Bài giảng Managerial Accounting - Chapter 2: Job Order Cost Accounting

John Wiley & Sons, Inc.Prepared byKarleen Nordquist..The College of St. Benedict... and St. John’s University...with contributions byMarianne Bradford..The University of Tennessee...Gregory K. Lowry.Macon Technical Institute..Managerial Accounting Weygandt, Kieso, & KimmelChapter 2Job Order Cost AccountingAfter studying this chapter, you should be able to:1 Explain the characteristics and purposes of cost accounting.2 Describe the flow of costs in a job order cost accounting system.3 Explain the nature and importance of a job cost sheet.4 Indicate how the predetermined overhead rate is determined and used.Chapter 2Job Order Cost AccountingAfter studying this chapter, you should be able to:5 Prepare entries for jobs completed and sold.6 Distinguish between under- and overapplied manufacturing overhead.Chapter 2Job Order Cost AccountingPreview of Chapter 2Cost Accounting SystemsJob Order Cost FlowAccumulating Manufacturing CostsAssigning Manufacturing Costs to Work in ProcessAssigning Costs to Finished GoodsAssigning Costs to Cost of Goods SoldSummaryJOB ORDER COST ACCOUNTINGPreview of Chapter 2Reporting Job Cost DataUnder- or Overapplied Manufacturing OverheadInterim BalancesYear-End BalancesJOB ORDER COST ACCOUNTINGExplain the characteristics and purposes of cost accounting.Study Objective 1Cost Accounting SystemsCost Accounting involves the measuring, recording, and reporting of product costs.A cost accounting system consists of manufacturing cost accounts that are fully integrated into the general ledger of a company.Cost Accounting SystemsAn important feature of a cost accounting system is the use of a perpetual inventory system that provides information immediately on the cost of a product. There are two basics types of cost accounting systems: a job order cost system, and a process cost system.Job Order Cost SystemUnder a job order cost system, costs are assigned to each job or batch of goods.An important feature of job order costing is that each job (or batch) has its own distinguishing characteristics.The objective of job order costing is to calculate the cost per job, rather than for a time period.Job Order Cost System Two jobs: Wedding Invitations & MenusEach job has distinguishing characteristics and related costs.Job #9501Black ink $Typesetting $225 Invitations $225 Envelopes $Vellum stock $Job #9502Typesetting $White stock $Lamination $50 Copies $Job Order Cost SystemIllustration 2-1Process Cost SystemA process cost system is used when a series of connected manufacturing processes or departments produce a large volume of uniform or relatively homogeneous products. Production is continuous.Process costing accounts for and accumulates product-related costs for a period of time, as opposed to assigning costs to specific products or jobs.Process Cost System: Compact Disc ProductionRelatively similar products are produced over a specified time period.1. Oil is pumped.2. Benzene is removed.3. The benzene is made into pellets...4. ...from which compact discs are made.Illustration 2-2Process Cost SystemCost Accounting SystemsCost accounting systems differ widely from company to company. A company may use both types of cost systems. The objective of both systems is to provide unit cost information for product pricing, cost control, inventory valuation, and financial statement presentation. Describe the flow of costs in a job order cost accounting system.Study Objective 2Job Order Cost FlowThe flow of costs (direct materials, direct labor, and manufacturing overhead) in job order cost accounting parallels the physical flow of the materials as they are converted into finished goods.As jobs are worked on, manufacturing costs are assigned to the Work in Process Inventory account. When a job is completed, the cost of the job is transferred to Finished Goods Inventory. When the goods are sold, their cost is transferred to Cost of Goods Sold.Flow of Costs in Job Order Cost AccountingManufacturing CostsWork in Process InventoryFinished Goods InventoryCost of Goods SoldMaterialsLaborOverheadAssigned toCompletedSoldIllustration 2-3Job Order Cost FlowThere are 2 major steps in the flow of costs:accumulating the manufacturing costs incurred andassigning the accumulated costs to the work done.Manufacturing costs incurred are accumulated in entries by debits to Raw Materials Inventory, Factory Labor, and Manufacturing Overhead.The remaining entries pertain to the assignment of manufacturing costs incurred. Job Order Cost Accounting SystemFlow of CostsKey to Entries:75846Illustration 2-4Accumulating Manufacturing CostsIn a job order cost system, manufacturing costs are recorded in the period in which they are incurred.No effort is made at this point to associate the cost of materials with specific jobs or orders.The costs of raw materials purchased are debited to Raw Materials Inventory when materials are received.Wallace Manufacturing Company, which makes tools and dies, purchases handles and 800 modules for a total cost of $42,000.DateAccount Titles and ExplanationDebitCredit(1)Jan. 4Raw Materials Inventory Accounts Payable (Purchase of raw materials on account)42,00042,000Materials Inventory CardRaw Materials Inventory is a control account. The subsidiary ledger consists of individual records for each item of raw materials in the form ofmechanically or manually prepared accounts (or cards) orcomputer data files.The inventory card for Stock No. AA2746 following the purchase is shown below.Accumulating Manufacturing CostsIn a manufacturing company, the cost of factory labor consists ofgross earnings of factory workers,employer payroll taxes on such earnings, andfringe benefits incurred by the employer.Labor costs are debited to Factory Labor when they are incurred.Wallace Manufacturing incurs $32,000 of factory labor costs, of which $27,000 relates to wages payable and $5,000 relates to payroll taxes payable in January. The entry is:DateAccount Titles and ExplanationDebitCredit(2)Jan. 31Factory Labor Factory Wages Payable Employer Payroll Taxes Payable (To record factory labor costs)32,00027,0005,000Accumulating Manufacturing CostsThe accumulation of overhead costs may be recognized daily, as in the case of machinery repairs and the use of indirect materials and indirect labor.Overhead costs may also be recorded periodically through adjusting entries, as in the case of property taxes, depreciation, and insurance.A summary entry for overhead in Wallace Manufacturing Company is:DateAccount Titles and ExplanationDebitCredit(3)Jan. 31Manufacturing OverheadUtilities PayablePrepaid InsuranceAccounts Payable (for repairs)Accumulated DepreciationProperty Taxes Payable (To record overhead costs)13,8004,8002,0002,6003,0001,400Explain the nature and importance of a job cost sheet.Study Objective 3Assigning Manufacturing Costs to Work in ProcessAssigning manufacturing costs to Work in Process results in debits to Work in Process Inventory and credits to Raw Materials Inventory, Factory Labor, and Manufacturing Overhead. Journal entries for the assignment of costs to work in process are usually made and posted monthly.An indispensable accounting record used in assigning costs to jobs is the job cost sheet.Job Cost SheetA job cost sheet is a form used to record the costs chargeable to a specific job and to determine the total and unit cost of the completed job. Postings to job cost sheets are made daily.Illustration 2-6Job Cost SheetA separate job cost sheet is kept for each job. Job cost sheets constitute the subsidiary ledger for the Work in Process Inventory account.Each entry to Work in Process Inventory must be accompanied by a corresponding posting to one or more job cost sheets.Assigning Manufacturing Costs to Work in ProcessRaw materials costs are assigned to jobs when the materials are issued by the storeroom.Materials Requisition SlipThe authorization for issuing raw materials is made on a prenumbered materials requisition slip signed by an authorized employee such as a department supervisor. The requisition should indicate the quantity and type of materials (direct or indirect) withdrawn and the account to be charged.Illustration 2-7Materials Requisition SlipThe requisition is prepared in duplicate. A copy is retained in the storeroom as evidence of the materials released.The original is sent to accounting, where the cost per unit and total cost of the materials used are determined. Materials Journalizing and PostingRequisitions for direct materials are posted daily to the individual job cost sheets.Periodically, the requisitions are sorted, totaled, and journalized. If $24,000 of direct materials and $6,000 of indirect materials are used in Wallace Manufacturing in January, the entry is a shown below.DateAccount Titles and ExplanationDebitCredit(4)Jan. 31Work in Process InventoryManufacturing Overhead Raw Materials Inventory (To assign materials to jobs and overhead)24,0006,00030,000Assigning Manufacturing Costs to Work in ProcessFactory Labor costs are assigned to jobs when the work is performed by the employees.Bob KadlerM.CherTime TicketLabor costs are assigned to jobs on the basis of time tickets. The time ticket should indicate the employee, the hours worked, the account and job to be charged, and the total labor cost. Illustration 2-10Factory Labor Journalizing and PostingJust as with Materials, direct costs are debited to Work in Process and indirect costs are debited to Manufacturing Overhead.If the total factory labor cost incurred of $32,000 consists of $28,000 of direct labor and $4,000 of indirect labor, the entry is as shown below.DateAccount Titles and ExplanationDebitCredit(5)Jan. 31Work in Process InventoryManufacturing Overhead Factory Labor (To assign labor to jobs and overhead)28,0004,00032,000Indicate how the predetermined overhead rate is determined and used.Study Objective 4Assigning Manufacturing Costs to Work in ProcessManufacturing Overhead costs are assigned to work in process and to specific jobs on an estimated basis through the use of a predetermined overhead rate.Predetermined Overhead RateThe predetermined overhead rate is established at the beginning of the year and is based on the relationship between estimated annual overhead costs and expected annual operating activity, expressed in terms of a common activity base.The activity base may be stated in terms of direct labor costs, direct labor hours, machine hours, or any other measure that will provide an equitable basis for applying overhead costs to jobs.Estimated Annual Overhead CostsExpected Annual Operating Activity÷=Predetermined Overhead RatePredetermined Overhead RateThe formula to compute a predetermined overhead rate is shown below.Illustration 2-12A predetermined overhead rate is used to assign costs because overhead costs are not incurred uniformly each month, and not all actual overhead invoices are received at the end of the month. Therefore, using a predetermined overhead rate enables a cost to be determined for the job immediately.XActivity BasePredetermined Overhead Rateis assigned toWork in ProcessJob 1Job 2Job 3Using Predetermined Overhead RatesIllustration 2-13Manufacturing Overhead JournalizingAt Wallace Manufacturing Company, direct labor cost is the activity base.Annual overhead costs are expected to be $280,000, and $350,000 of direct labor costs are anticipated.Thus, the overhead rate is 80% ($280,000 ÷ $350,000).Overhead applied for January is $22,400 ($28,000 X 80%), and the application is recorded through the entry shown below.DateAccount Titles and ExplanationDebitCredit(6)Jan. 31Work in Process Inventory Manufacturing Overhead (To assign overhead to jobs)22,40022,400Proof of Job Cost Sheets to Work in Process InventoryAt the end of each month, the balance in Work in Process Inventory should equal the sum of the costs shown on the job cost sheets of unfinished jobs.Assuming that all jobs are unfinished, proof of the agreement of the control and subsidiary accounts in Wallace Manufacturing Company is shown below.Work in Process InventoryJob Cost SheetsJan. 3124,000No. 101$ 39,000Jan. 3128,00010223,200Jan. 3122,40010312,20074,400$ 74,400Illustration 2-15Prepare entries for jobs completed and sold.Study Objective 5Assigning Manufacturing Costs to Finished GoodsWhen a job is finished, an entry is made to transfer its total cost from Work in Process Inventory to Finished Goods Inventory.When a job is completed, the manufacturing costs are summarized and the lower portion of the applicable job cost sheet is completed. If Job No. 101 is completed on January 31, the job cost sheet will be as shown to the right.Completed Job Cost SheetIllustration 2-16Journalizing Finished GoodsThe entry to transfer the cost of the completed job from Work in Process Inventory to Finished Goods Inventory for Wallace Manufacturing Company is:DateAccount Titles and ExplanationDebitCredit(7)Jan. 31Finished Goods Inventory Work in Process Inventory (To record completion of Job No. 101)39,00039,000Assigning Manufacturing Costs to Cost of Goods SoldRecognition of Cost of Goods Sold is made when each sale occurs.JournalizingCost of Goods SoldOn January 31 Wallace Manufacturing Company sells Job No. 101 (costing $39,000) for $50,000 on account. The entries are:DateAccount Titles and ExplanationDebitCredit(8)Jan. 31Accounts Receivable Sales (To record sale of Job No. 101) 31Cost of Goods Sold Finished Goods Inventory (To record cost of Job No. 101)50,00050,00039,00039,000Flow of CostsKey to Entries:75846Job Order Cost System Flow Of CostsIllustration 2-18aFlow of DocumentsMaterials Requisition SlipsLabor Time TicketsPredetermined Overhead RateJob Cost SheetJobs Are Charged ThroughCost of Jobs is Summarized on aThe job cost sheet summarizes the cost of jobs completed and not completed at the end of the accounting period. Jobs completed are transferred to Finished Goods to await sale.Job Order Cost System Flow Of DocumentsIllustration 2-18bCost of Goods ManufacturedAt the end of a period, financial statements are prepared that present aggregate data on all jobs manufactured and sold. The Cost of Goods Manufactured Schedule in job order costing is prepared the same as in Chapter 1 except that manufacturing overhead applied, rather than actual overhead costs is added to direct materials and direct labor in determining total manufacturing costs.Cost Of Goods Manufactured ScheduleA condensed Cost of Goods Manufactured Schedule for Wallace Manufacturing Company is shown below.Note that the cost of goods manufactured ($39,000) agrees with the amount transferred from Work in Process to Finished Goods.WALLACE MANUFACTURING COMPANYCost of Goods Manufactured ScheduleFor the Month Ended January 31, 1999Work in process inventory, January 1$ –0–Direct materials used$ 24,000Direct labor28,000Manufacturing overhead applied22,400 Total manufacturing costs74,400Total cost of work in process74,400Less: Work in process inventory, January 3135,400Cost of goods manufactured$ 39,000Illustration 2-19Balance Sheet andIncome StatementThe Income Statement and Balance Sheet in job order costing are the same as those in Chapter 1.As an example, the partial Income Statement for Wallace Manufacturing Company is shown below.WALLACE MANUFACTURING COMPANYIncome StatementFor the Month Ended January 31, 1999Sales$ 50,000Less: Cost of goods sold Finished goods inventory, January 1$ –0– Cost of goods manufactured 39,000 Cost of goods available for sale39,000 Finished goods inventory, January 31–0– Cost of goods sold 39,000Gross profit$ 11,000Illustration 2-20Distinguish between under- and overapplied manufacturing overhead.Study Objective 6Under- or Overapplied Manufacturing OverheadWhen Manufacturing Overhead has a debit balance, overhead is said to be underapplied. Underapplied overhead means that the overhead applied to Work in Process is less than the overhead actually incurred. When Manufacturing Overhead has a credit balance, overhead is said to be overapplied. Overapplied overhead means that the overhead applied to Work in Process is greater than the overhead actually incurred.Manufacturing OverheadApplied (costs assigned)Actual (costs incurred)The existence of under- or overapplied overhead at the end of a month (or other interim period) usually does not require corrective action by management. It is reported on the interim Balance Sheet as follows:underapplied overhead is a prepaid expense (current asset), andoverapplied overhead is unearned revenue (current liability).At the end of the year, there is no further opportunity for offsetting events to occur so the Manufacturing Overhead balance must be eliminated with an adjusting entry.Under- or Overapplied Manufacturing OverheadUnder- or overapplied overhead is usually considered to be an adjustment to cost of goods sold. Thus, underapplied overhead is debited to Cost of Goods Sold, and overapplied overhead is credited to Cost of Goods Sold. Wallace Manufacturing Company has a $2,500 credit balance in Manufacturing Overhead at December 31. The adjusting entry for the overapplied overhead is shown below. After this entry is posted, Manufacturing Overhead will have a zero balance.Elimination of Under- or Overapplied Manufacturing OverheadDateAccount Titles and ExplanationDebitCreditDec. 31Manufacturing Overhead Cost of Goods Sold (To transfer overapplied overhead to cost of goods sold)2,5002,500Copyright © 1999 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that named in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.CopyrightChapter 2Job Order Cost Accounting