Professional Documents
Culture Documents
Job-Order Costing
Types of Product
Costing Systems
Process
Costing
Job-order
Costing
A company
company produces
produces many
many units
units of
of aa single
single
product.
product.
One
One unit
unit of
of product
product is
is indistinguishable
indistinguishable from
from
other
other units
units of
of product.
product.
The
The identical
identical nature
nature of
of each
each unit
unit of
of product
product enables
enables
assigning
assigning the
the same
same average
average cost
cost per
per unit.
unit.
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.
Job-Order Costing An
Overview
Direct
DirectMaterials
Materials
Direct
DirectLabor
Labor
Manufacturing
Manufacturing
Overhead
Overhead
Job
JobNo.
No.11
Job
JobNo.
No.22
Job
JobNo.
No.33
Charge
Charge
direct
direct
material
material and
and
direct
direct labor
labor
costs
costs to
to
each
each job
job as
as
work
work is
is
performed.
performed.
Direct Manufacturing
Costs
Direct
DirectMaterials
Materials
Job
Job No.
No.11
Direct
DirectLabor
Labor
Job
Job No.
No.22
Manufacturing
Manufacturing
Overhead
Overhead
Job
JobNo.
No. 33
Manufacturing
Manufacturing
Overhead,
Overhead,
including
including
indirect
indirect
materials
materials and
and
indirect
indirect labor
labor,,
are
are allocated
allocated
to
to all
all jobs
jobs
rather
rather than
than
directly
directly traced
traced
to
to each
each job.
job.
Direct Labor
Manufacturing Overhead
Ticket Hours Amount Hours
Rate
Amount
Cost Summary
Direct Materials
Direct Labor
Manufacturing Overhead
Total Cost
Unit Product Cost
Units Shipped
Date Number Balance
XYZ XYZ
Compute predetermined
overhead rates
Compute predetermined
overhead rates and
explain why estimated
overhead costs (rather
than actual overhead
costs) are used in the
costing process.
Manufacturing Overhead
Application
The predetermined overhead rate
(POHR) used to apply overhead to jobs
is determined before the period begins.
POHR =
Ideally,
Ideally, the
the allocation
allocation base
base
is
is aa cost
cost driver
driver that
that causes
causes
overhead.
overhead.
Application of Manufacturing
Overhead
Based
Based on
on estimates,
estimates, and
and
determined
determined before
before the
the
period
period begins.
begins.
POHR =
Applying Manufacturing
Overhead
Compute underapplied or
overapplied overhead cost
and prepare the journal
entry to close the balance
in Manufacturing
Overhead to the
appropriate accounts.
Problems of Overhead
Application
The difference between the overhead cost applied to Work
in Process and the actual overhead costs of a period is
referred to as either underapplied or overapplied overhead.
Underapplied overhead
exists when the amount of
overhead applied to jobs
during the period using the
predetermined overhead
rate is less than the total
amount of overhead actually
incurred during the period.
Overapplied overhead
exists when the amount of
overhead applied to jobs
during the period using the
predetermined overhead
rate is greater than the total
amount of overhead actually
incurred during the period.
Allocating Under- or
Overapplied Overhead Between
Accounts
QUIZ TIME
Example:
Job
Job WR53
WR53 at
at NW
NW Fab,
Fab, Inc.
Inc. required
required P200
P200 of
of
direct
direct materials
materials and
and 10
10 direct
direct labor
labor hours
hours at
at
P15
P15 per
per hour.
hour. Estimated
Estimated total
total overhead
overhead for
for the
the
year
year was
was P760,000
P760,000 and
and estimated
estimated direct
direct labor
labor
hours
hours were
were 20,000.
20,000. What
What would
would be
be recorded
recorded as
as
the
the cost
cost of
of job
job WR53?
WR53?
a.
a. P200.
P200.
b.
b. P350.
P350.
c.
c. P380.
P380.
d.
d. P730.
P730.
Example:
Job
JobWR53
WR53at
atNW
NWFab,
Fab,Inc.
Inc.required
requiredP200
P200of
ofdirect
direct
materials
materialsand
and10
10direct
directlabor
laborhours
hoursat
atP15
P15per
per
hour.
hour.Estimated
Estimatedtotal
totaloverhead
overheadfor
forthe
theyear
yearwas
was
P760,000
P760,000and
andestimated
estimateddirect
directlabor
laborhours
hourswere
were
20,000.
20,000.What
Whatwould
wouldbe
berecorded
recordedas
asthe
thecost
costof
ofjob
job
WR53?
WR53?
a.
a.P200.
P200.
b.
b.P350.
P350.
c.
c.P380.
P380.
d.
d.P730.
P730.
Have a Nice
day