15-11
Goods in Process
Cost of GoodsSold
Labor
Materials
Ind
irec
tIn
dir
ect
FinishedGoods
FactoryOverhead
Direct
Direct
Allocate
C 1 Job Order Production Activities
15-12
Road Warriors Job Cost Sheet
Customer Carroll Connor Job No. B15Address 1542 High Point Dr. Portland, OregonJob Description Level I Alarm System on Ford Expedition Date promised 3/15/11 Date started 3/3/11 Date completed
Direct Materials Direct Labor Factory OverheadDate Req. Cost Date Ticket Cost Date Rate Cost
Total Total Total
Remarks Cost SummaryDirect MaterialsDirect LaborFactory OverheadTotal Cost
Job Cost SheetC 2
15-13
Road Warriors Materials Requisition No. R-4705
Job No. B15 Date 3-7-11
Material Stock No. M-347
Material Description Alarm system wiring
Quantity Requested 1 Requested By
Quantity Provided 1 Date Provided 3-7-11
Filled By Received By
Remarks
C. Luther
C. Luther
M. Bateman
Materials RequisitionP1
15-14
Road Warriors Materials Ledger Card
Item Alarm sys. wiring Stock No. M-347 Location Bin137
Maximum Qty. 5 units Minimum Qty. 1 unit Reorder Qty. 2 units
Received Issued BalanceRec. Unit Total Req. Unit Total Unit Total
Date Rep. Units Cost Cost No. Units Cost Cost Units Cost Cost1 $225 $225
3/4/11 C7117 2 $225 $450 3 $225 $6753/7/11 R4705 1 $225 $225 2 $225 $450
Materials Ledger CardP1
15-15
Road Warriors Job Cost Sheet
Customer Carroll Connor Job No. B15Address 1542 High Point Dr. Portland, OregonJob Description Level I Alarm System on Ford Expedition Date promised 3/15/11 Date started 3/3/11 Date completed
Direct Materials Direct Labor Factory OverheadDate Req. Cost Date Ticket Cost Date Rate Cost3/7/11 R4705 $225
Total $225 Total Total
Remarks Cost SummaryDirect Materials $225Direct LaborFactory OverheadTotal Cost
Job Cost SheetP1
15-16
Road Warriors Job Cost Sheet
Customer Carroll Connor Job No. B15Address 1542 High Point Dr. Portland, OregonJob Description Level I Alarm System on Ford Expedition Date promised 3/15/11 Date started 3/3/11 Date completed
Direct Materials Direct Labor Factory OverheadDate Req. Cost Date Ticket Cost Date Rate Cost3/7/11 R4705 $225
Total $225 Total Total
Remarks Cost SummaryDirect Materials $225Direct LaborFactory OverheadTotal Cost
Accumulate direct labor
costs by means of a
work record, such as a time ticket, for each
employee.
Let’s see one
Job Cost SheetP2
15-17
Road Warriors Time Ticket No. L-3479
Job No. B15 Date 3/8/11
Employee Name T. Zeller Employee Number 3969
TIME AND RATE INFORMATION:
Start Time 9:00 Finish Time 12:00
Elapsed Time 3.0 Hourly Rate $20.00 Total Cost $60.00
Approved By
RemarksC. Luther
Labor Time TicketP2
15-18
Road Warriors Job Cost Sheet
Customer Carroll Connor Job No. B15Address 1542 High Point Dr. Portland, OregonJob Description Level I Alarm System on Ford Expedition Date promised 3/15/11 Dated started 3/3/11 Date completed
Direct Materials Direct Labor Factory OverheadDate Req. Cost Date Ticket Cost Date Rate Cost3/7/11 R4705 $225 3/8/11 L3479 $60
Total $225 Total $60 Total
Remarks Cost SummaryDirect Materials $225Direct Labor 60Factory OverheadTotal Cost
Job Cost SheetP2
15-19
Road Warriors Job Cost Sheet
Customer Carroll Connor Job No. B15Address 1542 High Point Dr. Portland, OregonJob Description Level I Alarm System on Ford Expedition Date promised 3/15/11 Date started 3/3/11 Date completed
Direct Materials Direct Labor Factory OverheadDate Req. Cost Date Ticket Cost Date Rate Cost3/7/11 R4705 $225 3/8/11 L3479 $60
Total $225 Total Total
Remarks Cost SummaryDirect Materials $225Direct Labor 60Factory OverheadTotal Cost
Allocate manufacturing overhead to jobs using a predetermined overhead rate
Let’s do it
Job Cost SheetP3
15-20
Job Cost Sheet
Road Warriors Job Cost Sheet
Customer Carroll Connor Job No. B15Address 1542 High Point Dr. Portland, OregonJob Description Level I Alarm System on Ford Expedition Date promised 3/15/11 Date started 3/3/11 Date completed
Direct Materials Direct Labor Factory OverheadDate Req. Cost Date Ticket Cost Date Rate Cost3/7/11 R4705 $225
Total $225 Total Total
Remarks Cost SummaryDirect Materials $225Direct LaborFactory OverheadTotal Cost
P3
15-21
Road Warriors uses a predetermined overhead rate (POHR) based on direct labor cost to apply overhead to jobs.
Estimated total manufacturingoverhead cost for the coming period
Estimated total direct labor costsfor the coming period
POHR =
POHR = = 160% of direct labor $$200,000
$125,000
Predetermined OverheadAllocation Rate Formula
P3
15-22
Materials Ledger CardsMaterials
Ledger CardsMaterials Ledger CardsMaterialsRequisition
Direct materials
The materials requisition
indicates the cost of direct materials
to charge tojobs
and the cost of indirect materials
to charge to overhead.
Indirect materials
Job Cost Sheets
Job Cost Sheets
Job Cost Sheets
Job Cost Sheets
Factory Overhead Account
Cost Flows and DocumentsP1
15-23
Employee time tickets indicate
the cost of direct laborto charge to
jobsand the cost
of indirect labor to charge to
overhead.
Job Cost Sheets
Factory Overhead Account
Job Cost Sheets
Job Cost Sheets
Job Cost Sheets
Direct Labor
Indirect Labor
Employee Time TicketEmployee Time
TicketEmployee Time TicketEmployee Time
Ticket
P3
Cost Flows and Documents
15-24
MaterialPurchases Direct
MaterialDirect
Material
Raw Materials Goods in Process
Factory Overhead
ActualOverhead
Costs
Indirect Material
P3
Summary of Cost Flows
Dr Cr
Dr Cr Dr Cr
15-25
Incurred DirectMaterial
Actual Applied factory factoryoverhead overhead
=/an adjustment is needed.
We will look at how to accomplish this later.
When
Goods in ProcessFactory Payroll
Factory Overhead
DirectLabor
DirectLabor
Indirect Labor
ActualOverhead
Costs
Overhead
OverheadApplied to
Work inProcess
P4
Summary of Cost Flows
15-26
DirectMaterialDirectLabor
Overhead
Cost ofGoodsMfd.
Cost ofGoodsMfd.
Cost ofGoodsSold
Cost ofGoodsSold
Goods in Process Finished Goods
Cost of Goods Sold
P4
Summary of Cost Flows
15-27
We multiply the POHRtimes the number of
activity units (direct labor cost for Road Warriors)
incurred for the job.
Tell me again how we use the POHR to
assign overhead to jobs.
Overhead ApplicationP4
15-28
Overhead Application
Overhead is notincurred uniformly
during the year.
Actual overhead ratemight vary from month to month.
Predetermined ratemakes it possible to
estimate job costs sooner.
Reasons for using apredetermined overhead rate
Reasons for using apredetermined overhead rate
P4
15-29
The result will be either underapplied or overapplied
overhead and wewill adjust Cost of Goods
Sold at the end of the period.
Here, let me show you.
The POHR is basedon estimates.
What happens ifactual results differfrom the estimates?
Adjusting of Overapplied or Underapplied Overhead
P4
15-30
Overhead is overapplied.
Overhead is overapplied.
Overheadapplied to
Work in Process
(POHR × Activity)
Actualoverhead
costsincurred
Adjusting of Overapplied and Underapplied Overhead
P4
15-31
Overhead is underapplied.
Overhead is underapplied.
Actualoverhead
costsincurred
Overheadapplied to
Work in Process
(POHR × Activity)
Adjusting of Overapplied and Underapplied Overhead
P4
15-32
Overhead is: Sold is: Adjustment will:
Actual overhead > applied overhead
Underapplied (Dr. Balance)
Too lowDebit to COGS (Credit FOH)
Actual overhead < applied overhead
Overapplied (Cr. Balance)
Too highDebit to FOH
(Credit to COGS)
Adjusting Cost of Goods Sold for underapplied or overapplied overhead
Adjusting of Overapplied and Underapplied Overhead
P4
15-33
Apply Job Order Costing toPricing Services
Estimate the cost of any supplies (shampoo/conditioner)
Estimate the cost of the labor (stylist’s rate X time of service)
Estimate the amount of overhead to be allocated to all customers
Add a mark up
A typical haircut
15-34