chap 003 managerial accounting hilton

8/9/2019 Chap 003 managerial accounting Hilton

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Copyright 2009 by The McGraw-Hill Companies, Inc. llMcGraw-Hill#Irwin

Product Costing and Cost

Accumulation in a Batch

Production Environment

Product Costing and CostAccumulation in a Batch

Production Environment

Chapter 3


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Learning

Objective

1


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Product and Service CostingProduct and Service Costing

FinancialAccounting

Product costs are usedto value inventor andto compute cost o!

goods sold"

#anagerialAccounting and

Cost #anagement

Product costs are used!or planning$ control$

directing$ andmanagement decision

ma%ing"


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Learning

Objective

&


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Flo' o! Costs in #anu!acturing Firm


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Used for production of large, unique, high-cost items.Built to order rather than mass produced.

Many costs can be directly traced to each job.

TWO T!"#$

%ob-shop operations

!roducts manufactured in &ery lo' &olumes or oneat a time.

Batch-production operations

Multiple products in batches of relati&ely smallquantity.

Process

Costing

(ob)Order

Costing

*pes o! Product)Costing Sstems


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Typical job-order cost applications$#pecial-order printing

Building construction(lso used in ser&ice industry)ospitals

*a' firms

Process

Costing

(ob)Order

Costing

*pes o! Product)Costing Sstems*pes o! Product)Costing Sstems


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Process

Costing

(ob)Order

Costing

Used for production of small, identical, lo' costitems.

Mass produced in automated continuous

production process.+osts cannot be directly traced to each unit ofproduct.

Typical process cost applications$!etrochemical refinery

!aint manufacturer

!aper mill

*pes o! Product)Costing*pes o! Product)CostingSstemsSstems


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*he primar document!or trac%ing the costs

associated 'ith a

given job is thejob)cost record"

*ets in&estigate usingthe (B +ompany

Accumulating Costs in aAccumulating Costs in a

(ob)Order Costing Sstem(ob)Order Costing Sstem


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*ets see one

( materials requisitionformis used to

authorie the use of

materials on a job.

(ob)Order Cost Accounting(ob)Order Cost Accounting


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TimothyWilliams



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(ccumulatedirect labor

costs bymeans of a'or/ record,

such as a timetic/et, for each

employee.

*ets see one



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Emploee *ime *ic%etEmploee *ime *ic%et


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(pply manufacturing o&erhead to jobs using apredetermined o&erhead ratebased on direct

labor hours 01*)2.*ets do it



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22/50Copyright 2009 by The McGraw-Hill Companies, Inc. llMcGraw-Hill#Irwin

Learning

Objective

+


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Overhead is applied to jobs using a predeterminedoverhead rate ,PO-./ based on estimates made at

the beginning o! the accounting period"

!O)3 4 Budgeted manufacturing o&erhead costBudgeted amount of cost dri&er 0or acti&ity base2

O&erhead applied 4 !O)3 5 (ctual acti&ity

Based on estimates, anddetermined before the

period begins

(ctualamount of the allocationbase, such as direct labor hours,

incurred during the period

6

7

#anu!acturing Overhead Costs#anu!acturing Overhead Costs


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O&erhead is applied to jobs using apredetermined o&erhead rate 0!O)32 based on

estimates made at the beginning of theaccounting period.

!O)3 4 Budgeted manufacturing o&erhead costBudgeted amount of cost dri&er 0or acti&ity base2

O&erhead applied 4 !O)3 5 (ctual acti&ity

3ecall the (luminum Boat e8ample 'here$O&erhead applied 4 9:; per 1*) 5


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Learning

Objective

0


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*ets summariethe documentflo' 'e ha&e

been discussingin a job-ordercosting system.

(ob)Order Costing

ocument Flo' Summar


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!roductionOrder for %ob

*he materials re2uisition indicates the cost o!

direct materialto charge to jobs and the cost o!

indirect materialindirect material to charge to overhead"Material

3equisition

*he production order !or the job authories the start

o! the production process"

*abor Time 3ecords

Emploee time tic%ets indicate the cost o!directlabor to charge to jobs and the cost o!indirectindirect

laborlabor to charge to overhead"

(ctual +ost 1ri&er 0or (cti&ity Base2

>Predetermined Overhead .ate

(pply Manufacturing O&erhead

(ob)Order Costing(ob)Order Costing

ocument Flo' Summarocument Flo' Summar


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*ets e8amine thecost flo's in a

job-order costingsystem. We 'illuse T-accountsand start 'ith

materials.

(ob)Order Sstem Cost Flo's


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3a' Materials

4Material!urchases

41irectMaterial

41irectMaterial

Mfg. O&erhead

4?ndirectMaterial

4?ndirect

Material

Wor/ in !rocess0%ob-+ost 3ecord2



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@e8t lets addlabor costs and

appliedmanufacturing

o&erhead to thejob-order costflo's. (re you

'ith meA



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41irect*abor

Mfg. O&erhead

4?ndirectMaterial

41irect Material

4?ndirect*abor

41irect

*abor

4?ndirect

*abor

Wages !ayableWor/ in !rocess

0%ob-+ost 3ecord2



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41irect*abor

Mfg. O&erhead

4?ndirectMaterial

41irect Material

4O&erhead(pplied to

Wor/ in!rocess

?f actual and applied

manufacturing o&erhead arenot equal, a year-end

adjustment is required. We'ill loo/ at the procedure to

accomplish this later.

4?ndirect*abor

41irect

*abor4O&erhead(pplied

4?ndirect

*abor

Wages !ayableWor/ in !rocess

0%ob-+ost 3ecord2



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@o' letscomplete the

goods and sell

them. #till 'ithmeA



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4+ost ofoods

Mfd.

inished oods

4+ost ofoods#old

4+ost ofoods

Mfd.

+ost of oods #old

4+ost ofoods

#old

41irect Material

41irect

*abor4O&erhead(pplied

Wor/ in !rocess0%ob-+ost 3ecord2



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*ets return to(B +ompany

and see 'hat 'e'ill do if actual

and appliedo&erhead are not

equal.



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(ctual O&erhead costs for the year$ 9C,;C;,;;;

(ctual direct labor hours 'or/ed for the year$ 6D;,;;;

(pplied O&erhead 4 !O)3 5 (ctual 1irect *abor )ours

(pplied O&erhead 4 9:;.;; per 1*) 5 6D;,;;; 1*) 4 9C,6;;,;;;

(pplied o&erhead e8ceeds actual o&erhead by 9C;,;;;

This difference is called o&erapplied o&erhead.

Overhead Application E5ampleOverhead Application E5ample


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Wor/ in!rocess

inishedoods

+ost ofoods #old

9C;,;;;may be allocated

to these accounts.

9C;,;;; may beclosed directly to

cost of goods sold.

+ost ofoods #old

(B +ompanysMethod

O3

Overapplied and 6nderappliedOverapplied and 6nderapplied

#anu!acturing Overhead#anu!acturing Overhead


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(ctualo&erhead

costs

9C,;C;,;;;

9C;,;;;o&erapplied

UnadjustedBalance

9C;,;;;

9C;,;;;

(djustedBalance

O&erhead(ppliedto jobs

9C,6;;,;;;

(BsMfg. O&erhead

for the year

(Bs +ostof oods #old

for the year


#anu!acturing Overhead#anu!acturing Overhead


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(lternati&e 6 (lternati&e 7

?f Manufacturing +lose to +ost

O&erhead is . . . (llocation of Boods #old

U@1"3(!!*?"1 ?@+3"(#" ?@+3"(#"

Wor/ in !rocess +ost of Boods #old

0(pplied O) is less -inished Boods

than actual O)2 +ost of Boods #old

OE"3(!!*?"1 1"+3"(#" 1"+3"(#"

Wor/ in !rocess +ost of Boods #old

0(pplied O) is greater -inished Boods

than actual O)2 +ost of Boods #old


#anu!acturing Overhead )#anu!acturing Overhead )

SummarSummar


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Learning

Objective7


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Schedule o! Cost o! 8oods #anu!acturedSchedule o! Cost o! 8oods #anu!actured


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Schedule o! Cost o! 8oods SoldSchedule o! Cost o! 8oods Sold


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Actual direct material

and direct labor

combined 'ithactualoverhead"

Actual direct material

and direct labor

combined 'ithpredeterminedoverhead"

6sing a predetermined rate ma%es it6sing a predetermined rate ma%es it

possible topossible to estimateestimatetotal job costs sooner"total job costs sooner"

Actual overhead !or the period is notActual overhead !or the period is not%no'n until the end o! the period"%no'n until the end o! the period"

Actual and 9ormal CostingActual and 9ormal Costing


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Learning

Objective:


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+ost pools

#tage One$+osts assignedto pools

;ndirect

Labor

;ndirect

#aterials

Other

Overhead

epartment

1

epartment

&

epartment

3

*'o)Stage Cost Allocation*'o)Stage Cost Allocation


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epartmental Overhead .atesepartmental Overhead .ates

epartment

1

epartment

&

epartment

3

!roducts

+ost pools

irect

Labor

-ours

#achine

-ours

.a'

#aterials

Cost

#tage One$#tage One$

+osts assigned+osts assigned

to poolsto pools

#tage T'o$

+osts appliedto products

1epartmental (llocation Bases

;ndirect

#aterials

Other

Overhead

;ndirect

Labor


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Learning

Objective

chap 003 managerial accounting hilton

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