Job Order Cost System Module 5 ACG 2071 Created by M. Mari Fall 2007-1.
-
Upload
allan-cameron -
Category
Documents
-
view
215 -
download
1
Transcript of Job Order Cost System Module 5 ACG 2071 Created by M. Mari Fall 2007-1.
Cost Accounting Systems Job order cost
Provides separate record of the cost of each quantity of the product that passes through the factory
Process cost system Costs are accumulated
for each of the department or processes within the factory
Job Order Accounting A major aim is to determine the cost of
producing each job or job lot. Job sheet
Is a separate record maintained for each job While a job is being manufactured, its
accumulated costs are kept in Goods in Process Inventory
When job is finished , costs are transferred to Finished Goods Inventory
Example Purchased $8,000
worth of materials for use in production on account
Date
Account PR Debit Credit
Raw materials inventory $8,000
Accounts payable $8,000
Requisition of Materials
Date Account Debit Credit
Work in process Total direct materials used
Factory overhead Total indirect materials used
Materials inventory Total materials used
Example 2 Material usage is shown below, record the
material used
Job # Materials
125 $4,500
126 $4,250
127 $4,000
128 $3,500
129 $3,000
Indirect $2,000
TOTAL $21,250
Example 2Date
Account Debit Credit
Work in process $19,250
Factory overhead 2,000
Raw materials inventory $21,250
Factory LaborDate Account PR Debit Credit
Good in process Direct labor
Factory overhead Indirect labor
Wages payable Total labor costs
Example 3
Job # Labor Direct labor hours
125 $5,000 200
126 $4,900 175
127 $4,500 150
128 $4,000 125
129 $3,500 100
Indirect $1,500
TOTAL $23,400 830
To the right, you will find a distribution of labor costs between jobs. Please record the labor used.
Example 3Date Account Debit Credit
Work in process $21,900
Factory overhead 1,500
Wages payable $23,400
Factory Overhead CostsDate Account PR Debit Credit
Factory overhead Total actual overhead costs
Various accounts Total actual overhead costs
Allocating Factory Overhead Cost allocation – the process of assigning factory
overhead costs to a cost object Activity Base – measure used to allocate factory
overhead
Predetermined factory overhead rate =Predetermined factory overhead rate =
Estimated total factory overhead costsEstimated total factory overhead costs Estimated Activity BaseEstimated Activity Base
Examples Example 4: The corporation estimates FO at $500,000
for the next period. The corporation uses direct labor hours as its activity base and estimates 50,000 total direct labor hours
Predetermined rate = Estimated FO CostsEstimated activity base
= $500,000 50,000 DLH
= $10 per direct labor hourSo factory overhead is applied at rate of $10 for each
hour of direct labor charged to the job.
Examples Factory overhead costs are $500,000 for the next
period. Factory overhead is determined as a percentage of direct labor costs. If direct labor costs is $750,000, what is the factory overhead rate?
Predetermined rate = Est. Factory overheadEst. Activity Base
= $500,000$750,000
= 67%Factory overhead is applied at a rate of 67% of direct labor
costs. For each dollar of direct labor charged to the job, 67 cents is charged to factory overhead.
Applying Factory Overhead The factory overhead
account is applied based on the predetermined rate.
Date Account PR Debit Credit
Work in process Total factory overhead applied
Factory overhead
Total factory overhead applied
Example 6
Job # Mtrls Labor DL hr FO
125 4500 5000 230
126 4250 4900 175
127 4000 4500 150
128 3500 4000 125
129 3000 3500 100
Indirect 2000 1500
Totals 21250 23400 780
Below is the manufacturing information for Bunny. Factory overhead rate is $50 per direct labor hour. Record the application of factory overhead to the jobs listed below.
Example 6Job # DLhr FO
125 230 230 X $50 per direct labor hour = $11,500
126 175 175 x $50 = $8,750
127 150 150 x $50 = $7,500
128 125 125 x $50 = $6,250
129 100 100 x $50 = $5,000
Indirect
Totals 780 $39,000$39,000
Example 7 Taxon Corporation applies factory overhead at the
rate of 75% of direct labor costs. Record the application using the following information:
Job #
Labor Factory
125 $5000 $5,000 x 75% = $3,750
126 $4900 $4,900 X 75% = $3,675
127 $4500 $4,500 X 75% = $3,375
128 $4000 $4,000 X 75% = $3,000
129 $1500 $1,500 X 75% = $1,125
TOTAL $14,925$14,925
Factory Overhead
Debit Credit
Factory Overhead AccountFactory Overhead Account
Actual factory overhead costs greater than estimated and applied factory overhead costs
Actual factory overhead costs less than estimated and applied factory overhead costs
Disposal of Factory Overhead
Since Factory overhead is an EXPENSE account, it must be closed at the end of the period.
The balance of the account is closed into COST OF GOODS SOLD
Date Account PR
Debit Credit
Cost of Goods Sold Debit if underapplied by the balance in the account
Credit if overapplied by the balance in the account
Factory overhead
Debit if overapplied by the balance in the account
Credit if underapplied by the balance in the account
Example Example 7: The balance in the factory
overhead account is $50,000, the corporation applies $60,000 to work in process. Record the disposal of the balance.
The factory overhead account has a credit balance of $10,000 after the entry to apply factory overhead to work in process.
Example
Date Account Debit Credit
Factory overhead $10,000
Cost of goods sold $10,000
Factory overhead
Debit
$50,000
Actual factory overhead costs
Credit
$60,000
Factory overhead costs applied
$10,000 balance
Over-applied factory overhead
Example Example 7: The balance in the factory
overhead account is $100,000, the corporation applies $95,000 to work in process. Record the disposal of the balance.
The factory overhead account has a debit balance of $5,000 after the entry to apply factory overhead to work in process.
Example
Date Account Debit Credit
Cost of goods sold $5,000
Factory overhead $5,000
Factory overhead
Debit
$100,000
Actual factory overhead costs
Credit
$95,000
Factory overhead costs applied
$5,000 balanceUnder-applied factory overhead
Transfer of Finished GoodsDate Account Debit Credit
Finished goods Total manufacturing costs
Work in process Total manufacturing costs
Example 9:
Job Mtrl Labor FO Total
125 $4500 $5000 $6900 $16400
126 $4250 $4900 $5250 $14400
127 $000 $4500 $4500 $13000
Total $43,800
Suppose that jobs 125, 126, and 127 are completed. Record their transfer to finished goods inventory.
Transfer to Finished GoodsDat
eAccount PR Debit Credit
Finished goods inventory $43,800
Goods in process $43,800
The jobs are kept in Finished Goods Inventory until they are sold to the customer. Then they are transferred to Cost of Goods Sold
Transferred to COGS Date Account PR Debit Credit
Cost of goods sold Total cost
Finished goods Total costs