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Cost Accounting

A Presentation
By

“Against The
Dawn”
Group Members

• Mudassar Ali (Group Leader)


• Aamir Imrani
• Qaim Deen
• Usman Ali Qadir
• Uzair Urqam
• Ghulam Mahu Ud Deen
Job Order Cost
System
Ghulam Mahu-ud-Deen
(51)
Job Order Cost
System
• The job order cost system is used when
products are made based on specific customer
orders

• Each product produced is considered a job

• Costs are tracked by job

• Services rendered can also be considered a job


Job Order Cost System

• Purpose

• Job Order Categories


• End Items
• Real Property Construction
• Real Property Items
• Low Dollar Like Items
Job Cost Sheet
Materials Requisition
Form
Time Ticket
Qaim Deen
(05)
Objective 1

Distinguish between job order


costing and process costing

12
Cost Systems

• There are two basic systems used by


manufacturers to assign costs to their
products:
– Job order costing
– Process costing

13
Comparing Job Order
and Process
Production
Job Order Systems Process Systems

• Custom orders • Repetitive production

• Heterogeneous • Homogeneous products


products

• Low production volume • High production volume

• High product flexibility • Low product flexibility


a. A manufacturer of plywood would use
process costing.
b. A manufacturer of wakeboards would use
process costing.
c. A manufacturer of luxury yachts would use
job costing.
d. A professional services firm would use
job costing.
e. A landscape garden contractor would use
job costing.
15
Mudassar Ali
(14)
Objective 2

Record materials and labor in a


job order costing system

17
Cost Flow
Direct
Materials
Indirect

Factory Allocate Work in Finished


Overhead Process Goods
Indirect

Cost of
Labor Direct Goods
Sold
18
Accounting for
Materials
Raw Materials Work in Process
Material Direct Direct
Purchases Material Material
Indirect
Material

Manufacturing Overhead
Actual
Overhead
Costs

19
GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

Materials inventory – canvas 70,000


Accounts payable 70,000

Materials inventory – thread 1,000


Accounts payable 1,000

20
SUBSIDIARY MATERIALS LEDGER RECORD
C865
Item No._________ Canvas
Description: (black)
______________________
Received Used Balance

Mat
Date
7/10 Units
7000 Cost 70,000
$10 Total Req No Units Cost Total 7000
Units$10Cost Total
70,000
SUBSIDIARY MATERIALS LEDGER RECORD
T444
Item No._________ Thread
Description: (black)
______________________
Received Used Balance

Mat
Date
7/10 Units
50 Cost
$20 Total
1,000 Req No Units Cost Total 50 Units$20 Cost1,000
Tota

21
Materials Requisition
• Used to authorize the use of materials
on a job
• Serves as source document for
recording material usage

MATERIALS REQUISITION 8966


NO. _____
8/03
Date: _______ 562 _____
Job No.
Item no. Item Quantity Unit cost Amount
C865 Black canvas 6,300 $10 63,000
T444 Black thread 15 $20 300
Total 63,300

22
GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

Work in process inventory 63,000


Materials inventory-canvas 63,000
(for direct materials)

Manufacturing overhead 300


Materials inventory-thread 300
(for indirect materials)

23
Raw Materials
Beginning bal 35,000
Purchases 70,000
1,000 63,300 Requisitioned

Ending bal 42,700

24
Job Cost Record
Job C ost R eco rd
Job N o.562
C ustom er N ame and Address Happy Campers
Job D escription 2,000 backpacks
D ate P rom ised D ate S tarted D ate C o m pleted
D irect Materials D irect Labor Overhead C o sts Applied
Tim e
R equisi- Ticket
D ate 8966
8/03 tion N o. 63,000
Am ount N o. Am ount D ate R ate Am ount

Overall C ost S um m ary


Materials
Labor
Overhead 25
Accounting for Labor
Manufacturing Wages Work in Process
Incurred Direct Direct
Labor Material
Indirect Direct
Labor Labor

Manufacturing Overhead
Actual
Overhead
Costs

26
Labor Time Ticket
LABOR TIME RECORD
J. Khan
Employee ___________ K13
No. ______
Job J9738
_______

Time: 800 $11.25


Started: ___________
1500 Rate: ____________
Stopped: __________
7 hours Cost of Labor$78.75
Elapsed: __________ Charged to Job $___________

Employee: _J K ___________ M . M orley


Supervisor:

27
GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

Manufacturing wages 76,500


Wages payable
76,500
($600 + $900 + $75,000)

Work in process 75,900


Manufacturing overhead 600
Manufacturing wages
76,500
28
Usman Ali Qadir
(29)
Objective 3

Record overhead in a job order


costing system

30
Accounting for
Manufacturing
ManufacturingOverhead
Overhead Work in Process
Actual Overhead Direct
Overhead Applied to Material
Costs Work in Direct
Process Labor
Overhead
Predetermined
Manufacturing
Overhead Rate
Total estimated manufacturing overhead costs
Total estimated quantity of the manufacturing
overhead allocation base

32
Allocate Manufacturing
Overhead

Predetermined manufacturing overhead x


Actual quantity of the allocation based used
by each job

33
Total estimated manufacturing overhead costs
Total estimated quantity of the manufacturing
overhead allocation base

$100,000 / $80,000 = $1.25 per direct labor dollar

34
Amount to allocate to the job:
$1.25 x $64,000 = $80,000
GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

Work in process 80,000,


Manufacturing overhead
80,000

35
Manufacturing Overhead
Actual Overhead 83,000 80,000 Overhead Applied

Balance 3,000

36
GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

Cost of goods sold 3,000


Manufacturing overhead 3,000

37
Aamir Imrani
(29)
Objective 4

Record completion and sales of


finished goods and the adjustment
for under- or overallocated overhead

39
Accounting for Finished
Goods
Work in Process Finished Goods
•Direct Material
Cost of Cost of Cost of
•Direct Labor Goods Goods Goods Sold
•Manufacturing Manufactured Manufactured
Overhead

Cost of Goods Sold


Cost of
Goods
Sold

40
Materials Work in process Finished goods
17,000 Job 90- 44,000 61,000

GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

a. Accounts payable 81,000


Cash 81,000

b. Marketing & general expense 22,000


Cash 22,000

41
Materials Work in process Finished goods
17,000 Job 90- 44,000 61,000
55,000

GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

c. Cash 195,000
Accounts receivable 195,000

d. Materials inventory 55,000


Accounts payable 55,000

42
Materials Work in process Finished goods
17,000 49,000 44,000 61,000
55,000 42,000

GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

e. Work in process-job 90 4,000


Work in process-job 91 38,000
Manufacturing overhead 7,000
Materials inventory 49,000

43
Job C ost R eco rd
Job N o.91
C ustom er N ame and AddressWicom Company
Job D escription components
D ate P rom ised D ate S tarted D ate C o m pleted
D irect Materials D irect Labor Overhead C o sts Applied
Tim e
R equisi- Ticket
D ate 8966
e. tion N o. 38,000
Am ount N o. Am ount D ate R ate Am ount

Overall C ost S um m ary


Materials
Labor
Overhead 44
Materials Work in process Finished goods
17,000 49,000 44,000 61,000
55,000 42,000

GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

f. Manufacturing wages 56,000


Wages payable 56,000

Wages payable 50,500


Cash 50,500

45
Materials Work in process Finished goods
17,000 49,000 44,000 61,000
55,000 42,000
34,000

GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

g. Work in process-job 90 6,000


Work in process-job 91 28,000
Manufacturing overhead 22,000
Manufacturing wages 56,000

46
Job C ost R eco rd
Job N o.91
C ustom er N ame and AddressWicom Company
components
Job D escription
D ate P rom ised D ate S tarted D ate C o m pleted
D irect Materials D irect Labor Overhead C o sts Applied
Tim e
R equisi- Ticket
D
e.ate tion N o. 38,000
8966 Am ount N o. Am ount D ate R ate Am ount
g. T523 28,000

Overall C ost S um m ary


Materials
Labor
Overhead 47
Materials Work in process Finished goods
17,000 49,000 44,000 61,000
55,000 42,000
34,000

GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

h. Manufacturing overhead 7,500


Accumulated depreciation,
plant & equipment 7,500

48
Materials Work in process Finished goods
17,000 49,000 44,000 61,000
55,000 42,000
34,000
40,800
GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

i. Work in process-job 90 7,200


Work in process-job 91 33,600
Manufacturing overhead 40,800

49
Job C ost R eco rd
Job N o.91
C ustom er N ame and AddressWicom Company
components
Job D escription
D ate P rom ised D ate S tarted D ate C o m pleted
D irect Materials D irect Labor Overhead C o sts Applied
Tim e
R equisi- Ticket
D
e.ate tion N o. 38,000
8966 Am ount N o. Am ount D ate R ate Am ount
g. T523 28,000
i. 120% 33,600

Overall C ost S um m ary


Materials
Labor
Overhead 50
Materials Work in process Finished goods
17,000 49,000 44,000 61,200 61,000
55,000 42,000 61,200
34,000
40,800
GENERAL JOURNAL
Job 90:
DATE DESCRIPTION REF DEBIT CREDIT
In process, beginning $44,000
j. Finished goods added
Direct materials inventory 61,200
4,000
Direct
Worklabor added
in process-job 90 6,000 61,200
Overhead applied (6,000 x 120%) 7,200
$61,200

51
Materials Work in process Finished goods
17,000 49,000 44,000 61,200 61,000
55,000 42,000 61,200 61,200
34,000
40,800
GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

k. Accounts receivable 125,000


Sales revenue 125,000

Cost of goods sold 61,200


Finished goods inventory 61,200

52
Manufacturing overhead
e. 7,000 i. 40,800
g.22,000
h. 7,500
4,300 Bal 4,300
Bal 0

GENERAL JOURNAL
DATE DESCRIPTION REF DEBIT CREDIT

l. Manufacturing overhead 4,300


Cost of goods sold 4,300

53
Materials Work in process Finished goods
17,000 49,000 44,000 61,200 61,000
55,000 42,000 61,200 61,200
34,000
23,000 40,800 61,000
99,600

54
Uzair Urqam
(41)
Objective 5

Calculate unit costs for a


service company

56
1. Direct labor cost rate:
$2,550,000 / 17,000 hrs = $150

Indirect cost allocation rate:


Office rent $300,000
Support staff salaries 900,000
Utilities 330,000
Total $1,530,000

Rate: $1,530,000 / $2,550,000 = 60%

57
2. Predicted cost of job:
Direct labor (220 hrs x $150) $33,000
Indirect cost allocation
($33,000 x 60%) 19,800
$52,800

58
3. Bid:
Cost $52,800
Desired profit(50%) $26,400
$79,200

59
End of Job Order
Costing
I’m thinking about
some leisure time
So “No Questions”
Please!!!!!!!

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