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PowerPoint PowerPoint Presentation by Presentation by

Gail B. Wright Gail B. Wright
Professor Emeritus of Accounting Professor Emeritus of Accounting
Bryant University Bryant University
Copyright !!" #homson $outh%Western& a part of #he
#homson Corporation. #homson& the $tar 'ogo& an(
$outh%Western are tra(emar)s use( herein un(er license.
MANAGEMENT
ACCOUNTING
8
th
EDITION
BY
HANSEN & MOWEN
* P+,-UC# . $E+/0CE C,$#01G
2
LEARNING GOALS
After studying this
chapter, you should
be able to:
LEARNING OBJECTIVES
LEARNING OBJECTIVES
3
1. Describe basic characteristics of & differences
between job-order & process costing; identify
types of firms that would use each method.
2. Describe cost flows associated with job-order
costing.
3. Describe cost flows associated with process
costing.
4. Describe eui!alent units & e"plain their role in
process costing.
LEARNING OBJECTIVES
LEARNING OBJECTIVES
#ontinued
4
$. %repare departmental production report using
weighted a!erage method.
&. '"plain how process costing is affected by
nonuniform application of manufacturing inputs
& e"istence of multiple processing departments.
(. #omplete departmental production report using
)*)+ method (Appendix A).
,. %repare journal entries associated with job-order
& process costing (Appendix B).
LEARNING OBJECTIVES
LEARNING OBJECTIVES
Click the button to skip
Questions to Think About
5
2UE$#0,1$ #, #3014 AB,U#5
3ealthblen( 1utritional $upplements
-hy do you suppose that .rianna
did not originally implement an
accounting system that would gi!e
indi!idual product costs/
6
2UE$#0,1$ #, #3014 AB,U#5
3ealthblen( 1utritional $upplements
0sing a separate wor1-in-process
account for each producing
department2 describe the flow of
costs through 3ealthblend4s plant.
7
2UE$#0,1$ #, #3014 AB,U#5
3ealthblen( 1utritional $upplements
-hat types of managerial
decisions would be facilitated by
ha!ing unit product cost
information/
8
2UE$#0,1$ #, #3014 AB,U#5
3ealthblen( 1utritional $upplements
3ow would Delia4s cost
accounting system differ from
that of 3ealthblend/
9
1
Describe basic characteristics
of & differences between job-
order & process costing;
identify types of firms that
would use each method.
LEARNING OBJECTIVE
LEARNING OBJECTIVE
10
6,B%,+-E+ C,$#01G5
-efinition
6,B%,+-E+ C,$#01G5
-efinition
5n accounting system that
assigns costs to products
produced for indi!idually
specific jobs.
6+ 1
11
6,B%,+-E+ C,$#01G
7he 1ey feature of job-order costing
is that the cost of 1 job differs from
that of another and must be trac1ed
separately.
7he 1ey feature of job-order costing
is that the cost of 1 job differs from
that of another and must be trac1ed
separately.
6+ 1
12
P+,CE$$ C,$#01G5 -efinition
P+,CE$$ C,$#01G5 -efinition
5n accounting system that
assigns costs to products
produced in a series of
processes.
6+ 1
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6,B%,+-E+ C,$#01G
7he 1ey feature of process costing is
that the products produced are
homogeneous and therefore ha!e
the same cost.
7he 1ey feature of process costing is
that the products produced are
homogeneous and therefore ha!e
the same cost.
6+ 1
14
6,B%,+-E+5 Pro(uct Costs

Direct materials

Direct labor

+!erhead applied at predetermined rate

6+ 1
15
2
Describe cost flows
associated with job-
order costing.
LEARNING OBJECTIVE
LEARNING OBJECTIVE
16
3ow do you calculate costs for
a job-order cost system/
#ombine direct materials 8
direct labor 8 o!erhead.
6+ 2
17
$UP'0$3A4E%!!7
Materials cost $1,7!
"irect labor $#!! ($! hours x $1%)
&'erhead $$(! ($! hours x $1$)
6+ 2
Job 001
Material ! ! ! ! ! ! ! ! ! ! "1#$80
%abor ! ! ! ! ! ! ! ! ! ! ! ! ! &00
O'erhea( ! ! ! ! ! ! ! ! ! ! )*0
Total ! ! ! ! ! ! ! ! ! ! ! ! ! ! ")#&)0
U+it ,ot -")#&)0.)00/ "11!00
18
-hat will be the selling price
for 9upli9ha1e-::1/
*f the selling price is cost 8 $:;2
%<% will sell 9upli9ha1e-::1 for
"&#*80 =>2232: 8 >11&:?.
6+ 2
19
W,+4%01%P+,CE$$5 -efinition
W,+4%01%P+,CE$$5 -efinition
5ll incomplete wor1 at the end
of an accounting period.
6+ 2
20
ACC,U1#01G 8,+ ,/E+3EA-
Annual o'erhead costs (depreciation, rent,
utilities, insurance) are esti)ated to be
$1(,(!!
6+ 2
O'erhea( rate
1 "1*#*00 . 1#)00 (ire,t labor ho2r
1 "1) 3er D%H
21
'0GA$#+,1G%!!7
Materials cost $1,#!!
"irect labor $(%! (#! hours x $1%)
&'erhead $#*! (#! hours x $1$)
6+ 2
Job 001
Material ! ! ! ! ! ! ! ! ! ! "1#$80
%abor ! ! ! ! ! ! ! ! ! ! ! ! ! *40
O'erhea( ! ! ! ! ! ! ! ! ! ! &00
WI5 406 ,o73lete ! ! ")#480
22
,/E+3EA-
&'erhead is underapplied b+ $1% ,or )onth.
6+ 2
A,t2al O'erhea( Cot
9e+t ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! " *00
Utilitie ! ! ! ! ! ! ! ! ! ! ! ! ! 40
De3re,iatio+! ! ! ! ! ! ! ! ! 100
I+2ra+,e ! ! ! ! ! ! ! ! ! ! ! 04
Total O'erhea( Cot ! " 014
23
C,$# ,8 G,,-$ $,'-
E930B0#
E930B0#
*%7!
*%7!
6+ 2
0nderapplied
o!erhead adjusts
#@9.
0nderapplied
o!erhead adjusts
#@9.
24
3
Describe cost flows
associated with
process costing.
LEARNING OBJECTIVE
LEARNING OBJECTIVE
25
3EA'#3B'E1-5 : Processes

%ic1ing Department

D6 selects herbs2 !itamins2 minerals2 inert

materials

*ngredients are combined

'ncapsulating Department

Ai"ture loaded into gelatin capsule

.ottling Department

#apsules counted into bottles & labeled

6+ 3
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,PE+A#0,1 C,$#01G5
Blen(ing $ystems

+peration costing blends job-order and

process costing

Aaterial costs accumulated by batch

Bob-order costing applies

6abor2 o!erhead costs accumulated by process

6+ 3
27
#;PE$ ,8 P+,CE$$
<A1U8AC#U+01G

9euential processing

Aaterials pass through different process

seuentially

'"ampleC

.ottling follows pic1ing at 3ealthblend

%arallel processing

Different materials pass through different

processes simultaneously
6+ 3
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P+,-UC#0,1 +EP,+#5
-efinition
P+,-UC#0,1 +EP,+#5
-efinition
%ro!ides information about
physical units processed in a
department as well as
manufacturing costs.
6+ 3
29
4
Describe eui!alent
units & e"plain their
role in process costing.
LEARNING OBJECTIVE
LEARNING OBJECTIVE
30
2UA1#08;01G W0P 01 A
P+,CE$$ C,$# $;$#E<

%roblems counting -*%

3ow to define a unit of production/

Ans-erC 'ui!alent full units =')0?

3ow should beginning -*% be treated/

-eighted a!erage

)*)+
6+ 4
31
E2U0/A'E1# 8U'' U10#$5
-efinition
E2U0/A'E1# 8U'' U10#$5
-efinition
7he complete units that could
ha'e been produced gi!en the
total amount of manufacturing
effort e"pended for the period.
6+ 4
32
-E80101G U10# ,8
P+,-UC#0,15 Concept
-E80101G U10# ,8
P+,-UC#0,15 Concept
6+ 4
E930B0#
E930B0#
*%7:
*%7:
'ui!alent full
units =')0?
necessary to
calculate unit
cost.
33
BEG01101G W,+4%01%
P+,CE$$

2 ways to cost beginning -*%

-eighted a!erage

#ombines beginning in!entory costs with current

period costs

#osts are pooled into 1 a!erage unit cost

)*)+

9eparates beginning in!entory costs from current

period costs
6+ 4
34
5
%repare departmental
production report
using -ei.hted
a'era.e )ethod.
LEARNING OBJECTIVE
LEARNING OBJECTIVE
35
= $#EP$ #, P+EPA+E
P+,-UC#0,1 +EP,+#
1. %hysical units flow analysis
2. #alculation of eui!alent units
3. #omputation of unit cost
4. Daluation of in!entories
a. @oods transferred out
b. 'nding wor1 in process
$. #ost reconciliation
6+ $
36
3EA'#3B'E1->$ P0C401G
-EP#.5 6uly Costs
3EA'#3B'E1->$ P0C401G
-EP#.5 6uly Costs
6+ $
5ro(2,tio+
0nits in process Buly 12 ($; complete 2:2:::
0nits complete & transferred out $:2:::
0nits in process Buly 312 2$; complete 1:2:::
Cot
-or1 in process2 Buly 1 > 32$2$
#ost added during Buly 1:212$
37
CA'CU'A#E E8U5 $tep
6+ $
E
9
3
0
B
0
#
E
9
3
0
B
0
#


*
%
7
?
*
%
7
?
*n 9tep 12
calculate
units to be
accounted
for. 7hen
calculate
')0.
38
C,<PU#E U10# C,$#5 $teps : . ?
6+ $
E
9
3
0
B
0
#
E
9
3
0
B
0
#


*
%
7
?
*
%
7
?
U+it ,ot 1 "1&#0)4 . 4)#400 1 "0!)0 3er E:U
Tra+;erre( o2t -"0!)0 < 40#000 1 "1&#000
EWI5 -"0!)0 < )#400/ 1 040
Total ,ot ai=+e( 1 "1&#040
39
C,$# +EC,1C0'0A#0,15 $tep =
6+ $
Total Ma+2;a,t2ri+= Cot Ai=+e(
@oods transferred out > 132:::
@oods in ending -*% &$:
7otal costs accounted for > 132&$:
Ma+2;a,t2ri+= Cot to A,,o2+t :or
.eginning -*% > 32$2$
*ncurred during the period 1:212$
7otal costs to account for > 132&$:
40
WE0G3#E- A/E+AGE5
Evaluation

Aajor benefit

9implicity

Aajor disad!antage

5ccuracy in computing unit costs for current

period & for beginning -*%
6+ $
41
6
'"plain how process
costing is affected by
nonuniform application
of manufacturing inputs
& e"istence of multiple
processing departments.
LEARNING OBJECTIVE
LEARNING OBJECTIVE
42
1,1U108,+< 01PU#$5
-efinition
1,1U108,+< 01PU#$5
-efinition
+ccurs2 for e"ample2 when direct
materials are completely added
at the be.innin. o, process rather
than throu.hout process.
6+ &
43
1,1U108,+< 01PU#$5 E@ample
*n the .ottling Department2 filled
capsules2 bottles added at
be.innin. but bottle caps2 bo"es
added at end of process. 5ffects
computation of ')0.
*n the .ottling Department2 filled
capsules2 bottles added at
be.innin. but bottle caps2 bo"es
added at end of process. 5ffects
computation of ')0.
6+ &
44
7
#omplete departmental
production report using
)*)+ method (Appendix
A).
LEARNING OBJECTIVE
LEARNING OBJECTIVE
45
3EA'#3B'E1->$ P0C401G
-EP#.5 6uly Costs
3EA'#3B'E1->$ P0C401G
-EP#.5 6uly Costs
6+ (
5ro(2,tio+
0nits in process Buly 12 ($; complete 2:2:::
0nits complete & transferred out $:2:::
0nits in process Buly 312 2$; complete 1:2:::
Cot
-or1 in process2 Buly 1 > 32$2$
#ost added during Buly 1:212$
9e7e7ber
46
C,$# +EC,1C0'0A#0,15 $tep =
6+ (
Goo( tra+;erre( o2t
0nits in beginning -*% > 42,($
0nits started & completed ,21::
@oods in ending -*% &($
7otal costs accounted for > 132&$:
Ma+2;a,t2ri+= Cot to A,,o2+t :or
.eginning -*% > 32$2$
*ncurred during the period 1:212$
7otal costs to account for > 132&$:
47
8
%repare journal entries
associated with job-order
& process costing
(Appendix B).
LEARNING OBJECTIVE
LEARNING OBJECTIVE
48
3ow are transactions entered
into the accounting system/
7ransactions are entered into
accounting system by ma1ing
journal entries & posting to
accounts.
6+ ,
49
THE END
THE END
CHA5TE9 0