Professional Documents
Culture Documents
Chapter 3
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Copyright2012byTheMcGrawHillCompanies,Inc.Allrightsreserved.
3-2
Job-order
Job-order costing
costing systems
systems are
are
used
used when:
when:
1.
1.Many
Many different
different products
products are
are produced
produced each
each
period.
period.
2.
2.Products
Products are
are manufactured
manufactured to
to order.
order.
3.
3.The
The unique
unique nature
nature of
of each
each order
order requires
requires
tracing
tracing or
or allocating
allocating costs
costs to
to each
each job,
job, and
and
maintaining
maintaining cost
cost records
records for
for each
each job.
job.
3-3
Direct Materials
Charge
Job No. 1 direct
material and
Direct Labor direct labor
Job No. 2
costs to
Job No. 3 each job as
work is
performed.
3-5
Will E. Delite
3-8
Learning Objective 1
Compute a
predetermined overhead
rate.
3-12
Learning Objective 2
Y = a + bX
Y = $200,000 + ($2.75 per direct labor-hour 160,000 direct labor-hours)
Y = $200,000 + $440,000
Y = $640,000
Learning Objective 3
Quick Check
Job WR53 at NW Fab, Inc. required $200 of direct
materials and 10 direct labor hours at $15 per hour.
Estimated total overhead for the year was $760,000
and estimated direct labor hours were 20,000. What
would be recorded as the cost of job WR53?
a. $200.
b. $350.
c. $380.
d. $730.
3-23
Quick Check
Job WR53 at NW Fab, Inc. required $200 of direct
materials and 10 direct labor hours at $15 per hour.
Estimated total overhead for the year was $760,000
and estimated direct labor hours were 20,000. What
would be recorded as the cost of job WR53?
a. $200.
b. $350.
c. $380.
d. $730.
3-24
Key Definitions
1. Raw materials include any materials that go
into the final product.
2. Work in process consists of units of production
that are only partially complete and will require
further work before they are ready for sale to
customers.
3. Finished goods consist of completed units of
product that have not been sold to customers.
4. Cost of goods manufactured include the
manufacturing costs associated with the goods
that were finished during the period,
3-26
Mfg. Overhead
Actual Applied
Indirect
Materials
3-29
Labor Costs
Salaries and Work in Process
Wages Payable (Job Cost Sheet)
Direct Direct
Labor
Indirect
Materials
Direct
Labor Labor
Mfg. Overhead
Actual Applied
Indirect
Materials
Indirect
Labor
3-32
Labor Costs
During the month the employee time tickets
included $35,000 of direct labor and $12,000 for
indirect labor.
3-33
Labor Labor
Mfg. Overhead
Actual Applied
Indirect
Materials
Indirect
Labor
Other
Overhead
3-34
Labor Labor
Overhead
Mfg. Overhead
Actual Applied Applied
Indirect
If actual and
and applied
Materials Overhead
Indirect
manufacturing overhead
Applied to are not equal, a year-end
Labor Work in adjustment is required.
Other required.
Process
Overhead
3-36
Examples:
Examples:
1.
1. Salary
Salary expense
expense of of employees
employees
who
who work
work in
in aa marketing,
marketing, selling,
selling,
or
or administrative
administrative capacity.
capacity.
2.
2. Advertising
Advertising expenses
expenses areare expensed
expensed
in
in the
the period
period incurred.
incurred.
3-38
Cost of
Goods
Materials
Direct
Goods Mfd.
Mfd.
Labor
Overhead
Applied
3-40
Cost of
Goods Goods
Materials
Direct
Goods Mfd. Sold
Mfd.
Labor
Overhead
Learning Objective 6
Prepare schedules of
cost of goods
manufactured and cost
of goods sold and an
income statement.
3-44
Conversion
costs are costs
incurred to
convert the
direct material
into a finished
product.
3-47
Quick Check
Quick Check
Quick Check
Quick Check
Quick Check
Quick Check
Quick Check
Quick Check
Learning Objective 7
Compute underapplied or
overapplied overhead
cost and prepare the
journal entry to close
the balance in
Manufacturing Overhead
to the appropriate
accounts.
3-59
Quick Check
Tiger,
Tiger, Inc.
Inc. had
had actual
actual manufacturing
manufacturing overhead
overhead
costs
costs of
of $1,210,000
$1,210,000 and
and aa predetermined
predetermined
overhead
overhead rate
rate of
of $4.00
$4.00 per
per machine
machine hour.
hour. Tiger,
Tiger,
Inc.
Inc. worked
worked 290,000
290,000 machine
machine hours
hours during
during the
the
period.
period. Tigers
Tigers manufacturing
manufacturing overhead
overhead is:
is:
a.
a. $50,000
$50,000 overapplied.
overapplied.
b.
b. $50,000
$50,000 underapplied.
underapplied.
c.
c. $60,000
$60,000 overapplied.
overapplied.
d.
d. $60,000
$60,000 underapplied.
underapplied.
3-63
Quick Check
Tiger,
Tiger, Inc.
Inc. had
had actual
actual manufacturing
manufacturing overhead
overhead
costs
costs of
of $1,210,000
$1,210,000 and
and aa predetermined
predetermined
overhead
overhead rate
rate of
of $4.00
$4.00 per
per machine
machine hour.
hour. Tiger,
Tiger,
Inc.
Inc. worked
worked 290,000
290,000 machine
machine hours
hours during
during the
the
period.
period. Tigers
Tigers manufacturing
manufacturing overhead
overhead is:
is:
a.
a. $50,000
$50,000 overapplied.
overapplied.
b.
b. $50,000
$50,000 underapplied.
Overhead
underapplied.Overhead Applied
Applied
$4.00
$4.00 per
per hour
hour 290,000
290,000 hours
hours
c.
c. $60,000
$60,000 overapplied.
overapplied. == $1,160,000
$1,160,000
d.
d. $60,000
$60,000 underapplied.
underapplied.Underapplied
Underapplied Overhead
Overhead
$1,210,000
$1,210,000 -- $1,160,000
$1,160,000
== $50,000
$50,000
3-64
Cost of Cost of
Goods Sold Goods Sold
3-65
$68,000
$68,000 $680,000
$680,000 10%
10% $30,000
$30,000
3-68
More
More accurate
accurate but
but more
more complex
complex to
to compute.
compute.
3-70
Quick Check
What
What effect
effect will
will the
the overapplied
overapplied overhead
overhead
have
have on
on PearCos
PearCos netnet operating
operating income?
income?
a.
a. Net
Net operating
operating income
income will
will increase.
increase.
b.
b. Net
Net operating
operating income
income will
will be
be unaffected.
unaffected.
c.
c. Net
Net operating
operating income
income will
will decrease.
decrease.
3-71
Quick Check
What
What effect
effect will
will the
the overapplied
overapplied overhead
overhead
have
have on
on PearCos
PearCos netnet operating
operating income?
income?
a.
a. Net
Net operating
operating income
income will
will increase.
increase.
b.
b. Net
Net operating
operating income
income will
will be
be unaffected.
unaffected.
c.
c. Net
Net operating
operating income
income will
will decrease.
decrease.
3-72