Acct%202200%20Chapter%205%20Lecture%20Notes.2012.Students

Acct%202200%20Chapter%205%20Lecture%20Notes.2012.Students -...

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Acct 2200 Chapter 5 Lecture Notes (2012) Learning Objectives: 1. Distinguish between process costing and job-order costing and identify companies that would use each costing method. 2. Identify the documents used in a job-order costing system. 3. Compute predetermined overhead rates and explain why estimated overhead costs (rather than actual overhead costs) are used in the costing process. 4. Apply overhead cost to Work in Process using a predetermined overhead rate. 5. Determine underapplied or overapplied overhead. 6. Use the direct method to determine cost of goods sold. 7. Use the indirect method to determine cost of goods sold. Part I. process costing and job-order costing 1. Process costing system is used in situations where the company produces many units of a single product for long periods. Example companies: 1). Weyerhaeuser (paper manufacturing) 2). Reynolds Aluminum (refining aluminum ingots) 3). Coca-Cola (mixing and bottling beverages) 2. Job-order costing system is used in situations where many different products are produced each period. Example companies: 1. Boeing (aircraft manufacturing) 2. Bechtel International (large scale construction) 3. Walt Disney Studios (movie production) [Example 1] EXERCISE 5-1 Process Costing and Job-Order Costing Which method of determining product costs, job-order costing or process costing, would be more appropriate in each of the following situations? a. An Elmer's glue factory. b. A textbook publisher such as McGraw-Hill. c. An Exxon oil refinery. d. A facility that makes Minute Maid frozen orange juice. e. A Scott paper mill. f. A custom home builder. g. A shop that customizes vans. h. A manufacturer of specialty chemicals. i. An auto repair shop. j. A Firestone tire manufacturing plant. k. An advertising agency. l. A law office. 1
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Part II. Job-Order Costing – Overview 1. Costs are traced and allocated to jobs, and then the costs of the job are divided by the number of units in the job to determine an average cost per unit Charge direct material and direct labor costs to each job as work is performed. Manufacturing Overhead, are allocated to all jobs rather than directly traced to each job. 2. Direct materials cost - Source document: materials requisition form. The materials requisition form is a detailed source document that specifies the type and quantity of materials to be drawn from the storeroom and identifies the job that will be charged for the cost of the materials. The materials requisition form is used to control the flow of materials into production and also for making entries in the accounting records. 2 Direct materials Direct labor Manufacturing overhead The job PearCo Materials Requisition Form Requisition No. X7 - 6890 Date 3-4-05 Job No. A - 143 Department B3 Description Quantity Unit Cost Total Cost 2 x 4, 12 feet 12 3.00 $ 36.00 $ 1 x 6, 12 feet 20 4.00 80.00 116.00 $ Authorized Signature Will E. De lite
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After being notified that the production order has been issued, the Accounting Department prepares a job cost sheet. A job cost sheet is a form prepared for a job that records the materials, labor, and manufacturing overhead costs charged to that job.
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This note was uploaded on 01/23/2012 for the course ACCT 2200 taught by Professor Rose during the Spring '08 term at Kennesaw.

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Acct%202200%20Chapter%205%20Lecture%20Notes.2012.Students -...

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