direct materials are issued to production the materials requisition form

Direct materials are issued to production the

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direct materials are issued to production, the materials requisition form identifies the job, the quantity andtype of direct materials, and the costof direct materials. (Slide 19)A materials requisition form is presented in here and in Exhibit 5.6 on page 216.(Slide 20)Job time ticketsare the source documents used to assign direct labor costs to jobs. When a direct laborer works on a job, he or she fills out a time ticket indicating the time spent on the job, along with the wage rate. (Slide 21)30
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Here and in Exhibit 5.7 on page 217 is an example of a time ticket.(Slide 22)Overhead is assigned to jobs using predetermined rates. If the rate is based on direct labor hours, then the predetermined rate and the information from the time tickets are used to assign overhead to jobs. If another cost driver is used (e.g., machine hours), then another source document must be used to collect the amount of the activity driver used by each job.(Slide 23)Once a job is completed, its total manufacturing cost is computed by first totaling the costs of direct materials, direct labor, and overhead, and then summing these individual totals. If there are multiple units in a job, the grand total can be divided by the number of units produced to obtain the unit cost. (Slide 24)Accountants are concerned with tracing the manufacturing costs from the point of incurrence to the recognition as expenses on the income statement. Notice here how the purchase of direct materials are tracked in accounting with a debit to Materials Inventory. Then, as direct materials are used up in the production process, Materials Inventory is credited by the amount used up. The offsetting debit is to Work in Process. (Slide 25)Accounting for Direct Labor is performed differently. Direct labor is debited directly into Work in Process.(Slide 26)Applied Overhead flows into Work-in-Process inventory through use of the predetermined overhead rate. We call it PRE-determined because we’ve already calculated the rate as an estimate. This rate, is multiplied by the actual driver units that were used by the predetermined overhead rate in order to get Applied Manufacturing Overhead. Please note, this still is an estimateddollar rate applied to actualactivity which we call drivers.This applied overhead is debited to Work-in-Processand creditedto the Overhead Controlaccount. Actual Overhead is debitedto the Overhead Control account as it is incurred. (Slide 27)See here how the flow of applied overhead works.(Slide 28)In order to perform the Accounting for the Finished Goods Inventory, we must calculate the total job costs. Direct materials, direct labor, and applied manufacturing overhead are totaled for completed jobs. Then, the cost of a completed job is credited to Work-in-process and debited toFinished Goods Inventory. (Slide 29)31
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