Systems Design JobOrder Costing UAA ACCT 202 Principles
Systems Design: Job-Order Costing UAA – ACCT 202 Principles of Managerial Accounting Dr. Fred Barbee Chapter
Cost Measurement Cost Accumulation Cost Assignment Direct Materials Direct Labor Mfg. Overhead Work-in. Process Finished Goods Cost-of Goods Sold Goal: Accurately costed products.
The same basic purpose exists in both systems. Job-Order Costing Vs. Process Costing - 1 Similarities 2 To provide a mechanism for computing unit cost. To assign direct material, direct labor and manufacturing overhead to products. L s ’ t e
The same basic purpose exists in both systems. Job-Order Costing Vs. Process Costing - Similarities 3 Both systems maintain and use the same manufacturing accounts. 4 The flow of costs through the accounts is basically the same. L s ’ t e
Cost Flows in a Manufacturing Firm Manufacturing Costs DM DL MOH Balance Sheet Unused Used d e i l App WIP DM Inv. Unfinished Fini she d Sales - Income Statement COGS = Gross Margin - S&A = Net Income Sold WIP Inv. FG Inv.
Differences arise from two factors. . . L s ’ t e These units are indistinguishable from one another. 2 The flow of units in a process costing system is more or less continuous. 1 Job-Order Costing Vs. Process Costing - Differences
Job-Order Costing Job 100 DM DL MOH Job 101 Finished Goods Cost of Goods Sold Job 102 Work in Process Finished Goods Cost of Goods Sold
Process Costing System Process A DM DL MOH Process B Process C Finished Goods Cost of Goods Sold
Equivalent Units of Production Total Cost Information Providedby by a provided Cost System cost system. Cost of Units in WIP Cost Per Unit
Usefulness of Cost Information Valuing Inventory Pricing Products Decision Making Planning & Control Financial Reporting
Unit Cost 1 Is based on an averaging process. . . 2 . . . With the averaging process being dependant on the system used.
Flow of Documents in a Job-Order Costing System A sales order is prepared as a basis for issuing a. . . Sales Order A production order initiates work on a job, whereby costs are charged through: Materials Requisition Form Production Order Direct Labor Time Ticket Job Cost Sheet Predetermined Overhead Rates
Direct Materials Direct Labor Mfg. Overhead Work-in. Process Finished Goods Cost-of Goods Sold
Direct Materials Direct Labor Mfg. Overhead Work-in. Process Finished Goods Cost-of Goods Sold
Direct Materials Direct Labor Mfg. Overhead Work-in. Process Finished Goods Cost-of Goods Sold
Cost Assignment Dilemma Direct Materials Traceable Direct Labor Problem Mfg. Process (Work in Process) Unit Cost for Finished Goods Assigned Overhead Costs must be assigned using some activity base and a predetermined overhead rate.
Cost Assignment Dilemma Direct Materials Traceable Direct Labor Problem Assigned Overhead Mfg. Process (Work in Process) Solution? Estimated Overhead POR = ---------------------Estimated Units in Activity Base Unit Cost for Finished Goods
Simplify Recordkeeping 2 Why 1 Allocate? 3 Avoid Seasonal Factors Timeliness
Selecting an Allocation Base Possible Drivers Criterion: Causeand-Effect Relationship l Units produced l Direct Labor Hours l Direct Labor $ l Machine Hours l Direct Materials POR Choice of activity base used in the calculation of the Predetermined Overhead Rate.
Basic Concept of Applied Overhead Applied overhead = Overhead rate x Actual production activity Two points to consider in the application of MOH l Applied overhead is the basis for computing perunit overhead cost. l Applied overhead is rarely equal to a period's actual overhead costs.
Summary of Overhead Concepts Estimated Overhead Cost The amount of estimated overhead costs. Actual Overhead Cost The amount of overhead costs actually incurred. Applied Overhead Cost The amount of overhead costs applied to WIP. Difference equals Unde or Overapplied Overhead.
The Manufacturing Overhead Account Amounts rarely agree Actual Overhead Costs MOH xxx A “Clearing” Account Overhead Applied to WIP
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