Job-Order Costing-An Overview

Job-Order Costing-An Overview - McGraw-Hill's Connect...

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9/11/09 7:21 PM McGraw-Hill's Connect - Ebook Page 1 of 11 Managerial Accounting EBook 13/e Content Chapter3: Systems Design: Job-Order Costing Job-Order Costing-An Overview To introduce job-order costing, we will follow a specific job as it progresses through the manufacturing process. This job consists of two experimental couplings that Yost Precision Machining has agreed to produce for Loops Unlimited, a manufacturer of roller coasters. Couplings connect the cars on the roller coaster and are a critical component in the performance and safety of the ride. Before we begin our discussion, recall from the previous chapter that companies generally classify manufacturing costs into three broad categories: (1) direct materials, (2) direct labor, and (3) manufacturing overhead. As we study the operation of a job-order costing system, we will see how each of these three types of costs is recorded and accumulated. Learning Objective 2 Identify the documents used in a job-order costing system. MANAGERIAL ACCOUNTING IN ACTION The Issue Yost Precision Machining is a small company in Michigan that specializes in fabricating precision metal parts that are used in a variety of applications ranging from deep-sea exploration vehicles to the inertial triggers in automobile air bags. The company's top managers gather every morning at 8:00 a.m. in the company's conference room for the daily planning meeting. Attending the meeting this morning are: Jean Yost, the company's president; David Cheung, the marketing manager; Debbie Turner, the production manager; and Marc White, the company controller. The president opened the meeting: p. 91
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9/11/09 7:21 PM McGraw-Hill's Connect - Ebook Page 2 of 11 Jean: The production schedule indicates we'll be starting Job 2B47 today. Isn't that the special order for experimental couplings, David? David: That's right. That's the order from Loops Unlimited for two couplings for their new roller coaster ride for Magic Mountain. Debbie: Why only two couplings? Don't they need a coupling for every car? David: Yes. But this is a completely new roller coaster. The cars will go faster and will be subjected to more twists, turns, drops, and loops than on any other existing roller coaster. To hold up under these stresses, Loops Unlimited's engineers completely redesigned the cars and couplings. They want us to make just two of these new couplings for testing purposes. If the design works, then we'll have the inside track on the order to supply couplings for the whole ride. Jean: We agreed to take on this initial order at our cost just to get our foot in the door. Marc, will there be any problem documenting our cost so we can get paid? Marc:
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This note was uploaded on 09/18/2009 for the course ACC 3023 taught by Professor Dennislopez during the Spring '09 term at Abraham Baldwin Agricultural College.

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Job-Order Costing-An Overview - McGraw-Hill's Connect...

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