Post on 28-Mar-2015
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Managerial AccountingSecond EditionWeygandt / Kieso / Kimmel
ELS
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
NextSlide
PreviousSlide
EndEndShowShow
Job Order Cost Accounting
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Cost Accounting
An area of accounting that involves:
Measuring Recording Reporting
PRODUCT COSTS
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Why Do We Need Product Costs?
To determine: Which products to produce? What price to charge? What amounts to produce? What evaluation to give
employees?
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Cost Accounting System
Manufacturing cost accounts that are fully integrated into the general ledger of the company.
Perpetual inventory system used
to provide, immediate up-to-date
information on cost of product.
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Two Cost Accounting Systems
• Job Order Cost System
• Process Cost System
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Job Order System
A cost accounting system where costs are assigned to each job or batch of goods.
• Custom built factory
• Production of movie
• Batch of menus
• Audit engagement
Job Order Cost System
Two Jobs: Wedding Invitations and Menus
Each job has distinguishing characteristics and related costs.
Job #9501
Black ink $
Typesetting $
225
Invitations $225 Envelopes
$
Vellum stock $
Job #9502
Typesetting
Yellow Stock
Yellow stock
Lamination$50 Copies $
Illustration 2-1
$$
Colored Ink $
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Process Cost SystemA system of accounting used by companies
that manufacture Relatively homogeneous (same or similar)
products Through a series of continuous processes
or operations.
Compact Disc Production
Relatively 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 2-2
Process Cost System
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Job Order Cost FlowIllustration 2-3
Job Order Cost AccountingIllustration 2-4
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Two Major Steps in Flows of Costs
• Accumulating the manufacturing costs incurred– Raw materials inventory
– Factory Labor
– Manufacturing Overhead
• Assigning the accumulated costs to the work done
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Material Inventory Record
Each individual item of raw materials has a card or record.
Illustration 2-5
The sum of the balances of all these records should equal raw materials in the general ledger.
Item: Handles Part No: AA2746Receipts Issues Balance
Date Units Cost Total Units Cost Total Units Cost Total1/4 2,000 $5 $10,000 2,000 $5 $10,000
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Summary Entry
A journal entry that summarizes the total from multiple transactions.
Date Account Titles and Explanation Debit Credit(3)
Jan. 31 Manufacturing OverheadUtilities Payable
Prepaid InsuranceAccounts Payable - for repairsAccumulated DepreciationProperty Taxes Payable
(To record overhead costs)
13,800 4,8002,0002,6003,0001,400
Date Account Titles and Explanation Debit Credit(2)
Jan. 31 Factory Labor Factory Wages Payable Employer Payroll Taxes Payable (To record factory labor costs)
32,00027,0005,000
Date Account Titles and Explanation Debit Credit(1)
Jan. 4 Raw Materials Inventory Accounts Payable
(Purchase of raw materials on account)
42,00042,000
Accumulating Manufacturing Costs
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Job Cost SheetA form used to record the costs
chargeable to a job to determine:
• the total and
• unit cost
of the
completed
job.
Job Cost Sheet Job No. _________________________________ Quantity ________________________________ Item ___________________________________ Date Requested __________________________ For ____________________________________ Date Completed
__________________________
Direct Direct Manufacturing Date Materials Labor Overhead
Cost of completed job Direct materials $ Direct labor Manufacturing overhead Total cost $
Unit cost (total dollars ÷ quantity) $
Illustration 2-6
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Materials Requisition Slip
A document authorizing the issuance of raw materials from the store to production.
Illustration 2-7
Wallace Manufacturing CompanyMaterials Requisition Slip
Deliver to: Assembly Department Req. No. R247
Charge to: Work in Process – Job No. 101 Date 1/6/96
Quantity Description Stock No. Cost Per Unit Total
200 Handles AA2746 $5.00 $1,000
Requested by: Received by:
Approved by: Costed by:
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Job Cost Sheets – Direct MaterialsIllustration 2-8
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Time Ticket
A document that indicates the employee, the hours worked, the account and the job to be charged, and the total labor cost.
Bob Kadler M.Cher
Illustration 2-10
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Job Cost Sheets – Direct LaborIllustration 2-11
Predetermined Overhead Rate
A rate based on the relationship between estimated annual overhead costs and expected annual operating activity, expressed in terms of a common activity base.
Estimated Annual Overhead Costs
Expected Annual Operating Activity÷ = Predetermined
Overhead Rate
Illustration 2-12
Using Predetermined Overhead RateIllustration 2-13
XActivity BasePredetermined
Overhead Rate
is assigned
to
Work in Process
Job 1
Job 2
Job 3
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Job Cost Sheets – Manufacturing Overhead Applied
Illustration 2-14
Assigning Manufacturing Costs
Date Account Titles and Explanation Debit Credit(4)
Jan. 31 Work in Process InventoryManufacturing Overhead Raw Materials Inventory
(To assign materials to jobs and overhead)
24,0006,000
30,000
Date Account Titles and Explanation Debit Credit(5)
Jan. 31 Work in Process InventoryManufacturing Overhead
Factory Labor (To assign labor to jobs and overhead)
28,0004,000
32,000
Date Account Titles and Explanation Debit Credit(6)
Jan. 31 Work in Process Inventory Manufacturing Overhead (To assign overhead to jobs)
22,400
22,400
Jobs Completed and SoldDate Account Titles and Explanation Debit Credit
(1)
Jan. 31 Accounts Receivable
Sales
Cost of Goods Sold
To record cost of Job 101A
24,000
18,00018,000
24,000
Finished Goods Inventory
To record sale of Job 101A
Flow of CostsFlow of Costs
Accum ulation Assignm ent1. Purchase raw m aterials 4. Raw m aterials are used2. Incur factory labor 5. Factory labor is used3. Incur m anufacuring 6. O verhead is applied
overhead 7. Com pleted goods arerecognized
8. Cost of goods sold isrecognized
Key to Entries:
Factory Labor (2) 32,000 (5) 32,000
R a w M a t e r ia ls In v e n t o r y( 1 ) 4 2 ,0 0 0 ( 4 ) 3 0 ,0 0 0B a l . 1 2 ,0 0 0
M a n u f a c t u r i n g O v e r h e a d( 3 ) 1 3 , 8 0 0 ( 6 ) 2 2 , 4 0 0( 4 ) 6 , 0 0 0( 5 ) 4 , 0 0 0B a l . 1 , 4 0 0
F in is h e d G o o d s In v e n to r y( 7 ) 3 9 ,0 0 0 ( 8 ) 3 9 ,0 0 0
W o r k i n P r o c e s s I n v e n t o r y( 4 ) 2 4 , 0 0 0 ( 7 ) 3 9 , 0 0 0( 5 ) 2 8 , 0 0 0( 6 ) 2 2 , 4 0 0B a l . 3 5 , 4 0 0
C o s t o f G o o d s S o ld(8 ) 3 9 ,0 0 0
7
5
84
6
Job Order Cost AccountingIllustration 2-18
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
NextSlide
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EndEndShowShow
Underapplied Overhead
A situation in which overhead assigned to work in process is less than the overhead incurred.
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
NextSlide
PreviousSlide
EndEndShowShow
Overapplied Overhead
A situation in which overhead assigned to work in process is greater than the overhead incurred.
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Purposes of Cost Accounting
Flow of Costs in Job Order
Importance of Job Cost Sheet
Predetermined Overhead Rate
Entries for Jobs Completed/Sold
Under- and Over-applied Overhead
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Under- or Overapplied Manufacturing Overhead
Year-End Balance- adjust to Cost of Goods Sold
Date Account Titles and Explanation Debit Credit(5)
Dec. 31 Manufacturing Overhead
Cost of Goods Sold
(To transfer overapplied overhead to cost of goods sold)
2,5002,500
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