[ppt]managerial accounting chapter 8 - university of …dtanner/studyhall2071/ppt/dt_ch30.pptx ·...
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Copyright ©2015. University of North Florida. All rights reserved.
Product Costing – Assigning Product
Costs
Managerial Accounting
Prepared by Diane TannerUniversity of North Florida
Chapter 30
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2
Inventory Accounts for Manufacturers
• Three inventory accounts– Raw materials
• Materials to be used in production– Direct and indirect
– Work in process• Direct materials used in production• Direct labor costs incurred to produce• Manufacturing overhead costs identified as part
of the cost of production– Finished goods
• Goods completed and ready for sale
Reported on the balance sheet
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Production Departments 3
Materials Storeroom Factory/Production Area
Costs in departments correlate to inventory
accounts.
Raw Materials
Work in Process
Finished Goods
Ready for
Sale
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4Materials Storeroom Contains raw materials that will used in production
Direct and indirect materials Cost totals the balance in the raw materials account
Controlled by storeroom manager/clerk Counts and verifies materials received from suppliers Sends a copy of the receiving report to the accounting
department for future payment Issues materials for production upon receipt of a
materials requisition form from the factory production supervisor
Coordinates the physical transfer of the materials to the production area
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Factory Work Area Contains partially completed products Contains the production machinery and is the
location in which production occurs Accumulated costs total the balance in the WIP
account Direct materials requisitioned from the materials storeroom Costs of direct labor and MOH added
Controlled by the production supervisor Responsible for producing products in accordance with the
company's specifications
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Shipping Area Typically a loading dock for shipment to customers
Sometimes a showroom where goods are held for sale Contains completed inventory items held for sale Accumulated costs total the balance in the FG
account Costs are transferred from the WIP account when units
are completed Costs of goods sold are transferred out when units are
sold
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Assigning Costs to ProductsDirect materials and direct labor• Traced to specific
products– Easily associated with
specific products• Increase WIP as incurred
Manufacturing overhead• Consists of only indirect
costs• Allocated to products
– Not easily associated with specific products
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Acquiring Raw MaterialsThe Purchasing Manager fills out an electronic
purchase order to order materials from a supplier
1
When materials are received, the Materials Storeroom Clerk records and stocks the
materials in the storeroom.
2Materials Storeroom
The Materials Storeroom Clerk sends the receiving report to Accounting for payment.
3
DR Raw Materials InventoryCR Cash or Accounts Payable
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Using Direct Materials in Production
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The production supervisor fills out a materials requisition form.
1
The processed form is sent to Accounting.
3
Factory Work Area
PearCo Materials Requisition Form
Requisition No. X7 - 6890 Date March 3Job No. A - 143Department B3
Description Quantity Unit Cost Total Cost2 x 4, 12 feet 12 3.00$ 36.00$ 1 x 6, 12 feet 20 4.00 80.00
116.00$
Authorized Signature
A materials requisition form authorizes the use of materials on
a product or job
The materials storeroom clerk delivers the requested materials
to the production area.
2
DR Work in Process InventoryCR Raw Materials inventory
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Incurring Direct Labor Costs 10
Factory/Production Area
10
Employees fill out time tickets to record the time spent on each
product/service
PearCo Employee Time Ticket
Time Ticket No. 36 Date March 4Employee I. M. Skilled Station 42
Starting Ending Hours HourlyTime Time Completed Rate Amount Job No.0800 1600 8.00 11.00$ 88.00$ A-143
Totals 8.00 11.00$ 88.00$ A-143
Supervisor C. M. Workman
DR Work in Process InventoryCR Wages Payable or Cash
The processed form is sent to Accounting.
2
1
Direct labor cost = Gross wages + fringe benefitsGross wages =
Wage rate × Hours worked
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Incurring Manufacturing Overhead• Accumulated in the
Manufacturing Overhead expense account
• Three components– Indirect materials
• Requisitioned by production supervisor on a materials requisition form
– Indirect labor • Accumulated on time
tickets or time cards– Factory related costs
• Incurred in factory operations
DR Manufacturing OverheadCR Raw Materials Inventory
DR Manufacturing OverheadCR Wages Payable or Cash
DR Manufacturing OverheadCR Various payables, cash, accumulated depreciation, etc.
Indirect costs are not traceable.
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Assigning Manufacturing Overhead Allocated to specific products
Based on estimates of expected costs and a basis over which to allocate
Allocated cost is removed from the MOH expense account and transferred to the WIP account
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DR Work in Process InventoryCR Manufacturing Overhead
Indirect Costs
Product A
Product B
Product C
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The End