chap 003 managerial accounting hilton
TRANSCRIPT
-
8/9/2019 Chap 003 managerial accounting Hilton
1/50
Copyright 2009 by The McGraw-Hill Companies, Inc. llMcGraw-Hill#Irwin
Product Costing and Cost
Accumulation in a Batch
Production Environment
Product Costing and CostAccumulation in a Batch
Production Environment
Chapter 3
-
8/9/2019 Chap 003 managerial accounting Hilton
2/50
Copyright 2009 by The McGraw-Hill Companies, Inc. llMcGraw-Hill#Irwin
Learning
Objective
1
-
8/9/2019 Chap 003 managerial accounting Hilton
3/50
Product and Service CostingProduct and Service Costing
FinancialAccounting
Product costs are usedto value inventor andto compute cost o!
goods sold"
#anagerialAccounting and
Cost #anagement
Product costs are used!or planning$ control$
directing$ andmanagement decision
ma%ing"
-
8/9/2019 Chap 003 managerial accounting Hilton
4/50
Copyright 2009 by The McGraw-Hill Companies, Inc. llMcGraw-Hill#Irwin
Learning
Objective
&
-
8/9/2019 Chap 003 managerial accounting Hilton
5/50
Flo' o! Costs in #anu!acturing Firm
-
8/9/2019 Chap 003 managerial accounting Hilton
6/50
-
8/9/2019 Chap 003 managerial accounting Hilton
7/50
Used for production of large, unique, high-cost items.Built to order rather than mass produced.
Many costs can be directly traced to each job.
TWO T!"#$
%ob-shop operations
!roducts manufactured in &ery lo' &olumes or oneat a time.
Batch-production operations
Multiple products in batches of relati&ely smallquantity.
Process
Costing
(ob)Order
Costing
*pes o! Product)Costing Sstems
-
8/9/2019 Chap 003 managerial accounting Hilton
8/50
Typical job-order cost applications$#pecial-order printing
Building construction(lso used in ser&ice industry)ospitals
*a' firms
Process
Costing
(ob)Order
Costing
*pes o! Product)Costing Sstems*pes o! Product)Costing Sstems
-
8/9/2019 Chap 003 managerial accounting Hilton
9/50
Process
Costing
(ob)Order
Costing
Used for production of small, identical, lo' costitems.
Mass produced in automated continuous
production process.+osts cannot be directly traced to each unit ofproduct.
Typical process cost applications$!etrochemical refinery
!aint manufacturer
!aper mill
*pes o! Product)Costing*pes o! Product)CostingSstemsSstems
-
8/9/2019 Chap 003 managerial accounting Hilton
10/50
*he primar document!or trac%ing the costs
associated 'ith a
given job is thejob)cost record"
*ets in&estigate usingthe (B +ompany
Accumulating Costs in aAccumulating Costs in a
(ob)Order Costing Sstem(ob)Order Costing Sstem
-
8/9/2019 Chap 003 managerial accounting Hilton
11/50
-
8/9/2019 Chap 003 managerial accounting Hilton
12/50
*ets see one
( materials requisitionformis used to
authorie the use of
materials on a job.
(ob)Order Cost Accounting(ob)Order Cost Accounting
-
8/9/2019 Chap 003 managerial accounting Hilton
13/50
TimothyWilliams
(ob)Order Cost Accounting(ob)Order Cost Accounting
-
8/9/2019 Chap 003 managerial accounting Hilton
14/50
(ob)Order Cost Accounting(ob)Order Cost Accounting
-
8/9/2019 Chap 003 managerial accounting Hilton
15/50
(ccumulatedirect labor
costs bymeans of a'or/ record,
such as a timetic/et, for each
employee.
*ets see one
(ob)Order Cost Accounting(ob)Order Cost Accounting
-
8/9/2019 Chap 003 managerial accounting Hilton
16/50
Emploee *ime *ic%etEmploee *ime *ic%et
-
8/9/2019 Chap 003 managerial accounting Hilton
17/50
-
8/9/2019 Chap 003 managerial accounting Hilton
18/50
(pply manufacturing o&erhead to jobs using apredetermined o&erhead ratebased on direct
labor hours 01*)2.*ets do it
(ob)Order Cost Accounting(ob)Order Cost Accounting
-
8/9/2019 Chap 003 managerial accounting Hilton
19/50
(ob)Order Cost Accounting(ob)Order Cost Accounting
-
8/9/2019 Chap 003 managerial accounting Hilton
20/50
(ob)Order Cost Accounting(ob)Order Cost Accounting
-
8/9/2019 Chap 003 managerial accounting Hilton
21/50
(ob)Order Cost Accounting(ob)Order Cost Accounting
-
8/9/2019 Chap 003 managerial accounting Hilton
22/50Copyright 2009 by The McGraw-Hill Companies, Inc. llMcGraw-Hill#Irwin
Learning
Objective
+
-
8/9/2019 Chap 003 managerial accounting Hilton
23/50
Overhead is applied to jobs using a predeterminedoverhead rate ,PO-./ based on estimates made at
the beginning o! the accounting period"
!O)3 4 Budgeted manufacturing o&erhead costBudgeted amount of cost dri&er 0or acti&ity base2
O&erhead applied 4 !O)3 5 (ctual acti&ity
Based on estimates, anddetermined before the
period begins
(ctualamount of the allocationbase, such as direct labor hours,
incurred during the period
6
7
#anu!acturing Overhead Costs#anu!acturing Overhead Costs
-
8/9/2019 Chap 003 managerial accounting Hilton
24/50
O&erhead is applied to jobs using apredetermined o&erhead rate 0!O)32 based on
estimates made at the beginning of theaccounting period.
!O)3 4 Budgeted manufacturing o&erhead costBudgeted amount of cost dri&er 0or acti&ity base2
O&erhead applied 4 !O)3 5 (ctual acti&ity
3ecall the (luminum Boat e8ample 'here$O&erhead applied 4 9:; per 1*) 5
-
8/9/2019 Chap 003 managerial accounting Hilton
25/50
Copyright 2009 by The McGraw-Hill Companies, Inc. llMcGraw-Hill#Irwin
Learning
Objective
0
-
8/9/2019 Chap 003 managerial accounting Hilton
26/50
*ets summariethe documentflo' 'e ha&e
been discussingin a job-ordercosting system.
(ob)Order Costing
ocument Flo' Summar
-
8/9/2019 Chap 003 managerial accounting Hilton
27/50
!roductionOrder for %ob
*he materials re2uisition indicates the cost o!
direct materialto charge to jobs and the cost o!
indirect materialindirect material to charge to overhead"Material
3equisition
*he production order !or the job authories the start
o! the production process"
*abor Time 3ecords
Emploee time tic%ets indicate the cost o!directlabor to charge to jobs and the cost o!indirectindirect
laborlabor to charge to overhead"
(ctual +ost 1ri&er 0or (cti&ity Base2
>Predetermined Overhead .ate
(pply Manufacturing O&erhead
(ob)Order Costing(ob)Order Costing
ocument Flo' Summarocument Flo' Summar
-
8/9/2019 Chap 003 managerial accounting Hilton
28/50
*ets e8amine thecost flo's in a
job-order costingsystem. We 'illuse T-accountsand start 'ith
materials.
(ob)Order Sstem Cost Flo's
-
8/9/2019 Chap 003 managerial accounting Hilton
29/50
3a' Materials
4Material!urchases
41irectMaterial
41irectMaterial
Mfg. O&erhead
4?ndirectMaterial
4?ndirect
Material
Wor/ in !rocess0%ob-+ost 3ecord2
(ob)Order Sstem Cost Flo's
-
8/9/2019 Chap 003 managerial accounting Hilton
30/50
@e8t lets addlabor costs and
appliedmanufacturing
o&erhead to thejob-order costflo's. (re you
'ith meA
(ob)Order Sstem Cost Flo's
-
8/9/2019 Chap 003 managerial accounting Hilton
31/50
41irect*abor
Mfg. O&erhead
4?ndirectMaterial
41irect Material
4?ndirect*abor
41irect
*abor
4?ndirect
*abor
Wages !ayableWor/ in !rocess
0%ob-+ost 3ecord2
(ob)Order Sstem Cost Flo's
-
8/9/2019 Chap 003 managerial accounting Hilton
32/50
41irect*abor
Mfg. O&erhead
4?ndirectMaterial
41irect Material
4O&erhead(pplied to
Wor/ in!rocess
?f actual and applied
manufacturing o&erhead arenot equal, a year-end
adjustment is required. We'ill loo/ at the procedure to
accomplish this later.
4?ndirect*abor
41irect
*abor4O&erhead(pplied
4?ndirect
*abor
Wages !ayableWor/ in !rocess
0%ob-+ost 3ecord2
(ob)Order Sstem Cost Flo's
-
8/9/2019 Chap 003 managerial accounting Hilton
33/50
@o' letscomplete the
goods and sell
them. #till 'ithmeA
(ob)Order Sstem Cost Flo's
-
8/9/2019 Chap 003 managerial accounting Hilton
34/50
4+ost ofoods
Mfd.
inished oods
4+ost ofoods#old
4+ost ofoods
Mfd.
+ost of oods #old
4+ost ofoods
#old
41irect Material
41irect
*abor4O&erhead(pplied
Wor/ in !rocess0%ob-+ost 3ecord2
(ob)Order Sstem Cost Flo's
-
8/9/2019 Chap 003 managerial accounting Hilton
35/50
*ets return to(B +ompany
and see 'hat 'e'ill do if actual
and appliedo&erhead are not
equal.
(ob)Order Sstem Cost Flo's
-
8/9/2019 Chap 003 managerial accounting Hilton
36/50
(ctual O&erhead costs for the year$ 9C,;C;,;;;
(ctual direct labor hours 'or/ed for the year$ 6D;,;;;
(pplied O&erhead 4 !O)3 5 (ctual 1irect *abor )ours
(pplied O&erhead 4 9:;.;; per 1*) 5 6D;,;;; 1*) 4 9C,6;;,;;;
(pplied o&erhead e8ceeds actual o&erhead by 9C;,;;;
This difference is called o&erapplied o&erhead.
Overhead Application E5ampleOverhead Application E5ample
-
8/9/2019 Chap 003 managerial accounting Hilton
37/50
Wor/ in!rocess
inishedoods
+ost ofoods #old
9C;,;;;may be allocated
to these accounts.
9C;,;;; may beclosed directly to
cost of goods sold.
+ost ofoods #old
(B +ompanysMethod
O3
Overapplied and 6nderappliedOverapplied and 6nderapplied
#anu!acturing Overhead#anu!acturing Overhead
-
8/9/2019 Chap 003 managerial accounting Hilton
38/50
(ctualo&erhead
costs
9C,;C;,;;;
9C;,;;;o&erapplied
UnadjustedBalance
9C;,;;;
9C;,;;;
(djustedBalance
O&erhead(ppliedto jobs
9C,6;;,;;;
(BsMfg. O&erhead
for the year
(Bs +ostof oods #old
for the year
Overapplied and 6nderappliedOverapplied and 6nderapplied
#anu!acturing Overhead#anu!acturing Overhead
-
8/9/2019 Chap 003 managerial accounting Hilton
39/50
(lternati&e 6 (lternati&e 7
?f Manufacturing +lose to +ost
O&erhead is . . . (llocation of Boods #old
U@1"3(!!*?"1 ?@+3"(#" ?@+3"(#"
Wor/ in !rocess +ost of Boods #old
0(pplied O) is less -inished Boods
than actual O)2 +ost of Boods #old
OE"3(!!*?"1 1"+3"(#" 1"+3"(#"
Wor/ in !rocess +ost of Boods #old
0(pplied O) is greater -inished Boods
than actual O)2 +ost of Boods #old
Overapplied and 6nderappliedOverapplied and 6nderapplied
#anu!acturing Overhead )#anu!acturing Overhead )
SummarSummar
-
8/9/2019 Chap 003 managerial accounting Hilton
40/50
Copyright 2009 by The McGraw-Hill Companies, Inc. llMcGraw-Hill#Irwin
Learning
Objective7
-
8/9/2019 Chap 003 managerial accounting Hilton
41/50
Schedule o! Cost o! 8oods #anu!acturedSchedule o! Cost o! 8oods #anu!actured
-
8/9/2019 Chap 003 managerial accounting Hilton
42/50
Schedule o! Cost o! 8oods SoldSchedule o! Cost o! 8oods Sold
-
8/9/2019 Chap 003 managerial accounting Hilton
43/50
Actual direct material
and direct labor
combined 'ithactualoverhead"
Actual direct material
and direct labor
combined 'ithpredeterminedoverhead"
6sing a predetermined rate ma%es it6sing a predetermined rate ma%es it
possible topossible to estimateestimatetotal job costs sooner"total job costs sooner"
Actual overhead !or the period is notActual overhead !or the period is not%no'n until the end o! the period"%no'n until the end o! the period"
Actual and 9ormal CostingActual and 9ormal Costing
-
8/9/2019 Chap 003 managerial accounting Hilton
44/50
Copyright 2009 by The McGraw-Hill Companies, Inc. llMcGraw-Hill#Irwin
Learning
Objective:
-
8/9/2019 Chap 003 managerial accounting Hilton
45/50
+ost pools
#tage One$+osts assignedto pools
;ndirect
Labor
;ndirect
#aterials
Other
Overhead
epartment
1
epartment
&
epartment
3
*'o)Stage Cost Allocation*'o)Stage Cost Allocation
-
8/9/2019 Chap 003 managerial accounting Hilton
46/50
epartmental Overhead .atesepartmental Overhead .ates
epartment
1
epartment
&
epartment
3
!roducts
+ost pools
irect
Labor
-ours
#achine
-ours
.a'
#aterials
Cost
#tage One$#tage One$
+osts assigned+osts assigned
to poolsto pools
#tage T'o$
+osts appliedto products
1epartmental (llocation Bases
;ndirect
#aterials
Other
Overhead
;ndirect
Labor
-
8/9/2019 Chap 003 managerial accounting Hilton
47/50
Copyright 2009 by The McGraw-Hill Companies, Inc. llMcGraw-Hill#Irwin
Learning
Objective