Chapter 4 (wk3)

# Chapter 4 (wk3) - Learning Objective 1 Job Order Costing...

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4 - 1 4 - 1 Job Order Costing Chapter 4 Accy211: Management Accounting II 4 - 2 Learning Objective 1 Describe the building-block concepts of costing systems. 4 - 3 Building-Block Concepts of Costing Systems Cost object Direct costs of a cost object Indirect costs of a cost object 4 - 4 Building-Block Concepts of Costing Systems Cost Assignment Direct Costs Indirect Costs Cost Tracing Cost Allocation Cost Object 4 - 5 Building-Block Concepts of Costing Systems Cost pool Cost allocation base 4 - 6 Learning Objective 2 Distinguish between job costing and process costing.

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4 - 2 4 - 7 Job-Costing and Process-Costing Systems Job-costing system Process-costing system Distinct units of a product or service Masses of identical or similar units of a product or service 4 - 8 Learning Objective 3 Outline a seven-step approach to job costing. 4 - 9 Seven-Step Approach to Job Costing Step 1: Identify the chosen cost object. Step 2: Identify the direct costs of the job. Step 3: Select the cost-allocation bases. Step 4: Identify the indirect costs. 4 - 10 Seven-Step Approach to Job Costing Step 5: Compute the rate per unit. Step 6: Compute the indirect costs. Step 7: Compute the total cost of the job. 4 - 11 General Approach to Job Costing A manufacturing company is planning to sell a batch of 25 special machines (Job 650) to a retailer for \$114,800. Step 1: The cost object is Job 650. Step 2: Direct costs are: Direct materials = \$50,000 Direct manufacturing labor = \$19,000 4 - 12 General Approach to Job Costing Step 3: The cost allocation base is machine-hours. Job 650 used 500 machine-hours. 2,480 machine-hours were used by all jobs. Step 4: Manufacturing overhead costs were \$65,100.
4 - 3 4 - 13 General Approach to Job Costing Step 5: Actual indirect cost rate is \$65,100 ÷ 2,480 = \$26.25 per machine-hour. Step 6: \$26.25 per machine-hour × 500 hours = \$13,125 4 - 14 General Approach to Job Costing Step 7: Direct materials \$50,000 Direct labor 19,000 Factory overhead 13,125 Total \$82,125 4 - 15 General Approach to Job Costing What is the gross margin of this job? Revenues \$114,800 Cost of goods sold 82,125 Gross margin \$ 32,675 What is the gross margin percentage? \$32,675 ÷ \$114,800 = 28.5% 4 - 16 Source Documents Job cost record Materials requisition record Labor time record 4 - 17 Learning Objective 4 Distinguish actual costing from normal costing. 4 - 18

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Chapter 4 (wk3) - Learning Objective 1 Job Order Costing...

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