Вы находитесь на странице: 1из 35

COST ACCOUNTING NORMAL JOB COSTING

Presented By : Umut Korkuter & Sina Bakhshalian

Types of Costing Systems


Job Costing System the cost object is a unit or multiple units of a distinct product or service called a job. Process Costing System the cost object is masses of identical or similar units of a product or service.

Job Costing System

Actual Costing

Traces direct costs to a cost object by using the actual direct cost-rates times the actual quantities of the direct-cost inputs. Traces direct costs to a cost object by using the actual directcost rates times the actual quantities of the direct cost-inputs and that allocates indirect cost based on the budgeted indirect-cost rates times the actual quantities of the costallocation bases.

Normal Costing

Normal Job Costing

Job Costing System


Actual Costing Direct Costs Actual Direct Cost Rates x Actual Quantities of Direct Cost Inputs Actual Indirect Cost Rates x Actual Quantities of Cost Allocation Bases Normal costing Actual Direct Cost Rates x Actual Quantities of Direct Cost Inputs Budgeted Indirect Cost Rates x Actual Quantities of Cost Allocation Bases

Indirect Costs

General Approach To Normal Job Costing


Step1

: Identify the Job That is Chosen Cost Object Step 2 : Identify the Direct Cost of the Object Step 3 : Select the Cost-Allocation Bases To Use For Allocating Indirect Costs to the Job Step 4 : identify the Indirect Costs Associated with Each Cost-Allocation Base

General Approach To Normal Job Costing


Step5

: Compute the Rate per Unit of Each CostAllocation Base Used to Allocate Indirect Costs to the Job Step 6 : Compute the indirect costs Allocated To The Job Step 7 : Compute the Total Cost of the job by Adding All Direct and Indirect Costs Assigned To The Job

Time period Used To Compute Indirect Cost Rates


There are two reasons for using longer periods, such as year, to calculate indirect cost rates. 1. The numerator reason(indirect-cost pool) : The shorter the period, the greater the influence of seasonal patterns on the amount of costs. 2. The denominator reason(quantity of the cost allocation base) : Some indirect costs may be variable each month with respect to the cost allocation base(for example, supplies).

Budgeted Indirect Costs and End-ofAccounting Year Adjustments


Because of the numerator and denominator reasons, we do not expect actual overhead costs incurred each month to equal overhead costs allocated each month. Underallocated Indirect Costs occur when the allocated amount of indirect costs in an accounting period is less than the actual(incurred) amount. Overallocated Indirect Costs occur when the allocated amount of indirect costs in an accounting period is greater than the actual(incurred) amount.

Budgeted Indirect Costs and End-ofAccounting Year Adjustments (Contd)


There

are three main approaches to accounting for the underallocated or overallocated overhead caused by underestimated or overestimated the quantity of cost allocation base. These are : 1. Adjusted Allocation-Rate Approach 2. Proration Approach 3. Write-off to Cost of Goods Sold Approach

1. Adjusted Allocation-Rate Approach


Restates

all overhead entries in the general ledger and subsidiary ledgers using actual rates rather than budgeted cost rates. Yields the benefits of both the timeliness and convenience of normal costing during the year and the accuracy of actual costing at year-end.

2. Proration Approach
Spreads

underallocated overhead or overallocated overhead among ending work in process, finished goods, and cost of goods sold. Based on ending balances is frequently justified as being an expedient way of approximating the moreaccurate results from using indirect costs allocated.

3. Write-Off to Cost of Goods Sold Approach


The

total under or overallocated overhead is included in this years Cost of Goods Sold.

Example: Allocation of Costs (Direct Method)


SERVICE DEPARTMENTS
Department X, Building and Ground Maintenance
Total Budgeted Costs Allocated To Producing Departments A and B Balance after Allocation Factory Overhead Application Rates (per direct labor hour)

PRODUCING DEPARTMENTS
Department A, Machinery Department B, Assembly

Department Y, General Factory Administration

$10,000 (10,000)

$7,500

$36,500 2,500 (1) 5,250 (3) $44,250

$44,600 7,500 (2) 2,250 (4) $54,350

(7,500) $ 0 $ 0

$24.58 (5)

$57.21 (6)

Allocation of Costs (Direct Method) Contd


Allocation

of Department X, Building and Ground Maintenance :

Square Feet x Rate Per Square Foot


(1)To Department A, Machinery (2)To Department B, Assembly Total

$2,500 (1) 7,500 (2) $10,000

(1,000 (3,000

x $2.50) x 2.50)

Allocation of Costs(Direct Method) Contd


Allocation

of Department Y, General Factory Administration:

Total Labor Hours x Rate Per Total Labor Hours (3)To Department A, Machinery (4)To Department B, Assembly Total

$5,250 (3) 2,250 (4) $7,500

(2,800 (1,200

x $1.875) x 1.875)

Allocation of Costs (Direct Method) Contd


Factory

Overhead Application rate (on the basis of direct labor hours) for producing departments
Total Cost After Allocation / Direct Labor Hours

(5)For Department A, Machinery

$24.58/dlh

(44,250

/ 1,800)

(6)For Department B, Assembly

$57.21/dlh

(54,430

950)

Example: Allocation of Actual Service Department Costs To Producing Departments (Contd)


Total

Actual Costs
$11,000

Service Departments: Department X Building and Ground Maintenance Department Y General Factory Administration Producing Departments : Department A - Machinery Department B - Assembly

7,900

38,400 43,700

Example: Allocation of Actual Service Department Costs To Producing Departments (Contd)


Additional
DEPARTMENT
X Building and Ground Maintenance Y General Factory Administration A Machinery B Assembly Total

Information
ACTUAL DIRECT LABOR HOURS ACTUAL SQUARE FEET ACTUAL TOTAL LABOR HOURS

1,700 1,000 2,700

650 550 1,300 2,600 5,100

1,400 900 3,000 1,500 6,800

Example : Allocation of Actual Service Department Costs To Producing Departments(Contd)


Additional

Information
Factory overhead applied - machinery
$41,786*

Factory overhead control - machinery


$38,400 3,667 5,267 47,334

*24.58/DLH x 1,700 actual DLH

Example: Allocation of Actual Service Department Costs To Producing Departments (Contd)


Additional

Information
Factory overhead applied- assembly $57,210*
*57.21/DLH x 1,000 actual DLH

Factory overhead control - assembly $43,700 7,333 2,633 53,666

Example : Allocation of Actual Service Department Costs To Producing Departments(Contd)


Additional

Information
General Factory administration Cost Control $7,900

Building and Grounds maintenance cost control $11,000

Example : Allocation of Actual Service Department Costs To Producing Departments(Contd)


SERVICE DEPARTMENTS
Department X, Building and Ground Maintenance
Total Actual Costs Allocated To Producing Departments A and B Balance after Allocation

PRODUCING DEPARTMENTS
Department A, Machinery Department B, Assembly

Department Y, General Factory Administration

$11,000 (11,000)

$7,900 (7,900)

$38,400 3,667 (1) 5,267 (3) $47,334

$43,700 7,333 (2) 2,633 (4) $53,666

Example : Allocation of Actual Service Department Costs To Producing Departments (Contd)


Allocation

of Department X, Building and Ground Maintenance :


Square Feet x Rate Per Square Foot

(1)To Department A, Machinery (2)To Department B, Assembly Total

$3,667 (1) 7,333 (2) $11,000

(1,300 (2,600

x $2.82) x 2.82)

Example : Allocation of Actual Service Department Costs To Producing Departments(Contd)


Allocation

of Department Y, General Factory Administration :

Total Labor Hour x Rate Per Total Labor hours


(3)To Department A, Machinery (4)To Department B, Assembly Total

$5,267 (3) 2,633 (4) $7,900

(3,000 (1,500

x $1.75) x 1.75)

Example : Allocation of Actual Service Department Costs To Producing Departments(Contd)


The

Computation of under or overapplied factory overhead as follows:


MACHINERY ASSEMBLY $53,666 $47,334

End of period balance in factory overhead control after allocation End of period balance in factory overhead applied Underapplied factory overhead Overapplied factory overhead

41,786 5,548

57,210

3,544

Example : Allocation of Actual Service Department Costs To Producing Departments(Contd)


The

recording of underapplied factory overhead :

Factory overhead applied machinery.............. 41,786 Underapplied factory overhead machinery... 5,548 Factory overhead control machinery................ 47,334 ($38,400 + $3,667 + $5,267 = $47,334)

Example : Allocation of Actual Service Department Costs To Producing Departments(Contd)


The

recording of overapplied factory overhead :


3,544

Factory overhead applied assembly.............. 57,210 Overapplied factory overhead assembly... Factory overhead control assembly................ 53,666 ($43,700 + $7,333 + $2,633 = $53,666)

Accounting For the Difference Between Applied and Actual Factory Overhead
Assuming

that we have the following information : Units sold.................................................... 1,000


Type A.... 750 & Type B..... 250

Units in finished goods inventory............ 200


Type A.... 150 & Type B..... 50

Units in Work-In process Inventory.........

Accounting For the Difference Between Applied and Actual Factory Overhead(Contd)
Prorating

the underapplied factory overhead cost


DOLLARS PERCENTAG E of TOTAL 62,5% 12,5% PRORATION of $5,548 $3,467.5 693.5

$5,548:
Cost of goods sold (750x $24,58/dlh x 0.9dlh/unit) TA (250x $24,58/dlh x 1.3dlh/unit) TB Finished Goods Inventory (150 x 24,58/dlh x 0.9dlh/unit) TA (50 x 24,58/dlh x 1.3dlh/unit) TB Work-In-Process Inventory (300x 24,58/dlh x 0.9dlh/unit) TA (100x 24,58/dlh x 1.3dlh/unit) TB TOTAL

$24,580 4,916

9,832

25%

1,387

$39,328

100%

$5,548

Accounting For the Difference Between Applied and Actual Factory Overhead(Contd)

After proration of underapplied factory overhead cost $5,548 to machinery department:


BEFORE PRORATION PRORATION of $5,548
$3,467.5

AFTER PRORATION
$28,047.5

Cost of goods sold (750x $24,58/dlh x 0.9dlh/unit) TA (250x $24,58/dlh x 1.3dlh/unit) TB

$24,580

Finished Goods Inventory (150 x 24,58/dlh x 0.9dlh/unit) TA (50 x 24,58/dlh x 1.3dlh/unit) TB


Work-In-Process Inventory (300x 24,58/dlh x 0.9dlh/unit) TA (100x 24,58/dlh x 1.3dlh/unit) TB TOTAL

4,916

693.5

5609.5

9,832

1,387

11,219

$39,328

$5,548

$44,876

Accounting For the Difference Between Applied and Actual Factory Overhead(Contd)
Prorating

the overapplied factory overhead cost


DOLLARS PERCENTAGE of TOTAL 62,5% 12,5% PRORATION of $3,544 $2,215 443

$3,544:
Cost of goods sold (750x $24,58/dlh x 0.9dlh/unit) TA (250x $24,58/dlh x 1.3dlh/unit) TB Finished Goods Inventory (150 x 24,58/dlh x 0.9dlh/unit) TA (50 x 24,58/dlh x 1.3dlh/unit) TB

$24,580 4,916

Work-In-Process Inventory (300x 24,58/dlh x 0.9dlh/unit) TA (100x 24,58/dlh x 1.3dlh/unit) TB

9,832

25%

886

TOTAL

$39,328

100%

$3,544

Accounting For the Difference Between Applied and Actual Factory Overhead(Contd)
So

after proration of overapplied factory overhead cost $3,544 to assembly department:


BEFORE PRORATION PRORATION of $3,544 $2,215 443 AFTER PRORATION $22,365 4,473 $24,580 4,916

Cost of goods sold (750x $24,58/dlh x 0.9dlh/unit) TA (250x $24,58/dlh x 1.3dlh/unit) TB Finished Goods Inventory (150 x 24,58/dlh x 0.9dlh/unit) TA (50 x 24,58/dlh x 1.3dlh/unit) TB

Work-In-Process Inventory (300x 24,58/dlh x 0.9dlh/unit) TA (100x 24,58/dlh x 1.3dlh/unit) TB

9,832

886

8,946

TOTAL

$39,328

$3,544

$35,784

Example : Allocation of Actual Service Department Costs To Producing Departments(Contd)


Additional

Information
Factory overhead applied - machinery $41,786* 5,548** 47,334
* 24.58/DLH x 1,700 actual DLH ** Proration of Underapplied cost

Factory overhead control - machinery


$38,400 3,667 5,267 47,334

Example: Allocation of Actual Service Department Costs To Producing Departments (Contd)


Additional

Information
Factory overhead applied- assembly 3,544** $57,210* 53,666
* 57.21/DLH x 1,000 actual DLH ** Proration of Uverapplied Cost

Factory overhead control - assembly $43,700 7,333 2,633 53,666