Managerial accounting by garrison noreen13th chap003

Systems Design: Job-Order Costing
Chapter 3

McGraw­Hill/Irwin

   Copyright © 2010 by The McGraw­Hill Companies, Inc. All rights reserved.


Types of Product Costing Systems

Process
Costing






Job-order
Costing

Many
Many different
different products
products are
are produced
produced each
each period.
period.
Products
Products are

are manufactured
manufactured to
to order.
order.

The
The unique
unique nature
nature of
of each
each order
order requires
requires tracing
tracing or
or
allocating
allocating costs
costs to
to each
each job,
job, and
and maintaining
maintaining cost
cost
records
records for
for each
each job.
job.




3-2


Comparing Process and Job-Order Costing

3-3


Measuring Direct Materials Cost

3-4


Job-Order Cost Accounting

3-5


Manufacturing Overhead Application
The predetermined overhead rate (POHR) used to
apply overhead to jobs is determined before the
period begins.

3-6


Determining Predetermined Overhead Rates
Predetermined overhead rates are calculated

using a three-step process.




Estimate
Estimate the
the level
level of
of
production
production for
for the
the
period.
period.




Estimate
Estimate total
total amount
amount
of
of the
the allocation
allocation base
base
for

for the
the period.
period.




Estimate
Estimate total
total
manufacturing
manufacturing
overhead
overhead costs.
costs.

POHR =  ÷ 
3-7


Job-Order Cost Accounting

3-8


Job-Order Costing
Document Flow Summary

Materials
Materials

used
used may
may be
be
either
either direct
direct or
or
indirect.
indirect.

Direct
materials

Job Cost
Sheets

Materials
Requisition
Indirect
materials

Manufacturing
Overhead
Account

3-9


Job-Order Costing

Document Flow Summary
An
employee’s
time may be either
direct or
indirect.

Direct
Labor

Job Cost
Sheets

Employee Time
Ticket
Indirect
Labor

Manufacturing
Overhead
Account

3-10


Job-Order Costing
Document Flow Summary
Materials
Requisition

Other
Actual OH
Charges
Employee
Time Ticket

Indirect
Material

POHR
rate used
to apply
Manufacturing overhead
Overhead
Account

Job Cost
Sheets

Indirect
Labor
3-11


The Purchase and Issue of Raw Materials
Raw Materials
Material Direct
Purchases Materials
Indirect
Materials



Work in Process
(Job Cost Sheet)
Direct
Materials


Mfg. Overhead
Actual Applied
Indirect
Materials

3-12


Cost Flows – Material Purchases
Raw material purchases are recorded in an
inventory account.

3-13


Cost Flows – Material Usage
Direct materials issued to a job increase Work in
Process and decrease Raw Materials. Indirect
materials used are charged to Manufacturing
Overhead and also decrease Raw Materials.

3-14

The Recording of Labor Costs
Salaries and
Wages Payable
Direct
Labor
Indirect
Labor


Work in Process
(Job Cost Sheet)
Direct
Materials
Direct
Labor


Mfg. Overhead
Actual
Indirect
Materials
Indirect
Labor

Applied

3-15

Applying Manufacturing Overhead
Salaries and
Wages Payable
Direct
Labor
Indirect
Labor


Mfg. Overhead
Actual Applied
Indirect
Materials Overhead
Indirect
Applied to
Labor
Work in
Other
Process
Overhead

Work in Process
(Job Cost Sheet)
Direct
Materials
Direct
Labor
Overhead
Applied



If actual and applied
manufacturing overhead
are not equal, a year-end
adjustment is
is required.
required.

3-16


Transferring Completed Units
Work in Process
(Job Cost Sheet )
Direct
Materials
Direct
Labor
Overhead
Applied


Finished Goods
Cost of
Goods
Mfd.



Cost of
Goods
Mfd.



3-17


End of Chapter 3

3-18