Chapter 3 S07 Lecture - Phillip A. Blanchard 2007 Systems...

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Unformatted text preview: Phillip A. Blanchard 2007 Systems Design: Job-Order Costing Chapter 3 Phillip A. Blanchard 2007 Why Product Cost Data? Unit Product cost data is used for: Balance sheet inventory Income Statement (Cost of goods sold) Managerial decisions Phillip A. Blanchard 2007 Types of Costing Systems Used to Determine Product Costs Process Costing Job-order Costing Phillip A. Blanchard 2007 Types of Costing Systems Used to Determine Product Costs Process Costing Job-order Costing Typical job order cost applications: Special-order printing Building construction Also used in service industry Hospitals Law firms Phillip A. Blanchard 2007 Job-Order Costing Direct material Direct labor T r a c e d d i r e c t l y t o e a c h j o b T r a c e d d i r e c t l y t o e a c h j o b The Job Phillip A. Blanchard 2007 Job-Order Costing Direct material Direct labor T r a c e d d i r e c t l y t o e a c h j o b T r a c e d d i r e c t l y t o e a c h j o b Manufacturing overhead (OH) Applied to each job using a predetermined rate The Job Phillip A. Blanchard 2007 MANUFACTURING OVERHEAD PREDETERMINED APPLICATION RATE Estimated Overhead Cost for a Given Level of Activity Estimated (or, given) Level of Activity This Rate is determined at the beginning of the period, to be used during the period, and reconciled with actual costs at the end of the period Phillip A. Blanchard 2007 Direct Materials Direct Labor Manufacturing Overhead Job No. 1 Job No. 2 Job No. 3 Charge direct material costs to each job as the materials are used. Sequence of Events in a Job- Order Costing System Phillip A. Blanchard 2007 Direct Materials Direct Labor Manufacturing Overhead Job No. 1 Job No. 2 Job No. 3 Sequence of Events in a Job- Order Costing System Charge direct labor costs to each job as the work is performed. Phillip A. Blanchard 2007 Direct Materials Direct Labor Manufacturing Overhead Job No. 1 Job No. 2 Job No. 3 Sequence of Events in a Job- Order Costing System Apply Apply overhead to overhead to each job each job using the using the pre- pre- determined determined rate. rate. Phillip A. Blanchard 2007 APPLIED means Debited to Work in Process It does NOT NOT mean physically attached or even actually incurred. It is a tool used to move Overhead costs through the system to eliminate the effects that seasonal fluctuations have on the way OH costs are actually incurred. Phillip A. Blanchard 2007 Direct Materials Direct Labor Job No. 1 Job No. 2 Job No. 3 Special documents are used to track costs for each job. Manufacturing Overhead Sequence of Events in a Job- Order Costing System Phillip A. Blanchard 2007 Job-Order Cost Accounting The primary document for tracking the costs associated with a given job is the job cost sheet . I refer to it as the clipboard concept. Phillip A. Blanchard 2007 As a job is initiated, a clipboard is attached to the grouping of materials put into production. As that physical...
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Chapter 3 S07 Lecture - Phillip A. Blanchard 2007 Systems...

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