Bài giảng Fundamentals of cost accounting - Chapter 7: Job Costing

© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.  Job CostingChapter 7Learning ObjectivesLO 7-1 Explain what job and job shop mean.LO 7-2 Assign costs in a job cost system.LO 7-3 Account for overhead using predetermined rates.LO 7-4 Apply job costing methods in service organizations.LO 7-5 Understand the ethical issues in job costing.LO 7-6 Describe the difference between jobs and projects.Defining a JobLO 7-1 Explain what job and job shop mean.LO 7-1 Unit of a product that is easilydistinguishable from other units Firm that produces jobsUsing Accounting Recordsin a Job ShopLO 7-1Production Process at InShapeLO 7-2 Assign costs in a job cost system.Suppose InShape, Inc. manufactures custom workoutand training equipment for schools and gyms.LO 7-2Records of Costs at InShapeMaterialsWork-in-processDirectmaterialsRawmaterialsIndirectmaterialsOverhead12-0301-0101-02TotalWIPLO 7-2Records of Costs at InShapeLaborWork-in-processDirectlaborLaborIndirectlaborOverhead12-0301-0101-02TotalWIPLO 7-2Records of Costs at InShapeOverheadWork-in-processOverhead12-0301-0101-02TotalWIPOH costs are applied to each job using the POHR.LO 7-2Inventory AccountsOn January 1, InShape has the following balancesin each of its three inventory accounts: Direct materials inventory $30,000Work-in-process inventory (Job 12-03) $41,000Finished goods inventory (Job 12-02) $27,000Now, let’s record January’s activities for InShape. LO 7-2Direct MaterialsInShape purchased $135,000of raw materials on account.Accounts Payable 17,000 BB135,000 (1)Materials InventoryBB 30,000(1) 135,000LO 7-2Direct MaterialsInShape used $12,000 of direct materials for 12-03.They also started 01-01 and 01-02 and used $102,000and $15,000 of direct materials respectively. WIP InventoryBB 41,000(2) 129,000WIP 12-03BB 41,000(2) 12,000WIP 01-01(2) 102,000WIP 01-02(2) 15,000Materials InventoryBB 30,000(1) 135,000129,000 (2)LO 7-2Direct MaterialsDirect labor of $98,000 was incurred ($16,000 for 12-03,$71,000 for 01-01, and $11,000 for 01-02).WIP 12-03BB 41,000(2) 12,000(3) 16,000WIP 01-01(2) 102,000(3) 71,000WIP 01-02(2) 15,000(3) 11,000WIP InventoryBB 41,000(2) 129,000(3) 98,000Wages Payable98,000 (3)LO 7-2Subsidiary WIP AccountsManufacturing OverheadInShape incurred the following “actual” overheadcosts in January:(4)(5)(6)(6)(6)Indirect material requisitionedIndirect labor incurredUtilities & other factory expenses (credit A/P)Prepaid factory expenses used Factory depreciation Total actual overhead expenses$12,000 9,500 13,750 5,000 11,200$51,450ItemAmountJE#With this information, let’s continue recordingInShape’s activities.LO 7-2Manufacturing OverheadMOH Control(4) 12,000(5) 9,500(6) 13,750(6) 5,,000(6) 11,200Materials InventoryBB 30,000 (1) 135,000Accounts PayablePrepaid ExpenseWages PayableAccum. Depreciation5,000 (6) 17,000 BB135,000 (1) 13,750 (6)98,000 (3) 9,500 (5)11,200 (6)(4) 12,000LO 7-2How Manufacturing OverheadCosts Are Recorded at InShapeTwo common events that lead to manufacturingoverhead being recorded are: 1. Preparing financial statements 2. Completing a jobLO 7-2Predetermined RateLO 7-3 Account for overhead using predetermined rates. The estimated manufacturing overhead predetermined rate is the estimated overhead divided by the estimated activity for the allocation base. InShape uses estimates based on annual manufacturing overhead and annual production volume. Because it does not want erratic or monthly costs or production volumes to affect the long-run production costs.LO 7-3Application of ManufacturingCosts to JobsOverhead is allocated to jobs usingdirect labor cost as its base. InShape estimated that the manufacturingoverhead for the coming year would be$600,000 and that direct labor costwould be $1,200,000.LO 7-3POHR = $600,000 ÷ $1,200,000 = $0.50/DL$or 50% of direct labor costDirect labor costsLO 7-3Application of ManufacturingCosts to JobsJob #12-0301-0101-02Total$16,000 71,000 11,000$98,00050%50%50%50%$ 8,000 35,500 5,500$49,000DL$RateOH AppliedLO 7-3Application of ManufacturingCosts to JobsMOH - Applied43,500 (7) 5,500 (11)WIP 12-03BB 41,000(2) 12,000(3) 16,000(7) 8,000WIP 01-01(2) 102,000(3) 71,000(7) 35,500WIP 01-02(2) 15,000(3) 11,000(11) 5,500LO 7-3Application of ManufacturingCosts to JobsCost of Jobs Completedin JanuaryInShape completed Jobs 12-03 and 01-01and transferred them to Finished Goods.Job Ticket SummaryBeginning inventory January 1Direct materials – JanuaryDirect labor – JanuaryOH applied – JanuaryTotal cost on job tickets$41,000 12,000 16,000 8,000$77,000$ -0- 102,000 71,000 35,500$208,500Job 12-03Job 01-01LO 7-3Finished Goods Inventory (12-03) 77,000Finished Goods Inventory (01-01) 208,500 Work-in-Process Inventory (12-03) 77,000 Work-in-Process Inventory (01-01) 208,500Jobs 12-02 and 12-03 were sold for$35,000 and $95,000, respectively.LO 7-3Cost of Jobs Completedin JanuaryCost of Jobs Sold in JanuaryCost of Goods Sold (12-02) 27,000Cost of Goods Sold (12-03) 77,000 Finished Goods Inventory (12-02) 27,000 Finished Goods Inventory (12-03) 77,000Accounts Receivable (12-02) 35,000Accounts Receivable (12-03) 95,000 Revenue (12-02) 35,000 Revenue (12-03) 95,000LO 7-3Cost Flows Through T-AccountsWork-in-Process InventoryMaterials InventoryEB 24,000EB 31,500Cost of Goods SoldFinished Goods InventoryEB 208,500EB 104,000LO 7-3The Job Cost SheetLO 7-3The Job Cost SheetTotal Costs for Job 01-01Direct materialsDirect laborManufacturing overhead TotalTransferred to finished goods inventory Direct materials Direct labor Manufacturing overhead Total$102,000 71,000 35,500$208,500$102,000 71,000 35,500$208,500LO 7-3An Alternative Method of Recordingand Applying Manufacturing OverheadAssume InShape maintains two manufacturingoverhead accounts:Manufacturing Overhead Control which is usedto track all actual overhead expenses.Applied Manufacturing Overhead which is usedto allocate overhead to jobs based on thepredetermined OH rate.Some companies combine thesetwo accounts into one account.LO 7-3Underapplied overheadThe excess of actual overhead costs incurredover applied overhead costsOverapplied overheadThe excess of applied overhead costs overactual overhead costs incurredLO 7-3An Alternative Method of Recordingand Applying Manufacturing OverheadWriting Off Over- orUnderapplied OverheadThe two manufacturing overhead accountsare not balance sheet accounts.The combined ending balance must be zero.Manufacturing OverheadControl12,0009,50013,7505,00011,20051,450Applied ManufacturingOverhead49,00049,000The combined OH is $2,450 underapplied.LO 7-3Applied ManufacturingOverhead49,000 2,45051,450Cost of Goods Sold104,0002,450106,450After entry, the applied and controloverhead accounts sum to zero.LO 7-3Writing Off Over- orUnderapplied OverheadSome firms use only one OH account. In this condition, the debit side of the OH account containsactual data and the credit side contains applied data.For either condition of under- or overapplied, actual mustequal applied in the Overhead control account at the end of the period.Overhead12,0009,50013,7505,00011,20051,45049,000 2,45051,450Cost of Goods Sold104,0002,450106,450LO 7-3Writing Off Over- orUnderapplied OverheadSome companies prorate the over/underapplied MOH to WIP, FG, and COGS.Work-in-Process InventoryFinished Goods InventoryCost of Goods Sold Total$ 31,500 208,500 104,000$344,000 9.2% 60.6% 30.2%100.0%Costs% of TotalAccounts at January 31LO 7-3Writing Off Over- orUnderapplied OverheadAllocate underapplied overhead to finished goods,cost of good sold and WIP.Work-in-Process Inventory31,500225(2,450 × 0.092)Finished Goods Inventory208,5001,485(2,450 × 0.606)Cost of Goods Sold104,000740(2,450 × 0.302)Overhead51,45049,000 2,450LO 7-3Writing Off Over- orUnderapplied OverheadUsing Normal, Actual,and Standard CostingNormal:Cost of job determined by actual direct material, actualdirect labor, and applied overhead using the POHRand the actual allocation base.Actual:Cost of job determined by actual direct material, actualdirect labor, and applied overhead using actual overheadrate and the actual allocation base.Standard:Cost of job determined by standard (budgeted) directmaterial, standard direct labor, and applied overheadusing the POHR and a standard (budgeted) allocation base.LO 7-3Using Job Costing inService OrganizationsLO 7-4 Apply job costing methods in service organizations.Service organizations use fewer direct materialsthan manufacturing companies. Service companies’ overhead accounts haveslightly different names.Finished goods (or services) are charged toCost of Services Billed.LO 7-4LaborWork in processDirectlaborLaborIndirectlaborOverheadClient AClient BClient CTotalWIPLO 7-4Using Job Costing inService OrganizationsEthical IssuesLO 7-5 Understand the ethical issues in job costing.Improprieties Include: – Misstating the stage of completion – Charging costs to the wrong jobs – Misrepresenting the cost of jobsLO 7-5Managing ProjectsLO 7-6 Describe the difference between jobs and projects. A project is a complex job that often takes months or years to complete and requires the work of many departments, divisions, or subcontractors.LO 7-6End of Chapter 7