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Management Accounting for Business Dr. Mohamed A. Hamada Lecturer of Accounting Information Systems 1-1 Practical Cases on Job-order costing systems.

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Presentation on theme: "Management Accounting for Business Dr. Mohamed A. Hamada Lecturer of Accounting Information Systems 1-1 Practical Cases on Job-order costing systems."— Presentation transcript:

1 Management Accounting for Business Dr. Mohamed A. Hamada Lecturer of Accounting Information Systems 1-1 Practical Cases on Job-order costing systems

2 ABX Company uses a normal job-order costing system. The company has two departments through which most jobs pass. Selected budgeted and actual data for the past year as follow:

3 During the year, several jobs were completed. Data pertaining to one such job, Job #10, follow:

4 ABX Company uses predetermined overhead rate to assign overhead to jobs. Direct labor hours (DLH) are used to compute the predetermined overhead rate. Required 1. Compute the predetermined overhead rate. POHR 2. Using the predetermined rate, compute the per-unit manufacturing cost for Job # Recalculate the unit manufacturing cost for Job #10 using departmental overhead rates. Use direct labor hours for Department A and machine hours for Department B.

5 Solution The predetermined overhead rate Budgeted overhead = A B = $

6 2- compute the per-unit manufacturing cost for Job #10. *Direct labor = 5000 DLH *6$ (DEP. A ) DLH * 6$ (Dep. B) Overhead = Rate (10$ ) * DLH ( )= $

7 3-Recalculate the unit manufacturing cost for Job #10 POHR (A) =. The predetermined rate for Department A is $100,000/50,000 = $2 per DLH. 50,000 Expected direct labor hours for A Use direct labor hours for Department A and machine hours for Department B

8 POHR (B) = The predetermined rate for Department B is $500,000/50,000 = $10 per MHr. - 50,000 Expected machine hours for B

9 cost for Job #10 Overhead Dep. A = Rate 2 * 5000 DLH for A Dep. B = Rate 10 * 1200 DMH for B *Direct labor = 5000 DLH *6$ (DEP. A ) DLH * 6$ (Dep. B)

10 Case 2 AZ, Inc., designs and builds projects for individual customers. On August 1, there were two jobs in process: Job #614 with a beginning balance of $10,200; and Job 615 with a beginning balance of $9,670. AZ applies overhead at the rate of 60 percent of direct labor cost. During August, Jobs #616 and #617 were started. Data on August costs for all jobs are as follows:

11 Required 1. Prepare job-order cost sheets for each job as of the end of August

12 Solution


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