Chapter-5-summary-managerial-accounting-11e
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ACCOUNTING 240
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Nov 20, 2023
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Chapter 5 - Summary - Managerial Accounting 11e
Introductory Management Accounting (Kwantlen Polytechnic University)
Studocu is not sponsored or endorsed by any college or university
Chapter 5 - Summary - Managerial Accounting 11e
Introductory Management Accounting (Kwantlen Polytechnic University)
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Chapter 5 SYSTEMS DESIGN: JOB-ORDER COSTING
I.
Job-Order and Process Costng (Distnguish btw process costng and job-order costng,
and identfy the producton or service processes that ft with each costng method)
1.
Process Costng
A Process costng system - used in those manufacturing situatons where a single,
homogeneous product (i.e. cement or oil) fows in a contnuous stream out of the
producton process.
2.
Job-Order Costng - used in situatons where many diferent products, jobs, or services
are produced each period. In a job-order costng system, costs are traced and allocated
to jobs, and then the costs of the job are divided by the number of units in the job to
arrive at an average cost per unit.
II.
Job-Order Costng-An Overview (Recognize the fow of costs through a job-order costng
system.
1.
Measuring Direct Materials Cost
Bill of material is a record that lists the type and quantty of each item of the
materials needed to complete a unit of product.
A producton order is used when an agreement has been reached with the
customer concerning the quanttes, prices, and shipment date for the order.
Then prepares a materials requisiton form - is a document that (1) specifes the
type and quantty of materials to be drawn from the storeroom and (2) identfes
the job to which the costs of the materials are to be changed.
Clarifying the terms direct materials and raw materials.
2.
Job Cost Sheet - a form prepared for each separate job that records the materials,
labour, and overhead costs charged to the job.
3.
Measuring Direct labour Cost
Direct labour consists of labour charges that are easily traced to a partcular job.
Labour charges that cannot be easily traced directly to any job are treated as part
of manufacturing overhead.
Indirect labour - i.e. maintenance, supervision, and cleanup.
Time tcket - a detailed source document that is used to record an employee's
hour-by hour actvites during a day
III.
Computng Predetermined overhead Rates (Compute predetermined overhead rates,
and explain why estmated overhead costs (rather than actual overhead costs) are used
in the costng process.)
An allocaton base - a measure used to assign overhead costs to products and
services. i.e. Direct labour hours(DLH) or machine-hours (MH).
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Manufacturing overhead is commonly applied to products using a predetermined
overhead rate. the predetermined overhead rate is based on estmated rather
than actual results.
The process of assigning overhead cost to jobs is called overhead applicaton.
1.
Using the Predetermined Overhead Rate - this is not the actual amount of overhead
caused by the job. There is non atempt to trace actual overhead costs to jobs - if that
could be done, the costs would be direct costs, not overhead.
2.
The need for a Predetermined Rate
3.
Choice of an Allocaton Base for overhead cost - the allocaton base used in the
predetermined overhead rate should drive the overhead cost.
A cost driver is a factor
that causes overhead costs, such as machine0-hours, beds occupied, computer tme,
or fight-hours.
4.
Computaton of Unit Costs
Step 1: the totals for direct materials, direct labour, and manufacturing overhead are
transferred to the Cost Summary secton of the job cost sheet and added together to
obtain the total cost for the job.
Step 2: the total cost is divided by the number of units to obtain the unit cost.
5.
Summary of Document Flows
IV.
Job-Order Costng-the Flow of Costs (Record the journal entries that refect the fow of
costs in a job-order costng system)
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1.
The purchase and Issue of Materials
issue of direct and indirect materials
Issue oof direct materials only
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V.
The Applicaton of Manufacturing Overhead (Apply overhead cost to work in process
using a predetermined overhead rate.)
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1.
The Concept of a Clearing Account (Dr. Work in process Cr. Manufacturing overhead)
The clearing account concept actually represents a general ledger control account for
a subsidiary ledger that contains the detailed informaton on each type of overhead
cost.
2.
Non-manufacturing Costs (should not go into the manufacturing overhead account.)
i.e. Salaries, Depreciaton, Advertsing, other Selling and Administratve Expense
VI.
Cost of Goods Manufactured (Prepare schedules of cost of goods manufactured and cost
of goods sold.)
1.
COGm - The costs of the completed job are transferred out of the WIP account and
into the Finished Goods account. The sum of all amounts transferred btw these tow
accounts represent s the cost of goods manufactured for the period.
2.
COGs - as units in fnished goods are shipped to customers, their cost is transferred
from the Finished Goods account into the COGs account.
3.
Summary of Cost Flows
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VII.
Complicatons of Overhead Applicaton (Compute underapplied or overapplied overhead
cost, and prepare the journal entry to close the balance in manufacturing overhead to
the appropriate accounts.)
1.
Underapplied and Overapplied Overhead
Underapplied overhead - A debit balance in the Manufacturing Overhead
account that arises when the account of overhead cost actually incurred is
greater than the amount of overhead cost applied to WIP during a period.
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Overapplied overhead - A credit balance in the Manufacturing Overhead account
that arises when the amount of overhead cost applied to WIP is greater than the
amount of overhead cost actually incurred during a period.
E.g.
2.
Dispositon of Underapplied or overapplied Overhead Balances
If overhead was underapplied, the remaining balance is closed out to COGs.
If overhead was overapplied, the remaining balance is allocated among WIP,
Finished Goods, and COGs in proporton to the overhead applied during the
current period in the ending balances of these accounts.
Close out Underapplied Overhead to COGs
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Allocate Overapplied Overhead among Accounts
Summary of Overhead Concepts
3.
A general model of Product Cost Flows
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4.
Variatons from the General model of Product Cost Flow
E.g. a system variaton known as backfush costng can permit labour charges to be
made directly to manufacturing overhead. Then overhead is applied to the cost of
completed jobs along with raw materials, so that the need to keep work in process
records can be avoided.
5.
Multple Predetermined Overhead Rates
A single predetermined overhead rate for an entre factory - a plantwide
overhead rate
Multple predetermined overhead rate - usually used in larger companies,
diferent rate for each producton
VIII.
Job-Order Costng in Service Companies
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