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    Job Costing

    Uploaded by

    Parikshit Kundu
    The document outlines 4 learning goals: 1) Explain job costing system flows, 2) Compute predetermined overhead rates and allocate in two stages, 3) Learn how to disposition under-applied or over-applied overhead, and 4) Allocate service department costs using direct and step-down methods. It also provides an overview of job costing systems and how costs like direct materials, direct labor, and manufacturing overhead are accumulated and applied to jobs.

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    © All Rights Reserved
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    Job Costing

    Uploaded by

    Parikshit Kundu
    25 views9 pages
    The document outlines 4 learning goals: 1) Explain job costing system flows, 2) Compute predetermined overhead rates and allocate in two stages, 3) Learn how to disposition under-applied or over-applied overhead, and 4) Allocate service department costs using direct and step-down methods. It also provides an overview of job costing systems and how costs like direct materials, direct labor, and manufacturing overhead are accumulated and applied to jobs.

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    The document outlines 4 learning goals: 1) Explain job costing system flows, 2) Compute predetermined overhead rates and allocate in two stages, 3) Learn how to disposition under-applied or over-applied overhead, and 4) Allocate service department costs using direct and step-down methods. It also provides an overview of job costing systems and how costs like direct materials, direct labor, and manufacturing overhead are accumulated and applied to jobs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    25 views9 pages

    Job Costing

    Uploaded by

    Parikshit Kundu
    The document outlines 4 learning goals: 1) Explain job costing system flows, 2) Compute predetermined overhead rates and allocate in two stages, 3) Learn how to disposition under-applied or over-applied overhead, and 4) Allocate service department costs using direct and step-down methods. It also provides an overview of job costing systems and how costs like direct materials, direct labor, and manufacturing overhead are accumulated and applied to jobs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    You are on page 1of 9

    Learning Goals

    1. Explain the flow of costs through manufacturing accounts in


    job costing system
    2. Compute pre‐determined overhead rate and allocate
    overheads in two stages
    3. Learn disposition of under‐applied or over‐applied
    overhead
    4. Allocate Service department costs using direct method and
    step‐down method

    2
    Costing Systems based on - Absorption costing
    Job Costing:
    – Different products as per Customer specification– Non-repetitive
    • Not for mass market, produced in low volumes or one at a time
    – Each job order is unique
    • Can be continuously identified at each stage of production
    – Jobs are separately identifiable
    – Example : Houses made as per customer requirements
    Process Costing
    – Homogeneous products in continuous flow processing lines - Mass Scale
    – Many units of a product - units are undistinguishable from each other
    – Soft drink producer, Oil Refinery, Chemical processing plant, Cement

    Comparison Job costing Process Costing


    Number of Jobs Worked Many Same Product

    Cost Accumulation Job Department


    Average Unit Cost computed by Job Department

    3
    The Flow Of Documents In a
    Job-order Costing System
    FEATURES
    • Costs accumulated as per job Sales Order
    •Every job is identified by a unique
    A sales order is prepared
    number, has a job card or job cost as a basis for issuing
    sheet a ...
    Job cost sheet is used to track costs
    - Direct material, direct labor and Production Order
    manufacturing cost is accumulated
    for each job A production order initiates
    work on a job, whereby costs
    are charged through ...

    Materials Predetermined
    Requisition Labour Time Ticket Ovhd. Rates

    The various costs of production are


    accumulated on a form, prepared by the
    accounting department, known as a
    ...

    Job Cost
    Sheet
    The job cost sheet forms the basis for valuing 4
    ending inventories and Cost of Goods
    Sold.
    Measuring Direct Material & Labour Costs,
    Applying Manufacturing Overheads

    Materials Requisition Form Employee Time Ticket

    Application of Manufacturing Overhead:


    Predetermined OH Rate (POHR) = $6.4 lac/80,000 DLH = $ 8 per DLH OH
    Applied: Actual DLH used * POHR = 27 hrs * $ 8 = $216

    5
    6
    Also look at Exhibit 3.3 page 121 of the Text Book
    Application of Manufacturing Overhead
    • Overhead Absorption - Charging of OHs to units produced
    • Actual OH Absorption rate: Delay, Seasonality
    • OH is applied to jobs using a predetermined overhead rate (POHR) based on
    estimates made at the beginning of the accounting period

    Budgeted manufacturing overhead cost


    POHR =
    Budgeted amount of cost driver (or
    activity base)

    Overhead applied = POHR × Actual activity

    Based on estimates, and Actual amount of the allocation


    determined before the base, such as direct labor hours,
    period begins incurred during the period
    7
    Example : Job Costing

    Job Nuumber 110 Usage Price Cost


    Direct Material Cost (Rs) (Rs)
    Material 1 50 units 0.8 40
    Material 2 100 units 0.5 50 90
    Direct Wages
    Machining 200 hrs 0.6 120
    Assembly 100 hrs 0.4 40 160
    Production OH absorbed
    Machining 200 hrs 0.5 100
    Assembly 100 hrs 0.75 75 175
    Total Production costs 425
    Administrative and General OH
    (10% of Production costs) 40
    Selling and Distribution OH
    (12% of Production costs) 51
    Total Cost 516
    Profit 25
    Selling Price 525
    8
    Flows of Cost in Job Costing
    If actual and applied manufacturing
    overhead are not equal, a year-end
    adjustment is required

    Traced

    Applied

    Income Statement
    9
    Overapplied and Underapplied
    Manufacturing Overhead - Summary
    Alternative 1 Alternative 2
    If Manufacturing Close to Cost
    Overhead Allocation of Goods Sold
    is . . .
    UNDERAPPLIED INCREASE INCREASE
    Work in Process Cost of Goods Sold
    (Applied OH is less Finished Goods
    than actual
    OH) Cost of
    Goods Sold
    OVERAPPLIED DECREASE
    DECREASE Cost of Goods Sold
    Work in Process
    (Applied OH is greater Finished Goods
    than actual
    MoreOH) Cost of
    accurate but more complex to compute.
    Goods Sold

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