MAS - Chapter 3 - LO8

8/3/2019 MAS - Chapter 3 - LO8

1/12

Law Firm Movie Studio

Job Each client Each film produced

Direct Materials Legal forms and similar

inputs

Costumes, props, film, etc.

Direct Labor Time expended by

attorneys

Actors, directors and extras

Overhead Costs of secretaries,

clerks, rent, depreciation

and so forth

Utilities, depreciation of

equipment, wages of maintenance

workers and so forth

Project Costing: Job-Order Costing in

Nonmanufacturing Organizations

Job-order costing is a versatile and widely used costing method

that may be encountered in virtually any organization that provides

diverse products or services.


2/12

Cost-accumulation system used in a service industry firm

Publicidades Paulista

Makati City

Two managing partners having an annual salaries of P100,000

eachArtistic staff of six people each earning P50,000 per year

Fringe benefits for these professionals average 40 percent of

their compensation

So. . . . . . .


3/12

Publicidades Paulistas direct professional labor budget is. .

.

Partner salaries .. P 200,000

Partner benefits (40%) .. 80,000

Total partner compensation P 280,000

Artistic staff salaries .. P 300,000

Artistic staff benefits (40%) .. 120,000

Total artistic staff compensation P 420,000


4/12

Ad agencys annual overhead budget

PUBLICIDADES PAULISTA

Annual Overhead Budget

For the Year 20xx

1st Quarter 2nd Quarter 3rd Quarter th Quarter Year

Support staff:

Receptionist Php 8,000 Php 8,000 Php 8,000 Php 8,000 Php 32,000

Secretarial 17,500 17,500 17,500 17,500 70,000

Accounting 10,000 10,000 10,000 10,000 40,000

Custodial 7,250 7,250 7,250 7,250 29,000

Support staff benefits 17,100 17,100 17,100 17,100 68,400

Artistic supplies 40,000 40,000 40,000 40,000 160,000

Photographic supplies 30,000 30,000 30,000 30,000 120,000

Office:Computer 5,000 5,000 5,000 5,000 20,000

Photocopying 3,750 3,750 3,750 3,750 15,000

Office supplies 4,500 4,500 4,500 4,500 18,000

Postage 525 525 525 525 2,100

Utilities:

Electricity 3,250 3,250 3,250 3,250 13,000

Heat/air conditioning 4,000 4,000 4,000 4,000 16,000

Internet access 375 375 375 375 1,500

Cable TV 500 500 500 500 2,000

Telephone 775 775 775 775 3,100

Trash collection 600 600 600 600 2,400

Other 625 625 625 625 2,500Building rent 12,500 12,500 12,500 12,500 50,000

Insurance 3,750 3,750 3,750 3,750 15,000

Advertising 5,000 5,000 5,000 5,000 20,000

Vehicle maintenance 1,000 1,000 1,000 1,000 4,000

Depreciation:

Equipment 3,000 3,000 3,000 3,000 12,000

Vehicles 5,000 5,000 5,000 5,000 20,000

Other 5,000 5,000 5,000 5,000 20,000

Total overhead Php 189,000 Php 189,000 Php 189,000 Php 189,000 Php 756,000

Total overhead

budget

Support staff

Artistic supplies

Photographic supplies

Office operation

Utilities

Insurance

Building rent

Advertising

Vehicle maintenance

Depreciation


5/12

Accountant estimates:

One-third of the budgeted overhead cost is incurred to

support the ad agencys two partner

Two-thirds of it goes to support the artistic staff

Budgeted annual partner support overhead P756,000 x 1/390%

Budgeted annual partner compensation P280,000

Budgeted annual artistic staff support overhead P756,000 x 2/3120%

Budgeted annual artistic staff compensation P420,000


6/12

Budgeted annual partner support overhead P756,000 x 1/390%

Budgeted annual partner compensation P280,000

Budgeted annual artistic staff support overhead P756,000 x 2/3

120%

Budgeted annual artistic staff compensation P420,000

Interpretation:

Overhead is assigned to each ad contract at the rate of

90 percent of partner direct professional labor plus 120 percent of

artistic staff direct professional labor.


7/12

Application of Overhead

During May, Publicidades Paulista completed an

advertising project for ice cream company, Selecta.

Requirements of the contract:

1. P 1,800 direct material

2. P 1,200 partner direct professional labor

3. P 2,000 artistic staff direct professional labor


8/12

Computation of total cost of the contract

Contract MJH0207: Advertising Program

For Selecta

Direct material P 1,800

Direct professional labor (partner) .. 1,200

Direct professional labor (artistic staff) ... 2,000

Applied overhead:

Partner support (P1,200 x 90%) 1,080

Artistic staff support (P2,000 x 120%) . 2,400

Total cost ..... P 8,480


9/12

Changing Technology in Manufacturing Operations

Three Technological Changes

1. Electronic Data Interchange (EDI)

2. Extensible Markup Language (XML)3. Use of Bar Codes


10/12

Electronic Data Interchange (EDI)

Involves a network of computers linking organizations.

The direct exchange of data between organizations via

a computer-to-computer interface.

Allows companies to electronically exchange business

documents and other information that extend into all

areas of business activity from ordering raw materials toshipping completed goods.


11/12

Electronic Data Interchange (EDI) (continuation)

This eliminates. . .

1. The need for paper work.

2. Speeding up the flow of information.

3. Substantially reducing errors.


12/12

Extensible Markup Language (XML)

A recently developed alternative to EDI.

A Web-based and less expensive to implement thanEDI.

Its purpose is to share structured data via the Internet.

MAS - Chapter 3 - LO8

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