Professional Documents
Culture Documents
Chapter 8
Distinguish between
process costing and job-
order costing, and identify
companies that would use
each costing method.
Process Job-order
Costing Costing
Process Job-order
Costing Costing
Process Job-order
Costing Costing
Process Job-order
Costing Costing
v Example
Many companies:
different products are produced each period.
v 1. Commercial Aircraft
Products are Corporation
manufactured of China
to order.
(aircraft manufacturer)
v The unique nature of each order requires tracing or
2. Tata Consultancy Services (Information Technology)
allocating costs to each job, and maintaining cost
3. Hong Kong
records forAircraft Engineering (aircraft maintenance)
each job.
Direct Materials
Charge
Job No. 1 direct
material and
Direct Labor direct labor
Job No. 2
costs to
Manufacturing Job No. 3 each job as
Overhead work is
performed.
Manufacturing
Overhead,
Direct Materials including
Job No. 1 indirect
materials and
Direct Labor indirect labor,
Job No. 2
are allocated
Manufacturing
to all jobs
Job No. 3
Overhead rather than
directly traced
to each job.
2015 McGraw-Hill Educa4on Garrison, Noreen, Brewer, Cheng & Yuen 12
The Job Cost Sheet
PearCo Job Cost Sheet
Job Number A - 143 Date Initiated 3-4-09
Date Completed
Department B3 Units Completed
Item Wooden cargo crate
Direct Materials Direct Labor Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours Rate Amount
Authorized
Signature Will E. Delite!
Supervisor C. M. Wo r km an
Estimate the level of Estimate total amount Estimate total
production for the of the allocation base manufacturing
period. for the period. overhead costs.
POHR =
2015 McGraw-Hill Educa4on Garrison, Noreen, Brewer, Cheng & Yuen 22
Application of Manufacturing Overhead
$640,000
POHR =
160,000 direct labor hours (DLH)
Materials
used may be Direct Job Cost
either direct or materials Sheets
indirect.
Materials
Requisition
Manufacturing
Indirect Overhead
materials Account
Manufacturing
Indirect
Overhead
Labor
Account
Materials Indirect
Requisition Material POHR
rate used
to apply
Other Manufacturing
overhead Job Cost
Actual OH Overhead
Sheets
Charges Account
Employee Indirect
Time Ticket Labor
Mfg. Overhead
Actual Applied
lIndirect
Materials
Mfg. Overhead
Actual Applied
lIndirect
Materials
lIndirect
Labor
2015 McGraw-Hill Educa4on Garrison, Noreen, Brewer, Cheng & Yuen 41
The Recording of Labor Costs
The cost of direct labor incurred increases Work
in Process and the cost of indirect labor
increases Manufacturing Overhead.
GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Work in Process XXXXX
Manufacturing Overhead XXXXX
Salaries and Wages Payable XXXXX
Materials
lIndirect
Labor
lOther
Overhead
2015 McGraw-Hill Educa4on Garrison, Noreen, Brewer, Cheng & Yuen 43
Recording Actual Manufacturing Overhead
In addition to indirect materials and indirect labor,
other manufacturing overhead costs are charged
to the Manufacturing Overhead account as they
are incurred.
GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Manufacturing Overhead XXXXX
Accounts Payable XXXXX
Property Taxes Payable XXXXX
Prepaid Insurance XXXXX
Accumulated Depreciation XXXXX
GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Work in Process XXXXX
Manufacturing Overhead XXXXX
Examples:
1. Salary expense of employees
who work in a marketing, selling,
or administrative capacity.
2. Advertising expenses are expensed
in the period incurred.
GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Salaries Expense XXXXX
Salaries Payable XXXXX
GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Finished Goods XXXXX
Work in Process XXXXX
Materials Cost of
l Goods Goods
Goods Mfd. Sold
lDirect
Mfd.
Labor
lOverhead
Applied Cost of Goods Sold
Cost of
l
Goods
Sold
GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Accounts Receivable XXXXX
Sales XXXXX
b. $50,000 underapplied.
c. $60,000 overapplied.
d. $60,000 underapplied.
Cost of Cost of
Goods Sold Goods Sold
Percent of Allocation
Amount Total of $30,000
Work in process $ 68,000 10% $ 3,000
Finished Goods 204,000 30% 9,000
Cost of Goods Sold 408,000 60% 18,000
Total $ 680,000 100% $ 30,000
10% $30,000
GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Manufacturing Overhead 30,000
Work in Process Inventory 3,000
Finished Goods Inventory 9,000
Cost of Goods Sold 18,000
Appendix 8A