By:Mailisa Putri 1010532076

Leonie Aloysyania 1110532013

• Explain how hybrid costing systems develop in relation to production systems

• Develop an understanding for an operation costing systems

• Prepare journal entries for an operation costing systems

• Described a Just-In-Time production systems• Identify the major features of a Just-In-Time

production systems• Explain how Just-In-Time systems simplify job costing• Described Journal entries for Backflush Costing

systems

Hybrid costing employs some aspectsof both job-order and process costing.

Job-order Costing Hybrid Costing Process Costing (Products produced in batches)

Distinct, identifiable unit of

a product or service

Masses of similar product units or

service units

Overview of Operation Costing An Illustration of Operation Costing

An operation is a standardized method or technique that is perform repetitively regardless of the distinguishing features of the finished goods.

Operation costing is hybrid costing system applied to batches of similar products. Each batch of products is often a variation of a single design and proceed through a sequence of selected (though not necessarily the same) activities or operations.

Work Order 423

Work Order 424

Direct Materials Wool PolyesterSatin full lining

Rayon partial lining

Bone buttons

Plastics buttons

Operation:1 Cutting cloth use use2 Checking edges use do not use3 Sewing body use use4 Checking seams use do not use5 Machine sewing of collars and lapels

Do not use use

6 Hand sewing of collars and lapels use do not use

Work Order 423 Work Order 424Number of blazers 50 100Direct material costs $6000 $3000Conversion cost allocated:Operation 1 580 1160Operation 2 400 -Operation 3 1900 3800Operation 4 500 -Operation 5 - 875Operation 6 700 -Total Manufacturing Cost

$10080 $8835For example;

Operation 1 Budgeted conversion cost rate = Operation 1 budgeted conversion cost/ operation 1 budgeted product units

= $232,000/20,000 units = $11.60 per units

1. Conversion cost $24,400Various accounts(such us wages payable and

accumulated depreciation) $24,4002. WIP, Operation 1 $2,975

Materials inventory control $2,9753. WIP, Operation 1 $1,160

Conversion costs allocated $1,1604. WIP, Operation 3 $4,135

WIP, Operation 1 $4,135

2. Direct Materials $2,9753. Conversion cost allocated $1,160

4. Transferred to Operation 3 $4,135

Work In Process, Operation 1

JIT Production is a systems in which each component on a production line is produced immediately as needed by the next step in the production line. In JIT production line, manufacturing activity at any particular workstation is prompted by the need for that stations output at the following station.

• Production is organized in manufacturing cells, a grouping of all the difference types of equipment used to manufacture a given product

• Workers are trained to be multiskilled so that they are capable of performing a variety of operations and tasks

• Total Quality Management is aggressively pursuade to eliminated defects.

• Emphasis is placed on reducing set up time, which is the time require to get equipment, tools, and materials ready to start the production of a component or product, and manufacturing lead time, which is the time from when an order is ready to start on the production line to when it becomes a finished good.

• Suppliers are carefully selected to obtained delivery of quality-tested parts in a timely manner

• Lower investment in inventories• Reduction in carrying and handling cost of

inventories• Reduction in risk of obsolescence of inventories• Lower investment in plant spaced for

inventories and production• Reduction in set up cost and total

manufacturing cost• Reduction in cost of waste and spoilage as a

result of improved quality• Higher revenues as a result of responding

faster to the customer• Reduction in paper work

In reducing the need for materials handling, warehousing, inspection of supplies, and other activities, JIT systems reduce overhead costs. JIT systems also facilitated the direct tracing of some costs that were formerly classified as over head. For example, the use of manufacturing cells make it easy to traced materials handling and machine operating costs to specifics product or product families made in specific cells. These costs than become direct costs of those product. Also, the use of multiskilled workers in these cells allows the costs of set up, minor maintenance, and quality inspection to become easily traced, direct costs.

An alternative to the sequential tracking approach in many costing systems is to delay the recording of journal entries until after the physical sequences have occured.

Backflush costing (also called delayed costing, end point costing, or post deduct costing) describeds a costing systems that delays recording changes in the status of a product being produced until good finished units appear, it then uses budgeted or standard costs to work backward to flush out manufacturing costs for the units produced.

In companies that adopt backflush costing, the following occurs:Management wants a simple accounting systems. Detailed tracking of direct costs through each step of the production systems to the point of completion is deemed unnecessaryEach product has a set of budgeted or standard costsBackflush costing reports approximately the same financial results as sequential tracking would generate