ch05 - Chapter 5 Job Costing LEARNING OBJECTIVES Chapter 5...

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Chapter 5 Job Costing LEARNING OBJECTIVES Chapter 5 addresses the following questions: Q1 How are costs assigned to customized goods and services? Q2 How is overhead allocated to individual jobs? Q3 What is the difference between actual costing and normal costing? Q4 What are the uses and limitations of job cost information? Q5 How are spoilage, rework, and scrap handled in job costing? Q6 What are the quality and behavioral implications of spoilage? These learning questions (Q1 through Q6) are cross-referenced in the textbook to individual exercises and problems. COMPLEXITY SYMBOLS The textbook uses a coding system to identify the complexity of individual requirements in the exercises and problems. Questions Having a Single Correct Answer: No Symbol This question requires students to recall or apply knowledge as shown in the textbook. e This question requires students to extend knowledge beyond the applications shown in the textbook. Open-ended questions are coded according to the skills described in Steps for Better Thinking (Exhibit 1.10): Step 1 skills (Identifying) Step 2 skills (Exploring) Step 3 skills (Prioritizing) Step 4 skills (Envisioning)
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5-2 Cost Management QUESTIONS 5.1 Most itemized statements recorded for a particular individual ("job") constitute a job order cost sheet. Examples of job costing record sheets include: Automobile repair bill Restaurant receipt Doctor, dentist, or veterinarian bill Telephone, electricity, or other utility bill Photocopying service receipt 5.2 Under actual costing there is no underapplied or overapplied overhead because actual costs and actual volumes of the allocation base are used to allocate overhead. Under normal costing, an estimated rate is used to allocate overhead that is based on estimates of cost and production. Because costs or volumes cannot be perfectly predicted, there will always be overapplied or underapplied overhead under normal costing. 5.3 Examples of businesses that would use job costing: veterinary clinic, dentist, custom iron security doors, print shop, automobile repair shop, attorney. Examples of businesses that would use process costing: local bottling companies, flour mill, golf club manufacturer. 5.4 Spoilage costs include all of the direct materials, direct labor, and allocated overhead that accumulate before the unit is inspected and removed from production. If the unit is removed when 100% complete, then 100% of its costs are assigned. If the unit is less complete, the costs assigned reflect the level of completion. 5.5 Because overtime hours are more expensive than regular hours, the overtime premium should be treated as an indirect cost and assigned to overhead, while the regular cost of the hours is a direct cost that should be assigned to particular jobs. Assigning overhead to specific jobs just because the production schedule called for that job at that time unfairly treats those jobs. Overhead is guaranteed and will occur no matter what jobs are
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This note was uploaded on 02/28/2010 for the course SOM aim taught by Professor Are during the Spring '10 term at Texas El Paso.

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ch05 - Chapter 5 Job Costing LEARNING OBJECTIVES Chapter 5...

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