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Managerial Accounting Second Edition Weygandt / Kieso / Kimmel

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Presentation on theme: "Managerial Accounting Second Edition Weygandt / Kieso / Kimmel"— Presentation transcript:

1 Managerial Accounting Second Edition Weygandt / Kieso / Kimmel
Prepared by: Ellen L. Sweatt Georgia Perimeter College ELS

2 Job Order Cost Accounting

3 Cost Accounting An area of accounting that involves: Measuring Recording Reporting PRODUCT COSTS

4 Why Do We Need Product Costs?
To determine: Which products to produce? What price to charge? What amounts to produce? What evaluation to give employees?

5 Cost Accounting System
Manufacturing cost accounts that are fully integrated into the general ledger of the company. Perpetual inventory system used to provide, immediate up-to-date information on cost of product.

6 Two Cost Accounting Systems
Job Order Cost System Process Cost System

7 Job Order System A cost accounting system where costs are assigned to each job or batch of goods. Custom built factory Production of movie Batch of menus Audit engagement

8 Job Order Cost System Two Jobs: Wedding Invitations and Menus $ $ $
Illustration 2-1 Job Order Cost System Two Jobs: Wedding Invitations and Menus Job #9501 Black ink $ Typesetting $ 225 Invitations $ 225 Envelopes $ Vellum stock $ $ Colored Ink $ Job #9502 Typesetting Yellow Stock Yellow stock Lamination$ 50 Copies $ $ Each job has distinguishing characteristics and related costs.

9 Process Cost System A system of accounting used by companies that manufacture Relatively homogeneous (same or similar) products Through a series of continuous processes or operations.

10 Compact Disc Production
Illustration 2-2 Process Cost System Compact Disc Production 1. Oil is pumped. 2. Benzene is removed. 3. The benzene is made into pellets... 4. ...from which compact discs are made. Relatively similar products are produced over a specified time period.

11 Illustration 2-3 Job Order Cost Flow

12 Job Order Cost Accounting
Illustration 2-4 Job Order Cost Accounting

13 Two Major Steps in Flows of Costs
Accumulating the manufacturing costs incurred Raw materials inventory Factory Labor Manufacturing Overhead Assigning the accumulated costs to the work done

14 Material Inventory Record
Illustration 2-5 Each individual item of raw materials has a card or record. The sum of the balances of all these records should equal raw materials in the general ledger.

15 Summary Entry A journal entry that summarizes the total from multiple transactions.

16 Accumulating Manufacturing Costs
Date Account Titles and Explanation Debit Credit (3) Jan. 31 Manufacturing Overhead Utilities Payable Prepaid Insurance Accounts Payable - for repairs Accumulated Depreciation Property Taxes Payable (To record overhead costs) 13,800 4,800 2,000 2,600 3,000 1,400 (2) Factory Labor Factory Wages Payable Employer Payroll Taxes Payable (To record factory labor costs) 32,000 27,000 5,000 (1) Jan. 4 Raw Materials Inventory Accounts Payable (Purchase of raw materials on account) 42,000

17 Illustration 2-6 Job Cost Sheet A form used to record the costs chargeable to a job to determine: the total and unit cost of the completed job.

18 Materials Requisition Slip
Illustration 2-7 Materials Requisition Slip A document authorizing the issuance of raw materials from the store to production. Wallace Manufacturing Company Materials Requisition Slip Deliver to: Assembly Department Req. No. R247 Charge to: Work in Process – Job No. 101 Date 1/6/96 Quantity Description Stock No. Cost Per Unit Total 200 Handles AA2746 $5.00 $1,000 Requested by: Received by: Approved by: Costed by:

19 Job Cost Sheets – Direct Materials
Illustration 2-8 Job Cost Sheets – Direct Materials

20 Illustration 2-10 Time Ticket A document that indicates the employee, the hours worked, the account and the job to be charged, and the total labor cost. Bob Kadler M.Cher

21 Job Cost Sheets – Direct Labor
Illustration 2-11 Job Cost Sheets – Direct Labor

22 Predetermined Overhead Rate
Illustration 2-12 Predetermined Overhead Rate A rate based on the relationship between estimated annual overhead costs and expected annual operating activity, expressed in terms of a common activity base. Estimated Annual Overhead Costs Expected Annual Operating Activity ÷ = Predetermined Overhead Rate

23 Using Predetermined Overhead Rate
Illustration 2-13 Using Predetermined Overhead Rate X Activity Base Predetermined Overhead Rate is assigned to Work in Process Job 1 Job 2 Job 3

24 Job Cost Sheets – Manufacturing Overhead Applied
Illustration 2-14 Job Cost Sheets – Manufacturing Overhead Applied

25 Assigning Manufacturing Costs
Date Account Titles and Explanation Debit Credit (4) Jan. 31 Work in Process Inventory Manufacturing Overhead Raw Materials Inventory (To assign materials to jobs and overhead) 24,000 6,000 30,000 (5) Factory Labor (To assign labor to jobs and overhead) 28,000 4,000 32,000 (6) (To assign overhead to jobs) 22,400

26 Jobs Completed and Sold
Date Account Titles and Explanation Debit Credit (1) Jan. 31 Accounts Receivable Sales Cost of Goods Sold To record cost of Job 101A 24,000 18,000 Finished Goods Inventory To record sale of Job 101A

27 Job Order Cost Accounting
Illustration 2-18 Job Order Cost Accounting Flow of Costs Key to Entries: 7 5 8 4 6

28 Underapplied Overhead
A situation in which overhead assigned to work in process is less than the overhead incurred.

29 Overapplied Overhead A situation in which overhead assigned to work in process is greater than the overhead incurred.

30 Under- or Overapplied Manufacturing Overhead
Year-End Balance- adjust to Cost of Goods Sold Date Account Titles and Explanation Debit Credit (5) Dec. 31 Manufacturing Overhead 2,500 2,500 Cost of Goods Sold (To transfer overapplied overhead to cost of goods sold)

31 Copyright © 2001 John Wiley & Sons, Inc. All rights reserved
Copyright © 2001 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that named in Section 117 of the United States Copyright Act without the express written consent of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.


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