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Job%20Order%20Costing_Week%203 - Job Order Costing Chapter...

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Job Order Costing – Chapter 5 Job Order Costing
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Job Order Costing  Also known as:  “How do I account for this stuff?” and “How are our manufacturing operations doing?”
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5 -3 1. Describe the differences between job-order costing and process costing, and identify the types of companies that would use each. 2. Identify and set up the source documents used in job-order costing. 3. Describe the cost flows associated with job- order costing. 4. Appendix: Prepare the journal entries associated with job-order costing. Objectives Objectives
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5 -4 Refresher on Cost Accounting-Chapters 4 and 5 Allocation of Overhead (OH) by Developed “Normal” Predetermined Rates Plant-wide OH Rate vs. Departmental OH Rate Treatment of Over/Under Applied Job Order Costing - using a normal costing system which has similar mechanics - addresses overhead portion of costs Textbook distinguishes service vs. production: Intangibility, Inseparability and Perishability
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5 -5 Refresher on Cost Accounting-Chapters 4 and 5 Direct material and labor at actual (Prime costs) MOH – must pick a cost driver (more common: units produced, DL hours, DL dollars, Materials costs, machine hours) Need a cause and effect relationship Expected Activity: expect this period or year Normal Activity: expect over a number of years
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5 -6 Cost System Characteristics-Job Order Cost Accumulation by Job – job order cost sheet is the “heart” of the system Cost Measurement in Normal Cost System: material and labor are actual costs Assignment of costs: track costs on job order cost sheet (IT screen) – apply OH at end of job or end of accounting period
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5 -7 Comparison of Job-Order and Process Costing ?? Process or job- order costing?
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5 -8 Characteristics of Job-Order Costing Wide-variety of services or products that are quite distinct from each other Cost accumulated by job Unit cost computed by dividing total job costs by units produced on that job/product BEAT SOUTH HIGH
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5 -9 Characteristics of Process Costing Produce large quantities of similar or homogeneous products Cost accumulated by process or department for a given period of time Unit cost computed by dividing process costs of period by the units produced in the period
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5 -10 Process or Process or job-order job-order costing? costing? Note: Mfg Note: Mfg & Service & Service Co’s Co’s Process Process Job order Job order Job order Process Job order Exxon oil refinery Coca Cola plant Custom home builder Shop for customizing vans Television repair shop Campbell soup plant Advertising agency Law firm Job order
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5 -11 Job 425 Job 426 Job 427 Total Beginning balance $58,600 $51,300 $ 0 $109,900 Current costs: Direct materials 4,800 3,600 23,500 31,900 Direct labor 6,000 9,000 10,000 25,000 Applied overhead 2,400 3,600 4,000 10,000 Total $71,800 $67,500 $37,500 $176,800 This information is used to determine the total cost of goods manufactured.
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