Lecture Fundamentals of cost accounting (4th edition): Chapter 7 - Lanen, Anderson, Maher

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(BQ) Chapter 7: Job costing. After studying this chapter you should be able to explain what job and job shop mean. Assign costs in a job cost system. Account for overhead using predetermined rates. Apply job costing methods in service organizations. Understand the ethical issues in job costing, and describe the difference between jobs and projects.

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Nội dung Text: Lecture Fundamentals of cost accounting (4th edition): Chapter 7 - Lanen, Anderson, Maher

© 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 Costing Chapter 7 PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
7-3 Learning Objectives LO 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.
LO 7-4 7-1 Defining a Job LO 7-1 Explain what job and job shop mean. Unit of a product that is easily distinguishable from other units Firm that produces jobs
LO 7-1 Using Accounting Records 7-5 in a Job Shop
LO 7-6 7-2 Production Process at InShape LO 7-2 Assign costs in a job cost system. Suppose InShape, Inc. manufactures custom workout and training equipment for schools and gyms.
LO 7-7 7-2 Records of Costs at InShape Materials Work-in-process Direct materials 12-03 Total Raw 01-01 WIP materials 01-02 Indirect Overhead materials
LO 7-8 7-2 Records of Costs at InShape Labor Work-in-process Direct labor 12-03 Total 01-01 Labor WIP 01-02 Indirect Overhead labor
LO 7-9 7-2 Records of Costs at InShape Overhead Work-in-process 12-03 Total 01-01 Overhead WIP 01-02 OH costs are applied to each job using the POHR.
LO 7-10 7-2 Inventory Accounts On January 1, InShape has the following balances in each of its three inventory accounts: Direct materials inventory $30,000 Work-in-process inventory (Job 12-03) $41,000 Finished goods inventory (Job 12-02) $27,000 Now, let’s record January’s activities for InShape.
LO 7-11 7-2 Direct Materials InShape purchased $135,000 of raw materials on account. Materials Inventory Accounts Payable BB 30,000 17,000 BB (1) 135,000 135,000 (1)
LO 7-12 7-2 Direct Materials InShape used $12,000 of direct materials for 12-03. They also started 01-01 and 01-02 and used $102,000 and $15,000 of direct materials respectively. Materials Inventory WIP Inventory BB 30,000 BB 41,000 (1) 135,000 129,000 (2) (2) 129,000 WIP 12-03 WIP 01-01 WIP 01-02 BB 41,000 (2) 12,000 (2) 102,000 (2) 15,000
LO 7-13 7-2 Direct Materials Direct labor of $98,000 was incurred ($16,000 for 12-03, $71,000 for 01-01, and $11,000 for 01-02). WIP Inventory Wages Payable BB 41,000 98,000 (3) (2) 129,000 (3) 98,000 Subsidiary WIP Accounts WIP 12-03 WIP 01-01 WIP 01-02 BB 41,000 (2) 102,000 (2) 15,000 (2) 12,000 (3) 71,000 (3) 11,000 (3) 16,000
LO 7-14 7-2 Manufacturing Overhead InShape incurred the following “actual” overhead costs in January: JE# Item Amount (4) Indirect material requisitioned $12,000 (5) Indirect labor incurred 9,500 (6) Utilities & other factory expenses (credit A/P) 13,750 (6) Prepaid factory expenses used 5,000 (6) Factory depreciation 11,200 Total actual overhead expenses $51,450 With this information, let’s continue recording InShape’s activities.
LO 7-15 7-2 Manufacturing Overhead MOH Control Prepaid Expense Accum. Depreciation (4) 12,000 5,000 (6) 11,200 (6) (5) 9,500 (6) 13,750 (6) 5,,000 (6) 11,200 Materials Inventory Accounts Payable Wages Payable BB 30,000 (4) 12,000 17,000 BB 98,000 (3) (1) 135,000 135,000 (1) 9,500 (5) 13,750 (6)
LO 7-2 How Manufacturing Overhead 7-16 Costs Are Recorded at InShape Two common events that lead to manufacturing overhead being recorded are: 1. Preparing financial statements 2. Completing a job
LO 7-17 7-3 Predetermined Rate LO 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.
Application of Manufacturing LO 7-18 7-3 Costs to Jobs Overhead is allocated to jobs using direct labor cost as its base. InShape estimated that the manufacturing overhead for the coming year would be $600,000 and that direct labor cost would be $1,200,000.
Application of Manufacturing LO 7-19 7-3 Costs to Jobs Direct labor costs POHR = $600,000 ÷ $1,200,000 = $0.50/DL$ or 50% of direct labor cost
Application of Manufacturing LO 7-20 7-3 Costs to Jobs Job # DL$ Rate OH Applied 12-03 $16,000 50% $ 8,000 01-01 71,000 50% 35,500 01-02 11,000 50% 5,500 Total $98,000 50% $49,000

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