Академический Документы
Профессиональный Документы
Культура Документы
A. Costing Systems. Two major types of costing systems are used in manufacturing and
many service firms: process costing and job-order costing.
2. Job-Order Costing. Job-order costing is used when different types of products, jobs, or
batches are produced within a period. In a job-order costing system, direct materials
costs and direct labor costs are usually “traced” directly to jobs. Overhead is applied to
jobs using a predetermined rate. Actual overhead costs are not traced to jobs.
Examples of industries in which job-order costing is used include special order
printing, shipbuilding, construction, hospitals, professional services such as law firms,
and movie studios.
1. Job Cost Sheet. Each job has its own job cost sheet on which costs are charged to the
job. The job cost sheet will have some code or descriptive data to identify the particular
job and will contain spaces to record costs of materials, labor, and overhead. Slide 9
provides an illustration of a job cost sheet.
2. Materials Costs. When a job is started, materials that will be required to complete the
job are withdrawn from the storeroom. The document that authorizes these withdrawals
and that specifies the types and amounts of materials withdrawn is called the materials
requisition form. The materials requisition form identifies the job to which the
materials are to be charged. Care must be taken when charging materials to distinguish
between direct and indirect materials. An example of a materials requisition form is
shown in Slide 11.
3. Labor. Labor costs are recorded on a document called a time ticket or a time sheet.
Each employee records the amount of time he or she spends on each job and each task
on a time ticket. The time spent on a particular job is considered direct labor and its cost
is “traced” to that job. The cost of time spent on other tasks, not traceable to any
particular job, is usually considered part of manufacturing overhead. An example of an
employee time ticket is shown in Slide 15 in the text.
b. At any rate, the actual amount of the allocation base incurred by a job is recorded on
the job cost sheet. The actual amount of the allocation base is then multiplied by the
predetermined overhead rate to determine the amount of overhead that is applied to
the job.
REMEMBER!!!! that job costs consist of actual direct materials costs, actual direct labor
costs, but applied overhead costs.
1. Overview of Cost Flows. The basic flow of costs in a job-order system begins by
recording the costs of material, labor, and manufacturing overhead.
a. Direct material and direct labor costs are debited to the Work In Process account.
Any indirect material or indirect labor costs are debited to the Manufacturing
Overhead control account, along with any other actual manufacturing overhead
costs incurred during the period.
For example, suppose direct labour-hours used as the allocation base and that the
estimated total manufacturing overhead cost for next year is RM400,000 and the
estimated total number of direct labour-hours is 10,000. Then the predetermined
overhead rate would be:
For example, supposed that a particular job incurs 20 direct labor hours and the
predetermined overhead rate (POR) is RM40 per direct labour-hours. Then RM800
of overhead cost would be applied to that job.
b. The cost of finished units is credited to Worki Process and debited to the Finished
Goods inventory account.
Dr. Finished goods xxx
Cr. Work in Process xxx
c. When units are sold, their costs are credited to Finished Goods and debited to Cost
of Goods Sold.
Dr. Cost of Goods Sold xxx
Cr. Finished goods xxx
a. As stated above, actual overhead costs are recorded on the debit side of the
Manufacturing Overhead control account. Overhead costs applied to Work in
Process using predetermined rates are recorded on the credit side of the account.
b. Any discrepancy between overhead costs incurred and overhead costs applied
shows up as a balance in the Manufacturing Overhead control account at the end of
the period. A debit balance is called underapplied overhead and a credit balance is
called overapplied overhead.
An underapplied balance occurs when more overhead cost is actually incurred than is
applied to the Work In Process account. (Actual overhead > applied overhead)
An overapplied balance results from applying more overhead to Work In Process than is
actually incurred. (Actual overhead < applied overhead)
a. The simplest approach is to close out the under- or overapplied overhead to Cost of
Goods Sold. This is the method that is used in most of the exercises and problems
because it is easiest for students to understand and master.
If overhead has been underapplied:
Dr. cost of goods Sold xxx
Cr. Manufacturing overhead xxx
a. If overhead is underapplied, less overhead has been applied to inventory than has
actually been incurred. Enough overhead must be applied retroactively to Cost of
Goods Sold (and perhaps ending inventories) to eliminate this discrepancy. Since
Cost of Goods Sold is increased, underapplied overhead reduces net income.
b. If overhead is overapplied, more overhead has been applied to inventory than has
actually been incurred. Enough overhead must be removed retroactively from Cost
of Goods Sold (and perhaps ending inventories) to eliminate this discrepancy. Since
Cost of Goods Sold is decreased, overapplied overhead increases net operating
income.
EXAMPLES
The Mentari Enterprise estimated its factory overhead for the next period at RM160,000. It is
estimated that 40,000 units will be produced at a material costs of RM200,000. Production
will require 40,000 man hours at an estimated wage cost of RM80,000. The machine will
run about 25,000 hours.
Calculate the predetermined overhead rate using the following bases:
(a) Units produced
(b) Direct labor cost
(c) Direct material cost
(d) Machine hours
Answers:
(a) Units produced = RM160,000/40,000 units
= RM4/unit
Bazli Company uses a job-order cost system and applies overhead with a predetermined
overhead rate based on direct labor-hours. At the beginning of the year, the estimated total
manufacturing overhead for the year was RM150,000 and the estimated level of activity was
100,000 direct labor-hours. At the end of the year, cost records revealed that actual costs of
RM160,000 had been incurred and that 105,000 direct labor-hours had been worked.
Answers:
a. POR = RM150,000/100,000 DLHs
= RM1.50 per DLH
Disposition of Under- and Overapplied Overhead to Cost of Goods Sold and to the
Work In Process and Finished Goods inventory accounts.
If the company allocates the underapplied overhead among Cost of Goods Sold and to the
Work in Process and Finished Goods, calculate the amounts of allocation for each.