COST ACCOUNTING SYSTEMS

Transcription

1 19-2 C 1 COST ACCOUNTING SYSTEMS Process Costing Job Costing Chapter 20 Used for production of large, unique, or high-cost items. Built to order rather than mass produced. Many costs can be directly traced to each job.

2 19-3 C 1 JOB ORDER PRODUCTION Process Costing Job Costing Chapter 20 Typical job order cost applications: Special-order printing Building construction Also used in service industry Hospitals Law firms

3 19-4 C 1 EVENTS IN JOB ORDER COSTING Receive order from customer. Schedule production of the job. Predict cost to complete job. Negotiate a sales price and decide whether to pursue the job.

4 19-5 C 1 JOB ORDER PRODUCTION ACTIVITIES Materials Direct Indirect Factory Overhead Allocate Goods in Process Finished Goods Indirect Labor Direct Cost of Goods Sold

5 19-6 C 2 JOB ORDER COST DOCUMENTS The primary document for tracking the costs associated with a given job is the job cost sheet. Let s investigate

6 19-7 C 2 JOB COST SHEET Road Warriors Job Cost Sheet Customer Carroll Connor Job No. B15 Address 1542 High Point Dr. Portland, Oregon Job Description Level I Alarm System on Ford Expedition Date promised 3/15/11 Date started 3/3/11 Date completed Direct Materials Direct Labor Factory Overhead Date Req. Cost Date Ticket Cost Date Rate Cost Total Total Total Remarks Cost Summary Direct Materials Direct Labor Factory Overhead Total Cost

7 19-8 C 2 JOB COST SHEET Road Warriors Job Cost Sheet Customer Carroll Connor Job No. B15 Address 1542 High Point Dr. Portland, Oregon Job Description Level I Alarm System on Ford Expedition Date promised 3/15/11 Date started 3/3/11 Date completed Direct Materials Direct Labor Factory Overhead Date Req. Cost Date Ticket Cost Date Rate Cost Total Total Total Remarks A materials requisition is used to authorize the use of materials on a job. Let s see one Cost Summary Direct Materials Direct Labor Factory Overhead Total Cost

8 19-9 P 1 MATERIALS REQUISITION Road Warriors Materials Requisition No. R-4705 Job No. B15 Date Material Stock No. M-347 Material Description Alarm system wiring Quantity Requested 1 Requested By C. Luther Quantity Provided 1 Date Provided Filled By M. Bateman Received By C. Luther Remarks C. Luther

9 19-10 P 1 MATERIALS REQUISITION Cost of material is charged to Job B15. Road Warriors Materials Requisition No. R-4705 Proper authorization Job No. B15 Date Material Stock No. M-347 Material Description Alarm system wiring Quantity Requested 1 Requested By C. Luther Quantity Provided 1 Date Provided Filled By M. Bateman Received By C. Luther Remarks

10 19-11 P 1 MATERIALS REQUISITION Type and quantity of material charged to Job B15. Pre-printed, sequentially numbered form Road Warriors Materials Requisition No. R-4705 Job No. B15 Date Material Stock No. M-347 Material Description Alarm system wiring Quantity Requested 1 Requested By C. Luther Quantity Provided 1 Date Provided Filled By M. Bateman Received By C. Luther Remarks

11 19-12 P 1 MATERIALS REQUISITION Road Warriors Materials Requisition No. R-4705 Job No. B15 Date Material Stock No. M-347 Material Description Alarm system wiring Quantity Requested 1 Requested By C. Luther The materials requisition form also serves as the Quantity Provided 1 Date Provided source Filled Bydocument for recording Received material By usage in Remarks M. Bateman C. Luther the accounting records.

12 19-13 P 1 MATERIALS LEDGER CARD Road Warriors Materials Ledger Card Item Alarm sys. wiring Stock No. M-347 Location Bin137 Maximum Qty. 5 units Minimum Qty. 1 unit Reorder Qty. 2 units Received Issued Balance Rec. Unit Total Req. Unit Total Unit Total Date Rep. Units Cost Cost No. Units Cost Cost Units Cost Cost 1 $225 $225 3/4/11 C $225 $450 3 $225 $675 3/7/11 R $225 $225 2 $225 $450

13 19-14 P 1 JOB COST SHEET Road Warriors Job Cost Sheet Customer Carroll Connor Job No. B15 Address 1542 High Point Dr. Portland, Oregon Job Description Level I Alarm System on Ford Expedition Date promised 3/15/11 Date started 3/3/11 Date completed Direct Materials Direct Labor Factory Overhead Date Req. Cost Date Ticket Cost Date Rate Cost 3/7/11 R-4705 $ 225 Total Total Total Remarks Cost Summary Direct Materials $ 225 Direct Labor Factory Overhead Total Cost

14 19-15 P 2 JOB COST SHEET Road Warriors Job Cost Sheet Customer Carroll Connor Job No. B15 Address 1542 High Point Dr. Portland, Oregon Job Description Level I Alarm System on Ford Expedition Date promised 3/15/11 Date started 3/3/11 Date completed Direct Materials Direct Labor Factory Overhead Date Req. Cost Date Ticket Cost Date Rate Cost 3/7/11 R-4705 $ 225 Total Total Total Accumulate direct labor costs by means of a work record, such as a time ticket, for each employee. Remarks Cost Summary Direct Materials $ 225 Direct Labor Factory Overhead Total Cost Let s see one

15 19-16 P 2 LABOR TIME TICKET Road Warriors Time Ticket No. L-3479 Job No. B15 Date 3/8/11 Employee Name T. Zeller Employee Number 3969 TIME AND RATE INFORMATION: Start Time 9:00 Finish Time 12:00 Elapsed Time 3.0 Hourly Rate $20.00 Total Cost $60.00 Approved By Remarks C. Luther

16 19-17 P 2 JOB COST SHEET Road Warriors Job Cost Sheet Customer Carroll Connor Job No. B15 Address 1542 High Point Dr. Portland, Oregon Job Description Level I Alarm System on Ford Expedition Date promised 3/15/11 Date started 3/3/11 Date completed Direct Materials Direct Labor Factory Overhead Date Req. Cost Date Ticket Cost Date Rate Cost 3/7/11 R-4705 $ 225 3/8/11 L-3479 $ 60 Total Total $ 60 Total Remarks Cost Summary Direct Materials $ 225 Direct Labor 60 Factory Overhead Total Cost

17 19-18 P 3 JOB COST SHEET Road Warriors Job Cost Sheet Customer Carroll Connor Job No. B15 Address 1542 High Point Dr. Portland, Oregon Job Description Level I Alarm System on Ford Expedition Date promised 3/15/11 Date started 3/3/11 Date completed Direct Materials Direct Labor Factory Overhead Date Req. Cost Date Ticket Cost Date Rate Cost 3/7/11 R-4705 $ 225 3/8/11 L-3479 $ 60 Total Total $ 60 Allocate manufacturing overhead to jobs using a Remarks predetermined overhead rate Cost Summary Direct Materials $ 225 Direct Labor 60 Factory Overhead Let s do it $ - Total Cost $ 285

18 19-19 P 3 JOB COST SHEET Road Warriors Job Cost Sheet Customer Carroll Connor Job No. B15 Address 1542 High Point Dr. Portland, Oregon Job Description Level I Alarm System on Ford Expedition Date promised 3/15/11 Date started 3/3/11 Date completed Direct Materials Direct Labor Factory Overhead Date Req. Cost Date Ticket Cost Date Rate Cost 3/7/11 R-4705 $ 225 3/8/11 L-3479 $ 60 3/08/11 160% $ 96 Total Total $ 60 Total $ 96 Remarks Cost Summary Direct Materials $ 225 Direct Labor 60 Factory Overhead $ 96 Total Cost $ 381

19 19-20 P 3 PREDETERMINED OVERHEAD RATE Road Warriors uses a predetermined overhead rate (POHR) based on direct labor cost to apply overhead to jobs. POHR = Estimated total manufacturing overhead cost for the coming period Estimated total direct labor costs for the coming period $200,000 POHR = = 160% of direct labor $ $125,000

20 19-21 JOB ORDER COST FLOWS AND REPORTS Let s summarize the document flow we have been discussing in a job-order costing system.

21 19-22 P 1 Material Cost Flows and Documents The materials requisition indicates the cost of direct materials to charge to jobs and the cost of indirect materials to charge to overhead. Direct materials Materials Ledger Materials Cards Ledger Materials Cards Ledger Materials Cards Requisition Indirect materials Job Cost Job Cost Job Job Sheets Cost Sheets Sheets Cost Sheets Factory Overhead Account

22 19-23 P 2 Labor Cost Flows and Documents Employee time tickets indicate the cost of direct labor to charge to jobs and the cost of indirect labor to charge to overhead. Direct Labor Employee Time Employee Ticket Time Employee Ticket Time Employee Ticket Time Ticket Indirect Labor Job Cost Job Cost Job Job Sheets Sheets Cost Cost Sheets Sheets Factory Overhead Account

23 19-24 Summary of Cost Flows Let s examine the cost flows in a job order system. We will use T-accounts and start with materials.

24 19-25 P 1 Dr Cr Dr Cr Raw Materials Goods in Process Material Purchases Summary of Cost Flows Direct Material Indirect Material Direct Material Dr Cr Factory Overhead Actual Overhead Costs

25 19-26 P 2 P 3 Summary of Cost Flows Dr Cr Dr Cr Factory Payroll Incurred Actual Overhead Costs Direct Labor Indirect Labor Dr Cr Factory Overhead Overhead Applied to Work in Process Goods in Process Direct Material Direct Labor Overhead When Actual Applied factory factory overhead overhead an adjustment is needed. We will look at how to accomplish this later.

26 19-27 P 3 Direct Material Direct Labor Overhead Summary of Cost Flows Dr Cr Dr Cr Goods in Process Cost of Goods Mfd. Dr Cost of Goods Sold Cr Cost of Goods Mfd. Cost of Goods Sold Finished Goods Cost of Goods Sold

27 19-28 P 4 OVERHEAD APPLICATION Tell me again how we use the POHR to assign overhead to jobs. We multiply the POHR times the number of activity units (direct labor cost for Road Warriors) incurred for the job.

28 19-29 P 4 OVERHEAD APPLICATION Reasons for using a POHR (predetermined overhead rate) Overhead is not incurred uniformly during the year. Actual overhead rate might vary from month to month. Predetermined rate makes it possible to estimate job costs sooner.

29 19-30 P 4 ADJUSTMENT OF OVERAPPLIED OR UNDERAPPLIED OVERHEAD The POHR is based on estimates. What happens if actual results differ from the estimates? The result will be either underapplied or overapplied overhead and we will adjust Cost of Goods Sold at the end of the period. Here, let me show you.

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31 19-31 P 4 ADJUSTMENT OF OVERAPPLIED OR UNDERAPPLIED OVERHEAD Overhead is overapplied. Actual overhead costs incurred Overhead applied to Work in Process (POHR Activity)

32 19-32 P 4 ADJUSTMENT OF OVERAPPLIED OR UNDERAPPLIED OVERHEAD Overhead is underapplied. Actual overhead costs incurred Overhead applied to Work in Process (POHR Activity)

33 19-33 P 4 ADJUSTMENT OF OVERAPPLIED OR UNDERAPPLIED OVERHEAD Adjusting Cost of Goods Sold for underapplied or overapplied overhead Cost of Goods Overhead is: Sold is: Adjustment will: Actual overhead > applied overhead Underapplied Too low Increase Cost of Goods Sold Actual overhead < applied overhead Overapplied Too high Decrease Cost of Goods Sold