jobcostingppt-101026041420-phpapp02

8/8/2019 jobcostingppt-101026041420-phpapp02

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Job Costing

Presentation


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T o T each Job Costing

Objective 1


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Job order costing

Process costing

Cost Systems

There are two basic systems used bymanufacturers to assign costs to their

products:


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Chopping Mixing and Canning

Process Costing Example

Laxmi Foods Company produces a garlicflavored tomato sauce.

Production of the sauce requires two major processes:


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Job Costing

It is used by a manufacturer who produces products as individual units or in distinct

batches or jobs.


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Job Costing Example

Ram, Sham , and Co. is a small furnituremanufacturing business in Texas.

They received an order for 1 0 chairs froma customer in Kansas City.


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$500 10 = $50/ chair

Job Costing Example

Total cost for the job was $500 .How much was the cost per chair?


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Job Costing

Job cost record is a document used to

accumulate the costs of a job.


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Job Number: J9738 Date Promised: 9 /11 /06Customer: Miami Motors Date Started: 8 /03/06Job Description: 3 00 automobile engine valves

Engineering Design Number: JJJ-1 00

Job Cost Record Example


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Dates Number Hours Rate Amount

8/2, 3,4,5 M1 6 24 $28 $ 6728/2, 3,4,5 M18 , M19 , M20 6 4 $26 1,66 48/6, 7,8,9,10 A25, A26, A27 120 $ 18 2,160

8/6,

7,8

,9

,1

0A3

2,A34

,A3

5 61

$17 1

,037

Total direct labor cost : 269 $5,5 33



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Manufacturing Overhead Amount118 machine hours @ $40 per hour $ 4,72026 9 direct labor hours @ 3 6 per hour 9 ,684

Total overhead cost: $14 ,404



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Total cost $39 ,237 Number of units produced 3 00Cost per unit $130.79



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T race Materials and

Labor in a ManufacturersJob Costing System.

Objective 2


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Materials Cost

Companies using job costing often use a perpetual system to account for direct

materials.A materials requisition is used to requesttransfer of materials to the production

floor.


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Materials Cost Example

Alec Clothing Co. purchased raw materialson account for $15,000 .Materials costing $10,000 wererequisitioned for production.Of this total , $2,000 was indirect materials.


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Indirect materials

Direct materials

15,000 10,000

2,000

8,000

Materials Inventory WIP Inventory

Manufacturing Overhead

Materials Cost Example


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Labor Costs

Labor costs are accumulated using the payroll register and time records.

Labor time records identify the employee , the amount of time spent , and the costcharged to each job.


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Labor Cost Example

The company incurred $30,000 of manufacturing wages for all jobs.

Assume that $25,000 can be traced directlyto the jobs and $5,000 is for indirect labor.


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Indirect labor

Direct labor

30,000 30,000

5,000

25,000

Manufacturing Wages WIP Inventory

Manufacturing Overhead

Labor Cost Example


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A llocate ManufacturingOverhead in a

Manufacturers Job Costing

System

Objective 3


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Manufacturing Overhead(Deprec.-Plant and Equipment) 20,000

Accumulated Depreciation(Plant and Equipment) 20,000

To record plant and equipment depreciation

Manufacturing Overhead Costs

The company incurred $20,000 of plantequipment depreciation.


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Estimated overhead Estimated base = Rate

Manufacturing Overhead Rate

At the beginning of the year , a predetermined manufacturing overhead

application rate is computed.This rate is used to apply overhead to all

jobs completed during the year.


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Six Steps in Allocating

Manufacturing Overhead Cost1 Estimate total overhead for the period.2 Select an overhead allocation base.

3 Estimate total quantity of the overheadallocation base.

4 Compute the predetermined overhead rate.


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Six Steps in Allocating

Manufacturing Overhead Cost5 Obtain actual quantities of the overhead

allocation base.

6 Allocate manufacturing overhead bymultiplying the predeterminedmanufacturing overhead rate by the actualquantity of the allocation base that pertainsto each job.


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$243 ,000 4 ,500 = $5 4

Manufacturing Overhead Example

Alec Clothing Co.s total estimatedoverhead for the year equals $243 ,000 .

The predetermined overhead rate is basedon 4 ,500 direct labor hours.What is the predetermined overhead rate?


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Work-in-Process Inventory 1 0,800Manufacturing Overhead 1 0,800To record overhead applied to Job 51

Manufacturing Overhead Example

Assume that Job 51 used 200 direct labor hours.

What is the journal entry to record themanufacturing overhead applied?


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A ccount for Completion andSales of Finished Goods, and

A djust for Under-or-

Overapplied ManufacturingOverhead

Objective 4


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Accounting for Finished Goods ,

Sales , and Cost of Goods SoldAs jobs are completed they are transferredto finished goods inventory.

In addition to the overhead applied to Job51, direct labor was $4,000 and directmaterials totaled $30,000 .

How much was transferred to FinishedGoods Inventory?


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Direct materials $30,000Direct labor 4 ,000

Manufacturing overhead 1 0,800$44 ,800

Work in Process44 ,800

Finished Goods44 ,800


Sales , and Cost of Goods Sold


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Work in Process44 ,800

Finished Goods44 ,800 44 ,800

Cost of Goods Sold44 ,800


Sales , and Cost of Goods Sold


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Disposing of Underallocated or

Overallocated OverheadSuppose that the company incurred$232,000 of actual manufacturing

overhead during the year , and that actualdirect labor hours worked were 4 ,000 .The actual manufacturing overhead ratewould have been $232,000 4 ,000 = $58.The predetermined rate was $54.


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Disposing of Underallocated or

Overallocated OverheadHow much overhead was allocated to thevarious jobs?

4,000 direct labor hours $54 = $216,000What is the underallocated amount?$232,000 actual $216,000 allocated

= $16,000


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Manufacturing Overhead232,000 2 16,000

16,000

Cost of Goods Sold16,000

0

Disposing Underallocated

Overhead to Cost of Goods Sold


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Disposing Overallocated

Overhead to Cost of Goods SoldAssume the opposite situation in which allocatedoverhead is $2 32,000 and actual overhead is

$2 16,000 .How do we dispose of overallocated overhead?Debit the Manufacturing Overhead account andcredit the Cost of Goods Sold account to decreasethe costs that went to the income statement.


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Manufacturing Overhead216,000 2 32,00016,000

0

Cost of Goods Sold16,000

Disposing Overallocated

Overhead to Cost of Goods Sold


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A ssign Noninventoriable

Costs in Job Costing.

Objective 5


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Job Costing in a

Nonmanufacturing CompanyHow is direct labor traced to individual

jobs in a nonmanufacturing company?

Employees complete a weekly time record.Jim, Abby , and Associates is a firmspecializing in composing and arrangingmusic parts for different clients.

Musician Judy Lopezs salary is $80,000 per year.


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Advertising $ 15,000Depreciation 6,000Maintenance 1 2,000

Office rent 60,000Office support 47 ,000Travel 20,000Total indirect costs $160,000

Job Costing in a

Nonmanufacturing CompanyJim and Abby estimated the indirect coststhat will be incurred in 2006 .


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160,000 8 ,000 = $20

Job Costing in a

Nonmanufacturing CompanyAssume that they estimate that themusicians will work 8 ,000 direct labor

hours in 2006 .What is the predetermined indirect costrate?


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Direct Labor: 25 hours $40 = $1,000

Indirect costs: 25 hours $20 = 500Total costs: $1,500

Job Costing in a

Nonmanufacturing CompanyRecords show that Judy Lopez worked 25 hours servicing Los Abuelos Music Co.

What is the total cost assigned to thisclient?


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T hankswww.svtuition.org

T hankswww.svtuition.org

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