use only with permission of susan crosson chapter 3 costing systems: job order costing fall 2007...
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Chapter 3Chapter 3Costing Systems: Costing Systems: Job Order CostingJob Order Costing
Fall 2007
Crosson
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Learning Objectives:
How much does it cost?Types of Product Costing SystemsCost Flows in a Job Order Costing System in T-accounts and Journal entriesCompleting a Job Order Cost CardComputing a Job Order’s Product Unit Cost
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In Chapter 2 the question was:
How much does it cost?
Unit cost of a product or service under Normal Costing:
Costs of Goods Manufactured*
Units produced
*Actual DM, Actual DL, Applied OH
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Question refined:How much does a job cost?
_______Cost of Job*_____
Number of Units Produced
*DM+DL+OH
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Types of Product Cost SystemsTable 1
Job Order Costing
Process Costing
Income Statement format the same
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Financial Reporting of Costs
Manufacturing Income Statement
Sales
-Cost of Goods Sold (COGS)
=Gross Margin
-SAG
=Net Income
Chapter 2 Exhibit 1 in text Example: Chapter 2 E3 or E8.
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What Do You Know?Chapter 3 E 7 Starke CompanyChapter 3 E 7 Starke Company
Sales
-COGS
=GM
-SAG
=NI
+Beg. DM
+DM purchased
-End DM
+DM used
+DL
+OH
=Current Mfg Costs
+Beg. WIP
-End. WIP
=COGM
+Beg. FG
=COGAS
-End. FG
COGS
+$42,000
+A
+$38,000
=$168,000
+$382,000
+B=80%(DL)
=$?
+$66,000
-$138,600
=$C
+$29,000
=$?
-D
$808,000
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What Do You Know?E 7 Starke CompanyE 7 Starke Company
Sales
-COGS
=GM
-SAG
=NI
+Beg. DM
+DM purchased
-End DM
=DM used
+DL
+OH
=Current Mfg Costs
+Beg. WIP
-End. WIP
=COGM
+Beg. FG
=COGAS
-End. FG
=COGS
+$42,000
+A
+$38,000
=$168,000
+$382,000
+B=80%(DL)
=$?
+$66,000
-$138,600
=$C
+$29,000
=$?
-D
$808,000
A=164,000
B=305,600
$855,600
C=783,000
$812,000
D=4,000
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Financial Reporting of Costs
Where do Manufacturing Income Statements come from?
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Inventory Accounts and Job Order Cost Flows
Exhibit 13 Inventory Accounts:
Materials Work in Process Finished Goods
Cookie Example
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The Materials Account:the account that summarizes all material purchases
Material InventoryMaterial InventoryBeginning Balance
+DM Purchased
+IDM Purchased
DM used (to WIP)
IDM used (to OH)
Ending Balance
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The Work in Process Account: the account that summarizes of all in process Job Order Cards
WIP Inventory WIP Inventory Beginning Balance
+DM used
+DL used
+OH used
Cost of Goods* Manufactured or Completed
(COGM to FG)
Ending Balance
*JOBS*JOBS
Current ManufacturingCosts
Info. for the I/S’s COGM comes from this account!
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The Finished Goods Account: the account that summarizes all completed job order cards
Finished Goods InventoryFinished Goods InventoryBeginning Balance(BB)
+Cost of Goods* Manufactured
(COGM from WIP)
Cost of Goods* Sold
(to COGS)
Ending Balance
*JOBS*JOBS
BB+COGM=COGAS
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BB
+DM Purchased
+IDM Purchased
DM used (to WIP)
IDM used (to OH)
EB
BB
+DM
+DL
+OH
COGM
EB
BB
+COGM
COGS
EB
Material Inventory
Work in Process Inventory
Finished Goods Inventory
Info. for the I/S’s COGM comes from this account!
RECAP:
Good follow up is SE 5, SE6, or P2.Look and listen to journal entries SE4.
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What Do You Know?Now Do E 7 Starke Company using T-accountsNow Do E 7 Starke Company using T-accounts
Sales
-COGS
=GM
-SAG
=NI
+Beg. DM
+DM purchased
-End DM
=DM used
+DL
+OH
=Current Mfg Costs
+Beg. WIP
-End. WIP
=COGM
+Beg. FG
=COGAS
-End. FG
=COGS
+$42,000
+A
+$38,000
=$168,000
+$382,000
+B=80%(DL)
=$?
+$66,000
-$138,600
=$C
+$29,000
=$?
-D
$808,000
A=164,000
B=305,600
$855,600
C=783,000
$812,000
D=4,000
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BB 42,000
+DM Purchased
A=
DM used
168,000
EB
BB 66,000
+DM 168,000
+DL 382,000
+OH 80%(DL)
COGM = C
EB 138,600
BB 29,000
+COGM = C
COGS 808,000
EB = D
Material Inventory
Work in Process Inventory
Finished Goods Inventory
Info. for the I/S’s COGM comes from this account!
E 7 in T accounts:
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BB 42,000
+M Purchased
A= 164,000
DM used
168,000
EB
BB 66,000
+DM 168,000
+DL 382,000
+OH 80%(DL)=305,600
COGM
C =783,000
EB 138,600
BB 29,000
+COGM
C = 783,000
COGS 808,000
EB
D = 4,000
Material Inventory
Work in Process Inventory
Finished Goods Inventory
Info. for the I/S’s COGM comes from this account!
E 7 in T accounts:
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BB
+DM Purchased
+IDM Purchased
DM used (to WIP)
IDM used (to OH)
EB
BB
+DM
+DL
+OH
COGM
EB
BB
+COGM
COGS
EB
Material Inventory
Work in Process Inventory
Finished Goods Inventory
Info. for the I/S’s COGM comes from this account!
Try E 6 for June…
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BB 33,939+DM Purchased
57,100
DM used (to WIP)
59,025
EB 32,014
BB 89,605
+DM 59,025
+DL 48,760
+OH 58,512
COGM 154,701
EB 101,201
BB 79,764
+COGM 154,701
COGS 166,805
EB 67,660
Material Inventory
Work in Process Inventory
Finished Goods Inventory
Info. for the I/S’s COGM comes from this account!
E 6 for June…
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BB 32,014 (from June)
+DM Purchased
60,216
DM requested
= 64,602
EB 27,628
BB 101,201(from June)
+DM 64,602
+DL 54,540
+OH = 65,448*
COGM 231,861
EB = 53,930
BB 67,660
+COGM 231,861
COGS = 269,006
EB 30,515
Material Inventory
Work in Process Inventory
Finished Goods Inventory
Info. for the I/S’s COGM comes from this account!
E 6 for July…
*120% of 54,540
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BB
+DM Purchased
+IDM Purchased
DM used (to WIP)
IDM used (to OH)
EB
BB
+DM
+DL
+OH
COGM
EB
BB
+COGM
COGS
EB
Material Inventory
Work in Process Inventory
Finished Goods Inventory
Info. for the I/S’s COGM comes from this account!
Now Try P6…Know Journal entries and T-accounts!!!
Hint: create a WIP account for each Job.
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Where does Work in Process Information come from?
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Job Cost CardJob Order Cost Card
Job Order #: Batch Custom
Customer: Specifications:
Date of Order: Date of Completion:
Costs Charged to Job Previous Month Current Month Total Cost
TotalsUnits Completed:
Product Unit Cost:Profit Factor:
Revenue Generated:
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Job Cost Card Format
Figure 2-Product Figure 3-Service Review Problem
Good follow up exercises are SE8, SE10, E12, E15.
Look and listen to SE8.
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SE 10 Job Cost CardJob Order Cost Card
Job Order #: 2003-A7Batch Custom
Customer: Arthur Farnsworth Specifications: Annual Individual Tax Return
Date of Order: 3/24/x8Date of Completion: 4/8/x8
Costs Charged to Job Previous Month Current Month Total Cost
Client Interview Preparation of Return Delivery
Profit Factor: 25%Revenue Generated:
10+50+20= 60+24=
16+12+240+120
12
$$$
$$
$$Totals
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SE 10 Job Cost CardJob Order Cost Card
Job Order #: 2003-A7Batch Custom
Customer: Arthur Farnsworth Specifications: Annual Individual Tax Return
Date of Order: 3/24/x8Date of Completion: 4/8/x8
Costs Charged to Job Previous Month Current Month Total Cost
Client Interview Preparation of Return Delivery
Profit Factor: 25%Revenue Generated:
10+50+20 60+24
16+12+240+120
12
$164$388
$12
$564
$705
TotalsProfit= $141
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Check figure: Contract Revenue
$1,801.50
What Do You Know? : E 13
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BB
+DM Purchased
+IDM Purchased
DM used (to WIP)
IDM used (to OH)
EB
BB
+DM
+DL
+OH
COGM
EB
BB
+COGM
COGS
EB
Material Inventory
Work in Process Inventory
Finished Goods Inventory
Info. for the I/S’s COGM comes from this account!
Try P5 Job P-12…Know Job Cards and T-accounts!!!
Homework Hint: create a WIP account for each Job.
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P5 Job Cost Card for P-12…Job Order Cost Card
Job Order #: Batch Custom
Customer: Specifications:
Date of Order: Date of Completion:
Costs Charged to Job Previous Month Current Month Total Cost
TotalsUnits Completed:
Product Unit Cost:Profit Factor:
Revenue Generated:
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Homework:
Problem 2
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Build Your Own Business with LEGOS Form groups of 4 students Obtain a 2 sets of Legos (return at end of BYOB) Assign each student member a team role:
Manager (instructions and picture of product) Employee (product builder) Accountant (must have job cost card) Customer (quality control)
Each team will build 2 products with accountant recording costs on job card
In your group, how much does one unit cost? Compare results with other teams, do all the
cost cards agree? Why not?
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Put all Legos, instructions, picture, etc. back in the bag.
Return bags to front of class.
Before you leave…..
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Example of Job Order Costing
http://inst.sfcc.edu/~scrosson/w2002/6E/Chilly, Group E Website/index.html