C11_ProductCosting - Chapters 11 12 We are in the...

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Chapters 11 & 12 We are in the homestretch…
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Chapters 11 & 12 Intent of these chapters: 1. Provide a ‘big picture’ look at many of the concepts we’ve seen throughout the semester. 2. In this case, big picture means ‘looking at company-wide financial records’. We will look at company-wide financial records, but first, we will cover the ‘new’ topics from chapter 11.
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Sort of New Topic #1 The Manufacturing Overhead Account (often called the ‘Overhead Control’ account) What does it do?
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From Chapter 4… Predetermined Overhead Rates Overhead Item Estimated Cost Foremen 200,000 Janitors 100,000 Computer System 500,000 Building 500,000 Welding 50,000 Tools 50,000 Estimated Cost $1,400,000 Estimated DL hours: 10,000 hrs. Predetermined OH rate: $140 / hr .
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A concept from Chapter 4: The Normal Process... Estimate (budget) Overhead Apply (allocate) Overhead Compare actual to applied Overhead Will Predetermined Overhead ever equal Actual Overhead?
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We looked at an example of Boeing… Overhead Item Estimated Cost Foremen 200,000 Janitors 100,000 Computer System 500,000 Building 500,000 Welding 50,000 Tools 50,000 Estimated Cost $1,400,000 Estimated DL hours: 10,000 hrs. Predetermined OH rate: $140 / hr .
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Sort of New Topic #1 The Manufacturing Overhead Account (often called the ‘Overhead Control’ account) What does it do? It “corrects” for the difference between estimated and actual overhead.
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Long ago in Chapter 4, there were 1,000 direct labor hours on our job… Overhead Control Our Jet (WIP) 100,000 140,000 50,000 140,000 DM DL OH What does this mean…the instructor might not know how to operate the PowerPoint Projector? He might “lose control” of the overhead?
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We don’t immediately expense factory overhead (because MOH is first charged to inventory) Overhead – control account Wages Payable $190,000 $190,000 The above entry is made to account for Foreman Salaries. (Later, when you pay the foreman, you debit wages payable and credit cash.)
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