Lo 4 4 40 the public accounting firm of check and

LO 4

4-40
The public accounting firm of Check and Doublecheck prepares
the following condensed annual budget.
Illustration 4-16
Condensed annual
budget of a service
firm under traditional
costing
Traditional Costing Example
LO 4

4-41
Assume that Check and Doublecheck records $140,000 of actual
direct professional labor cost during its audit of Plano Molding
Company, which was billed an audit fee of $260,000. Under
traditional costing, using 50% as the rate for applying overhead to
the job, Check and Doublecheck would compute applied
overhead and operating income as shown in Illustration 4-16.
Traditional Costing Example
Illustration 4-17
LO 4

4-42
Check and Doublecheck distributes its estimated annual
overhead costs of $600,000 to three activity cost pools.
Activity-Based Costing Example
Illustration 4-18
Condensed annual budget of
a service firm under activity-
based costing
LO 4

4-43
Assigning overhead in a service industry.
Activity-Based Costing Example
Illustration 4-19
Assigning overhead in
a service company
LO 4

4-44
Under activity-based costing, Check and Doublecheck assigns
overhead costs of $57,200 as compared to $70,000 under
traditional costing.
Activity-Based Costing Example
Illustration 4-20
Comparison of traditional costing
with ABC in a service company
LO 4

4-45
4
Apply ABC to Service Company
(a) Compute the activity-based overhead rates for each pool.
LO 4

4-46
4
Apply ABC to Service Company
(b) Determine the overhead allocated to Job A1027 which has 150 pieces, requires
200 miles of driving, and 0.75 hours of logistics.
(150 x $0.70) + (200 x $0.50) + (0.75 x $30) = $227.50
LO 4

4-47
In-class assignment
Groups of 2 or 3, work on P4-5A (page
136) for 25 minutes after which we will
go over.
Write down your answers as I will call
on you.

4-48
JIT manufacturing is dedicated to having the right amount of materials,
parts, or products just as they are needed.
.
Illustration 4A-1
LEARNING
OBJECTIVE
5
APPENDIX 4A: Explain just-in-time (JIT)
processing.
LO 5

4-49
Objective of JIT Processing
 To eliminate all manufacturing inventories.
Elements of JIT Processing

Dependable suppliers.
 Multiskilled work force.

Total quality control system.
LEARNING
OBJECTIVE
5
APPENDIX 4A: Explain just-in-time (JIT)
processing.
LO 5

4-50
Benefits of JIT Processing
 Significant reduction or elimination of manufacturing
inventories.

Enhanced product quality.

Reduction or elimination of rework costs and inventory
storage costs.
 Production cost savings from the improved flow of goods
through the processes.
LEARNING
OBJECTIVE
APPENDIX 4A: Explain just-in-time (JIT)
processing.
5
LO 5

4-51
In-class assignment
Groups of 2 or 3, work on BYP4-2 (page
137) for 25 minutes after which we will
go over.
Write down your answers.

4-52
Practice quiz
These are the kinds of questions
that will be on the final exam.

4-53
For Day 5
Read Chapter 5. Go through
Practice Exercises (page 158)
and Practice Problem (page
160) at end of chapter.