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Chapter 20 Part two. Accumulating Manufacturing Cost The subsidiary ledger consists of individual records for each item of raw materials May be accounts.

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Presentation on theme: "Chapter 20 Part two. Accumulating Manufacturing Cost The subsidiary ledger consists of individual records for each item of raw materials May be accounts."— Presentation transcript:

1 Chapter 20 Part two

2 Accumulating Manufacturing Cost The subsidiary ledger consists of individual records for each item of raw materials May be accounts or manually/mechanically prepared cards May be kept as computer data files The records are referred to as materials inventory records or stores ledger cards Raw Materials Costs - Continued LO 2 Explain the flow of costs in a job order cost accounting system.

3 Accumulating Manufacturing Cost Postings are made daily to the subsidiary ledger After all postings, the sum of the balances in the raw materials subsidiary ledger equals the balance in the Raw Materials Inventory control account Raw Materials Costs - Continued LO 2: Explain the flow of costs in a job order cost accounting system.

4 Accumulating Manufacturing Cost Procedures for accumulating factory labor costs similar to those for computing the payroll for a merchandising company Consists of Gross earnings of factory workers Employer payroll taxes on such earnings, and Fringe benefits incurred by the employer Factory Labor Costs LO 2: Explain the flow of costs in a job order cost accounting system.

5 Accumulating Manufacturing Cost Factory Labor Costs - Continued LO 2: Explain the flow of costs in a job order cost accounting systems. Debited to Factory Labor when incurred Example: Wallace Manufacturing incurs $32,000 of factory labor costs, of which $27,000 relates to wages payable and $5,000 relates to payroll taxes payable in January.

6 Accumulating Manufacturing Cost Many types of overhead costs For example, machinery repairs, indirect materials, and indirect labor Debit to Manufacturing Overhead Daily as incurred or Periodically through adjusting entries Manufacturing overhead is a control account Subsidiary ledger consists of individual accounts for each type of cost Manufacturing Overhead Costs LO 2 Explain the flow of costs in a job order cost accounting system.

7 Accumulating Manufacturing Cost Example: The following is a summary entry to record the totals from multiple transactions that occurred during January for the Wallace Manufacturing Company. Manufacturing Overhead Costs - Continued LO 2 Explain the flow of costs in a job order cost accounting system.

8 When incurred, factory labor costs are debited to: a.Work in Process a.Work in Process. b. Factory Wages Expense. c. Factory Labor. d. Factory Wages Payable. Review Question Accumulating Manufacturing Costs LO 2 Explain the flow of costs in a job order cost accounting system.

9 Assigning Manufacturing Costs to Work In Process Manufacturing costs are assigned to Work in Process with Debits toWork in Process Inventory Credits toRaw Materials Inventory Factory Labor Manufacturing Overhead Entries assigning costs to Work in Process are usually made monthly An essential accounting record in assigning costs to jobs is a job cost sheet LO 3 Explain the nature and importance of a job cost sheet.

10 Assigning Manufacturing Costs to Work In Process Job cost sheet Used to record costs of a specific job Used to determine the total and unit costs of a completed job Postings to job cost sheets are made daily Each entry to a Work in Process Inventory must be accompanied by a corresponding posting to one or more job cost sheets. LO 3 Explain the nature and importance of a job cost sheet.

11 Assigning Manufacturing Costs to Work In Process A Typical Job Cost Sheet LO 3 Explain the nature and importance of a job cost sheet.

12 Assigning Manufacturing Costs to Work In Process Assigning Raw Materials Cost Assigned to a job when materials are issued A materials requisition slip Written authorization for issuing raw materials May be directly issued to use on a job - direct materials, May be considered indirect materials – part of manufacturing overhead LO 3 Explain the nature and importance of a job cost sheet.

13 Assigning Manufacturing Costs to Work In Process Materials Requisition Slip LO 3 Explain the nature and importance of a job cost sheet.

14 Assigning Manufacturing Costs to Work In Process Assigning Raw Materials Cost Requisition is prepared in duplicate One copy stays in the storeroom as evidence of materials released The original goes to accounting to determine the cost per unit and total cost of materials used Posted daily to individual job cost sheets and periodically journalized LO 3 Explain the nature and importance of a job cost sheet. Example: Assume that $24,000 of direct materials and $6,000 of indirect materials are used by Wallace Company in January.

15 Assigning Manufacturing Costs to Work In Process LO 3 Explain the nature and importance of a job cost sheet. Assigning Raw Materials Cost The sum of the direct materials columns of the job cost sheets should equal the direct materials debited to Work in Process Inventory

16 Assigning Manufacturing Costs to Work In Process Assigning Factory Labor Cost Assigned to jobs on the basis of time tickets Time tickets are prepared when the work is performed Time tickets indicate Employee Hours worked Account and job charged Total labor cost LO 3 Explain the nature and importance of a job cost sheet.

17 Assigning Manufacturing Costs to Work In Process Time Ticket LO 3 Explain the nature and importance of a job cost sheet.

18 Assigning Manufacturing Costs to Work In Process Assigning Factory Labor Time tickets are sent to payroll to be sorted, totaled, and journalized Work in Process is debited for direct labor costs Manufacturing overhead is debited for indirect labor costs Factory labor is left with a zero balance LO 3 Explain the nature and importance of a job cost sheet. Example: Assume that total factory labor cost is $32,000 of total factory labor cost which consists of $28,000 of direct labor cost and $4,000 of indirect labor cost.

19 Assigning Manufacturing Costs to Work In Process LO 3 Explain the nature and importance of a job cost sheet. Job Cost Sheets After Posting The sum of the direct labor columns of the job cost sheets should equal the direct labor debited to Work in Process Inventory.

20 The source documents for assigning material and factory labor costs to job cost sheets are: a.Invoices and time tickets a.Invoices and time tickets. b. Invoices and payroll register. c. Materials requisition slips and payroll register. d. Materials requisition slips and time tickets. Review Question Assigning Manufacturing Costs to Work in Process LO 3 Explain the nature and importance of a job cost sheet.


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