Académique Documents
Professionnel Documents
Culture Documents
Systems Design:
Job-Order Costing
1
Types of Costing Systems Used to
Determine Product Costs
Process Job-order
Costing Costing
Chapter
Chapter44
Many
Manydifferent
differentproducts
productsare
areproduced
producedeach
eachperiod.
period.
Products
Productsare
aremanufactured
manufacturedto
toorder.
order.
Cost
Costare
aretraced
tracedor
orallocated
allocatedto
tojobs.
jobs.
Cost
Costrecords
recordsmust
mustbe
bemaintained
maintainedfor
foreach
eachdistinct
distinct
product
productororjob.
job.
2
Types of Costing Systems Used to
Determine Product Costs
Process Job-order
Costing Costing
Which
Which of of the
the following
following companies
companies would
would bebe
likely
likely to
to use
use job-order
job-order costing
costing rather
rather than
than
process
process costing?
costing?
a.
a. Scott
Scott Paper
Paper Company
Company for
for kleenex.
kleenex.
b.
b. Architects.
Architects.
c.
c. Heinz
Heinz for
for ketchup.
ketchup.
d.
d. Caterer
Caterer forfor aa wedding
wedding reception.
reception.
e.
e. Builder
Builder of of commercial
commercial fishing
fishing vessels.
vessels.
4
Job-Order Costing
Manufacturing
Manufacturing
overhead
overhead(OH)
(OH)
Applied
Appliedto toeach
each
Direct
Direct Tra job
jobusing
usingaa
ced
material
material dire predetermined
predetermined
to e ctly
ach rate
rate
job
The
The Job
Job
c tl y
d ire
c e d b
Tr a jo
e a ch
Direct
Direct to
labor
labor
5
Sequence of Events in a Job-
Order Costing System
Receive
Receive
orders
ordersfrom
from Begin
Begin
customers
customers production
production
Schedule
Schedule Order
Order
jobs
jobs materials
materials
6
Sequence of Events in a Job-
Order Costing System
Direct
DirectMaterials
Materials
Charge
Charge
Job
JobNo.
No.11 direct
direct
material
material & &
Direct
DirectLabor
Labor direct
direct labor
labor
Job
JobNo.
No.22
costs
costs toto
each
each job
job as
as
Manufacturing
Manufacturing Job
JobNo.
No.33 work
work isis
Overhead
Overhead
performed.
performed.
7
Sequence of Events in a Job-
Order Costing System
Direct
DirectMaterials
Materials
Job
JobNo.
No.11 Apply
Apply
overhead
overhead to to
Direct
DirectLabor
Labor each
each job
job
Job
JobNo.
No.22
using
using aa
predeter-
predeter-
Manufacturing
Manufacturing Job
JobNo.
No.33 mined
mined rate.
rate.
Overhead
Overhead
8
Job-Order Cost Accounting
The primary
document for tracking
the costs associated
with a given job is the
job cost sheet.
Lets investigate
9
Job-Order Cost Accounting
PearCo Job Cost Sheet
Job Number A - 143 Date Initiated 3-4-01
Date Completed
Department B3 Units Completed
Item Wooden cargo crate
Direct Materials Direct Labor Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours Rate Amount
10
Job-Order Cost Accounting
PearCo Job Cost Sheet
Job Number A - 143 Date Initiated 3-4-01
Date Completed
Department B3 Units Completed
Item Wooden cargo crate A materials requisition
Direct Materials Direct Laborform Manufacturing
is used to Overhead
Req. No. Amount Ticket Hours Amount Hours Rate Amount
authorize the use of
materials on a job.
Cost Summary Units Shipped
Direct Materials Date Number Balance
Direct Labor
Lets see one
Manufacturing Overhead
Total Cost
Unit Product Cost
11
Materials Requisition Form
PearCo Materials Requisition Form
Authorized
Signature Will E. Delite
12
Materials Requisition Form
PearCo Materials Requisition Form
Type,
Type,quantity,
quantity,&&
total
totalcost
costof
ofmaterial
material
charged
charged to
to job
job A-143.
A-143.
Authorized
Signature Will E. Delite
13
Job-Order Cost Accounting
PearCo Job Cost Sheet
Job Number A - 143 Date Initiated 3-4-01
Date Completed
Department B3 Units Completed
Item Wooden cargo crate
Direct Materials Direct Labor Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours Rate Amount
X7-6890 $ 116
14
Job-Order Cost Accounting
PearCo Job Cost Sheet
Job Number A - 143 Date Initiated 3-4-01
Date Completed
Department B3 Units Completed
Item Wooden cargo crate
Direct Materials Direct Labor Workers
Manufacturing use
Overhead
Req. No. Amount Ticket Hours Amount Hours time
Rate tickets
Amount to
X7-6890 $ 116
record the time
spent on each
Cost Summary job.
Units Shipped
Direct Materials $ 116 Date Number Balance
Direct Labor
Manufacturing Overhead Lets see one
Total Cost
Unit Product Cost
15
Employee Time Ticket
PearCo Employee Time Ticket
Supervisor C. M. Workman
16
Job-Order Cost Accounting
PearCo Job Cost Sheet
Job Number A - 143 Date Initiated 3-4-01
Date Completed
Department B3 Units Completed
Item Wooden cargo crate
Direct Materials Direct Labor Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours Rate Amount
X7-6890 $ 116 36 8 $ 88
17
Job-Order Cost Accounting
PearCo Job Cost Sheet
Job Number A - 143 Date Initiated 3-4-01
Date Completed 3-5-01
Department B3 Units Completed 2
Item Wooden cargo crate
Direct Materials Direct Labor Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours Rate Amount
X7-6890 $ 116 36 8 $ 88 8
18
Job-Order Cost Accounting
PearCo Job Cost Sheet
Job Number A - 143 Date Initiated 3-4-01
Date Completed 3-5-01
Department B3 Units Completed 2
Item Wooden cargo crate
Direct Materials Direct Labor Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours Rate Amount
X7-6890 $ 116 36 8 $ 88 8 $ 4 $ 32
19
Application of Manufacturing Overhead
Ideally,
Ideally,the
theallocation
allocationbase
base
is
isaacost
costdriver
driverthat
thatcauses
causes
overhead.
overhead.
20
Application of Manufacturing Overhead
Based
Basedononestimates,
estimates,&&
determined
determinedbefore
beforethe
the
period
periodbegins.
begins.
Actual
Actualamount
amountof ofthe
theallocation
allocation
base
basesuch
suchasasunits
unitsproduced,
produced,
direct
directlabor
laborhours,
hours,orormachine
machine
hours
hours incurred
incurredduring
duringthe
the
period.
period.
21
Application of Manufacturing Overhead
22
The Need for a Predetermined
Manufacturing Overhead Rate
Using a predetermined rate makes it
possible to estimate total job costs sooner.
23
Overhead Application Example
24
Overhead Application Example
Estimated total manufacturing
overhead cost for the coming period
POHR =
Estimated total units in the
allocation base for the coming period
$640,000
POHR =
160,000 direct labor hours (DLH)
27
Overhead Application Example
PearCo Job Cost Sheet
Job Number X - 32 Date Initiated 3-9-01
Date Completed 3-11-01
Department B3 Units Completed 6
Item Wooden cargo crate
Direct Materials Direct Labor Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours Rate Amount
X7-7456 $ 240 23 26 $ 286 26 $ 4 $ 104
28
Quick Check 9
IfIf the
the number
number of of wooden
wooden cratescrates in
in the
the order
order on on
the
the previous
previous pagepage isis increased
increased or or decreased
decreased by by
one
one unit,
unit, what
what would
would you you expect
expect toto happen
happen to to
the
the total
total spending
spending of of PearCo?
PearCo?
a.a. Total
Total spending
spending would would probably
probably change
change
by
by less
less than
than $105.
$105.
Total
Totalb.b. Total
Total
spending
spendingspending
spending
would would
would probably
would change
change probably
by
by $105
$105 onlychange
change
only ifif all
all
of
of thetheby
by about
about
costs
costs $105.
were
were$105.
variable
variable with
with respect
respect to to the
the
c.
number
number c. Total
of
Total spending
of units
spending
units would
produced.
produced.would probably
Direct materials
probably
Direct change
materials is
changeis
variable,
variable,by
by more
but
more than
but much
thanof
much $105.
the
the overhead
$105.
of overhead && perhaps
perhaps
even
even directdirect labor
labor may
may be be fixed.
fixed.
29
Quick Check 9
Job
Job WR53
WR53 at at NW
NW Fab,Fab, Inc.
Inc. required
required $200
$200 of of
direct
direct materials
materials && 10 10 direct
direct labor
labor hours
hours at at $15
$15
per
per hour.
hour. Estimated
Estimated total
total overhead
overhead for for the
the year
year
was
was $760,000
$760,000 && estimated
estimated direct
direct labor
labor hours
hours
were
were 20,000.
20,000. What
What would
would be be recorded
recorded as as the
the
cost
cost of
of job
job WR53?
WR53?
a.
a. $200.
$200. Pred. Pred.ovhd.
ovhd.rate
rate $760,000/20,000hours
$760,000/20,000hours $38
$38
b.
b. $350.
$350. DirectDirectmaterials
materials $200
$200
Direct
Directlabor $15
$15 xx 10
10hours
hours $150
c. $380. labor
c. $380. Manufacturing overhead $38 x 10 hours $380 $150
Manufacturing overhead $38 x 10 hours $380
d.
d. $730.
$730. Total Totalcost
cost $730
$730
30
Quick Check 9
Job
Job WR53
WR53 atat NW
NW Fab,
Fab, Inc.
Inc. required
required $200 $200 of of
direct
direct materials
materials & & 10
10 direct
direct labor
labor hours
hours at at
$15
$15 per
per hour.
hour. Estimated
Estimated total total overhead
overhead for for
the
the year
year was
was $760,000
$760,000 & & estimated
estimated directdirect
labor
labor hours
hours were
were 19,000.
19,000. WhatWhat would
would be be
recorded
recorded as as the
the cost
cost of of job
job WR53?
WR53?
a.
a. $200.
$200. Pred.
Pred.ovhd.
ovhd.rate
rate $760,000/19,000hours
$760,000/19,000hours $40
$40
b.
b. $350.
$350. Direct
Directmaterials
materials $200
$200
c.
c. $750.
$750. Direct
Directlabor
labor $15
$15 xx 10
10hours
hours $150
$150
Manufacturing
Manufacturingoverhead
overhead $40
$40 xx 10
10hours
hours $400
$400
d.
d. $730.
$730. Total
Totalcost
cost $750
$750
31
Quick Check 9
IfIf overhead
overhead contains
contains fixed
fixed costs,
costs, what
what will
will
happen
happen to to the
the predetermined
predetermined overhead
overhead rate
rate
ifif lower
lower unit
unit sales
sales volume
volume isis expected?
expected?
a.
a. The
The predetermined
predetermined overhead
overhead rate
rate will
will
likely
likely increase.
increase.
b.
b. The
The predetermined
predetermined overhead
overhead rate
rate would
would
be
be unaffected.
unaffected.
c.
c. The
The predetermined
predetermined overhead
overhead rate
rate will
will
likely
likely decrease.
decrease.
32
Quick Check 9
IfIf overhead
overhead contains
contains fixed
fixed costs,
costs, what
what will
will
happen
happen to to product
product costs
costs computed
computed by by the
the
accounting
accounting system
system ifif lower
lower unit
unit sales
sales
volume
volume is is expected?
expected?
a.
a. Product
Product costs
costs will
will likely
likely increase.
increase.
b.
b. Product
Product costs
costs would
would be be unaffected.
unaffected.
c.
c. Product
Product costs
costs will
will likely
likely decrease.
decrease.
33
Quick Check 9
34
Job-Order Costing
Document Flow Summary
Lets summarize
the document flow
in a job-order
costing system.
35
Job-Order Costing
Document Flow Summary
Materials
Materialsused
used
may
maybe
beeither
either Direct Job
JobCost
Cost
direct
director
or materials Sheets
Sheets
indirect.
indirect.
Materials
Materials
Requisition
Requisition
Manufacturing
Manufacturing
Indirect
Overhead
Overhead
materials
Account
Account
36
Job-Order Costing
Document Flow Summary
An
Anemployees
employees
time
timemay
maybebeeither
either Direct Job
JobCost
Cost
direct
director
orindirect.
indirect. Labor Sheets
Sheets
Employee
EmployeeTime
Time
Ticket
Ticket
Manufacturing
Manufacturing
Indirect
Overhead
Overhead
Labor
Account
Account
37
Job-Order Costing
Document Flow Summary
Employee
Employee Indirect
Time
TimeTicket
Ticket Labor
Other
Other Manufacturing
Manufacturing Applied Job
JobCost
Cost
Actual
ActualOH
OH Overhead
Overhead Overhead Sheets
Sheets
Charges
Charges Account
Account
Materials
Materials Indirect
Requisition
Requisition Material
38
Job-Order System Cost Flows
39
Job-Order System Cost Flows
Mfg. Overhead
Actual Applied
zIndirect
Materials
40
Job-Order System Cost Flows
41
Job-Order System Cost Flows
Salaries & Wages Work in Process
Payable (Job Cost Sheet)
zDirect zDirect
Labor Materials
zIndirect zDirect
Labor Labor
zOverhead
Now lets
complete the
goods & sell them.
Still with me?
43
Job-Order System Cost Flows
Work in Process Finished Goods
(Job Cost Sheet)
zDirect Cost of
z Cost of
z
Materials Cost of
z Goods Goods
Goods Mfd. Sold
zDirect
Mfd.
Labor
zOverhead
Goods
Sold
44
Job-Order System Cost Flows
45
Overhead Application Example
PearCos
PearCos actual
actual overhead
overhead forfor the
the year
year was
was
$650,000
$650,000 forfor aa total
total of
of 170,000
170,000 direct
direct labor
labor
hours.
hours.
PearCo has overapplied
How
How much
much total
total overhead
overhead was
was applied
applied to
to PearCos
PearCos
overhead for the year
jobs
jobs during
during the
the year?
year? Use
Use PearCos
PearCos
by $30,000. What will
predetermined
predetermined overhead
overhead rate
rate of
of $4.00
$4.00 per
per direct
direct
PearCo do?
labor
labor hour.
hour.
SOLUTION
Applied Overhead = POHR Actual Direct Labor Hours
Applied Overhead = $4.00 per DLH 170,000 DLH = $680,000
46
Overapplied & Underapplied
Manufacturing Overhead
PearCos Method
Cost of Cost of
Goods Sold Goods Sold
47
Overapplied & Underapplied
Manufacturing Overhead
48
Quick Check 9
What
What effect
effect will
will the
the overapplied
overapplied overhead
overhead
have
have on
on PearCos
PearCos cost
cost of
of goods
goods sold?
sold?
a.
a. Cost
Cost of
of goods
goods sold
sold will
will increase.
increase.
b.
b. Cost
Cost of
of goods
goods sold
sold will
will be
be unaffected.
unaffected.
c.
c. Cost
Cost of
of goods
goods sold
sold will
will decrease.
decrease.
49
Quick Check 9
What
What effect
effect will
will the
the overapplied
overapplied overhead
overhead
have
have on
on PearCos
PearCos net net operating
operating income?
income?
a.
a. Net
Net operating
operating income
income will
will increase.
increase.
b.
b. Net
Net operating
operating income
income will
will be
be unaffected.
unaffected.
c.
c. Net
Net operating
operating income
income will
will decrease.
decrease.
50
Overapplied & Underapplied
Manufacturing Overhead - Summary
PearCos
Method
Alternative 1 Alternative 2
If Manufacturing Close to Cost
Overhead is . . . of Goods Sold Allocation
51
Quick Check 9
Tiger,
Tiger,Inc.
Inc.had
hadactual
actualmanufacturing
manufacturingoverhead
overheadcosts
costsof
of
$1,210,000
$1,210,000&&aapredetermined
predeterminedoverhead
overheadrate
rateof
of$4.00
$4.00
per
permachine
machinehour.
hour. Tiger,
Tiger,Inc.
Inc.worked
worked290,000
290,000
machine
machinehours
hoursduring
duringthe
theperiod.
period. Tigers
Tigers
manufacturing
manufacturingoverhead
overheadis is
Overhead
OverheadApplied
Applied
a.
a. $50,000
$50,000overapplied.
overapplied. $4.00
$4.00per
perhour
hour290,000
290,000hours
hours
b.
b. $50,000
$50,000underapplied.
underapplied. == $1,160,000
$1,160,000
c.
c. $60,000
$60,000overapplied.
overapplied. Underapplied
UnderappliedOverhead
Overhead
$1,210,000
$1,210,000--$1,160,000
$1,160,000
d.
d. $60,000 underapplied.
$60,000 underapplied. = $50,000
= $50,000
52
Job-Order Costing Typical
Accounting Entries
Lets look at
summary journal
entries for a job-
order costing
system.
53
Cost Flows Material Purchases
Raw material purchases are recorded in an
inventory account.
54
Cost Flows Material Usage
Direct materials issued to a job increase Work in
Process & decrease Raw Materials. Indirect
materials used are charged to Manufacturing
Overhead & also decrease Raw Materials.
55
Cost Flows Labor
56
Cost Flows Actual Overhead
In addition to indirect materials & indirect labor,
other manufacturing overhead costs are charged
to the Manufacturing Overhead account as they
are incurred.
57
Cost Flows Overhead Applied
58
Cost Flows Period Expenses
60
Cost Flows Sales
When finished goods are sold, two entries
are required: (1) to record the sale; & (2) to
record COGS & reduce Finished Goods.
61
Appendix 3a
The Predetermined
Overhead Rate &
Capacity
62
Quick Check 9
Crest
CrestWinery
WineryininWoodinville
Woodinville leases
leasesan anautomatic
automatic
corking
corkingmachine
machineforfor$100,000
$100,000per peryear.
year.IfIfrun
runatatfull
full
capacity,
capacity,ititcan
cancork
cork50,000
50,000cases
casesof ofwine
wineper peryear.
year.
The
Thecompany
companyhas hasestimated
estimated40,000
40,000cases casesof ofwine
wine
will
willbebeproduced
produced&&sold
soldnext
nextyear.
year.What Whatis isthe
the
predetermined
predeterminedoverhead
overheadrate
rateififititis
isbased
basedon onthe
the
estimated
estimated number
number of of cases
casesofofwine?
wine?
a.
a.$2.00
$2.00per
percase.
case.
b.
b.$2.50
$2.50per
percase.
case.
c.
c.$4.00
$4.00per
percase.
case.
63
Quick Check 9
Crest
CrestWinery
WineryininWoodinville
Woodinville leases
leasesan anautomatic
automatic
corking
corkingmachine
machineforfor$100,000
$100,000per peryear.
year.IfIfrun
runatatfull
full
capacity,
capacity,ititcan
cancork
cork50,000
50,000cases
casesof ofwine
wineper peryear.
year.
The
Thecompany
companyhas hasestimated
estimated40,000
40,000cases casesof ofwine
wine
will
willbebeproduced
produced&&sold
soldnext
nextyear.
year.What Whatis isthe
the
predetermined
predeterminedoverhead
overheadrate
rateififititis
isbased
basedon onthe
the
number
numberof ofcases
casesofofwine
wineat
atcapacity?
capacity?
a.
a.$2.00
$2.00per
percase.
case.
b.
b.$2.50
$2.50per
percase.
case.
c.
c.$4.00
$4.00per
percase.
case.
64
Quick Check 9
Crest
CrestWinery
WineryininWoodinville
Woodinville leases
leasesan anautomatic
automatic
corking
corkingmachine
machineforfor$100,000
$100,000per peryear.
year.IfIfrun
runatatfull
full
capacity,
capacity,ititcan
cancork
cork50,000
50,000cases
casesof ofwine
wineper peryear.
year.
The
Thecompany
companyhas hasestimated
estimated25,000
25,000 casescasesof ofwine
wine
will
willbebeproduced
produced&&sold
soldnext
nextyear.
year.What Whatis isthe
the
predetermined
predeterminedoverhead
overheadrate
rateififititis
isbased
basedon onthe
the
estimated
estimated number
number of of cases
casesofofwine?
wine?
a.
a.$2.00
$2.00per
percase.
case.
b.
b.$2.50
$2.50per
percase.
case.
c.
c.$4.00
$4.00per
percase.
case.
65
Quick Check 9
Crest
CrestWinery
WineryininWoodinville
Woodinville leases
leasesan anautomatic
automatic
corking
corkingmachine
machineforfor$100,000
$100,000per peryear.
year.IfIfrun
runatatfull
full
capacity,
capacity,ititcan
cancork
cork50,000
50,000cases
casesof ofwine
wineper peryear.
year.
The
Thecompany
companyhas hasestimated
estimated25,000
25,000 casescasesof ofwine
wine
will
willbebeproduced
produced&&sold
soldnext
nextyear.
year.What Whatis isthe
the
predetermined
predeterminedoverhead
overheadrate
rateififititis
isbased
basedon onthe
the
number
numberof ofcases
casesofofwine
wineat
atcapacity?
capacity?
a.
a.$2.00
$2.00per
percase.
case.
b.
b.$2.50
$2.50per
percase.
case.
c.
c.$4.00
$4.00per
percase.
case.
66
Quick Check 9
When
Whencapacity
capacityisis used
used in
inthe
thedenominator
denominatorin inthe
the
predetermined
predeterminedrate,rate,what
whathappens
happenstotothe
the
predetermined
predeterminedoverhead
overheadrate
rateas
asestimated
estimatedactivity
activity
decreases?
decreases?
a.
a.The
Thepredetermined
predeterminedoverhead
overheadrate
rategoes
goesup upwhen
when
activity
activitygoes
goesdown.
down.
b.
b.The
Thepredetermined
predeterminedoverhead
overheadrate
ratestays
staysthe
the
same;
same;ititis
isnot
notaffected
affectedbybychanges
changesin inactivity.
activity.
c.
c.The
Thepredetermined
predeterminedoverhead
overheadrate
rategoes
goesdown
down
when
whenactivity
activitygoes
goesdown.
down.
67
Quick Check 9
When
Whenestimated
estimated activity
activity is
is used
used in
in the
the denominator
denominator
in
inthe
thepredetermined
predeterminedrate,
rate,what
whathappens
happensto tothe
the
predetermined
predeterminedoverhead
overheadrate rateas
asestimated
estimatedactivity
activity
decreases?
decreases?
a.The
a.Thepredetermined
predeterminedoverhead
overheadrate rategoes
goesupupwhen
when
activity
activitygoes
goesdown.
down.
b.The
b.Thepredetermined
predeterminedoverhead
overheadrate ratestays
staysthe
thesame;
same;
ititis
isnot
notaffected
affectedbybychanges
changesin inactivity.
activity.
c.The
c.Thepredetermined
predeterminedoverhead
overheadrate rategoes
goesdown
down
when
whenactivity
activitygoes
goesdown.
down.
68
Basing the rate on capacity
Revenue $ 1,600,000
Cost of goods sold 1,040,000
Gross margin 560,000
Cost of idle capacity 20,000
Selling and admin. expense 500,000
Net operating income $ 40,000
69
Basing the rate on expected
volume
Actual volume 40,000 cases
Selling price $40.00 per case
Variable production cost $24.00 per case
Fixed manufacturing overhead $100,000 per year
Expected volume 40,000 cases
Predetermined overhead rate $2.50 per case
Fixed selling and admin. expense $500,000 per year
Revenue $ 1,600,000
Cost of goods sold 1,060,000
Gross margin 540,000
Cost of idle capacity -
Selling and admin. expense 500,000
Net operating income $ 40,000
70
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