Chpt 3 outline

Chpt 3 outline - CHAPTER 3 JOB COSTING Two ways of...

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CHAPTER 3 – JOB COSTING Two ways of assigning costs: 1. Job costing – 2. Process costing – Job Costing in a nutshell… The basic idea is that we apply direct materials and direct labor to each job. We accumulate indirect costs in a clearing account called “Manufacturing OH” and allocate it to the various jobs when they are completed. Clearing account
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Accounting for Materials Purchasing materials Materials are debited to Raw Materials when they are purchased. We can do this for each individual job, or we can do it all at once at the end of the month or at the end of the year (i.e., accumulate the costs). In practice, it is usually done all at once the end of each month. Journal entry: Using materials The raw materials account may contain both direct and indirect materials. When they are used, the types of materials are treated differently: Direct materials: Direct materials used are transferred directly to WIP. Continuing the example above, assume that $45,000 of direct materials were used. Journal entry: Indirect materials: Indirect materials used are transferred to an overhead account, which is discussed in detail below. It will eventually be allocated (assigned) to WIP, but not right away. Continuing the example above, assume that $2,000 of indirect materials were used. Journal entry: This process is diagramed on the following page.
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RAW MATERIALS USED WIP U S E D Direct Materials Indirect Materials MFG Overhead PURCHASED All Materials A L O C T Manufacturing OH Work in Process  (Inv) ???? Manufacturing OH ????
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Accounting for Direct Labor Labor is accounted for the same general way. Instead of a “Raw Materials” account, though, we’ll use another clearing account called “Manufacturing Wages”. Assume we pay a total of $100,000 for manufacturing wages (both direct and indirect). Journal entry: The manufacturing wages account may contain both direct and indirect labor. Then, we look to see how much labor we used on a particular job.
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This note was uploaded on 10/08/2011 for the course ACCT 101 taught by Professor Kang during the Spring '08 term at S.F. State.

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Chpt 3 outline - CHAPTER 3 JOB COSTING Two ways of...

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