Chap 05 SO - Chapter Five Job-Order Costing Learning...

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Chapter Five Job-Order Costing
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Learning Objectives 1. Describe the difference between job-order costing and process costing and identify the types of firms that would use each method. 2. Compute the predetermined overhead rate and use the rate to assign overhead to units or services produced. 2
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1. Identify and set up the source documents used in job-order costing. 2. Describe the cost flows associated with job-order costing. 3 Learning Objectives
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Distinguish Between Job- Order and Process Costing Job-Order Costing Wide _________ of _________ services & products Unit cost computed by dividing total job costs by ______produced on that job Accumulate Cost by ____ Example Industries: ________, __________, __________, _________ Process Costing _________products Cost of Each Unit Virtually _________ Cost Accumulated by _________ or department Example Industries: ________, _________, _________, __________
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Key Features: Job-Order Costing vs. Process Costing cost of one job _________ from that of another job and must be kept track of ____________ 5 cost of one _______ of a ________ is ____________ to the cost of another Process Production and Costing Job-Order Production and Costing
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What are the three costs of production? Easy to Trace to Job Apply
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Complete the Table with Either Actual or Applied Normal Actual Direct  Materials Direct  Labor Overhead
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Discuss the Importance of Unit Costs Producing Necessary for valuing _________ Necessary to determine _________ Managers need it for __________ __________ Service Service firms use it in similar ways However, Service firms, do not accumulate ______________ Helps to develop cost ________which is vital
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Normal Costing and Estimating Overhead 1. Calculate the _________________ _________ rate. 2. Apply overhead to _________ throughout the year. 3. Reconcile the difference between the total ________overhead incurred during the year and the total overhead __________to production. Applying overhead is a three step process: 9
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Calculate the Predetermined Overhead Rate _________ Rate = Estimated Annual __________ Formula: Both overhead and activity level are estimated because the overhead rate must be calculated at the ___________ of the year. 10 Estimated Annual _______ Level also called “Cost ________” Firm’s best estimate of ___________- related OH costs, such as factory-related costs, indirect materials, and indirect labor.
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Predetermined Overhead Rate & Apply Overhead to Production Information: 11 At the beginning of the year, Argus Company estimated the following costs: Overhead $360,000 Direct Labor Cost $720,000 Argus uses normal costing and applies overhead on the basis of direct labor cost. For the month of February, direct labor cost was $56,000.
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Calculate the Predetermined Overhead Rate Overhead Rate = Overhead Direct Labor Cost Overhead Rate = Overhead Rate = 12
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Applying Overhead to Production Applied Overhead = Predetermined overhead rate Actual activity level x 13 Overhead applied to February production =
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Chap 05 SO - Chapter Five Job-Order Costing Learning...

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