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Hilton 11e Chap003
Hilton 11e Chap003
3-2
Product and Service Costing
Financial Managerial
Accounting Accounting and
Product costs are used Cost Management
to value inventory on Product costs are used
the balance sheet and for planning, control,
to compute cost of directing, and
goods sold on the management decision
income statement. making.
3-4
Flow of Costs in Manufacturing Firm
3-5
Learning Objective 3-3 – Distinguish between job-order
costing and process costing.
3-6
Types of Product-Costing Systems
Process Job-Order
Costing Costing
Process Job-Order
Costing Costing
3-9
Job-Order Cost Accounting
JOB-COST RECORD
Job Number F16 Description 80 deluxe alum. fishing boats
Date Started Nov. 1, 20x1 Date Completed Nov. 22, 20x1
Number of Units Completed 80
Direct Material
Date Requisition Number Quantity Unit Price Cost
Direct Labor
Date Requisition Number Quantity Unit Price Cost
Manufacturing Overhead
Date Requisition Number Quantity Unit Price Cost
Cost Summary
Cost Item Amount
Total direct material
Total direct labor
Total manufacturing overhead
Total cost
Unit cost
Shipping Summary
Units Remaining
Date Units Shipped in Inventory Cost Balance
3-10
Job-Order Cost Accounting
JOB-COST RECORD
Job Number F16 Description 80 deluxe alum. fishing boats
Date Started Nov. 1, 20x1 Date Completed Nov. 22, 20x1
Number of Units Completed 80
Direct Material
Date Requisition Number Quantity Unit Price Cost
Direct Labor
Date Requisition Number Quantity Unit Price Cost
A materials requisition
Manufacturing Overhead
Date Requisition Number
form
Quantity
Unit Price
isCostused to
Cost Summary authorize the use of
Cost Item Amount
Total direct material
Total direct labor
materials on a job.
Total manufacturing overhead
Total cost
Unit cost
Shipping Summary
Let’s see one
Units Remaining
Date Units Shipped in Inventory Cost Balance
3-11
Job-Order Cost Accounting
Requisition No. 352 Date 11/1/x1
Job Number to Be Charged F16 Dept. Painting
Department Supervisor Timothy Williams
Authorized
Signature
Timothy Williams
3-12
Job-Order Cost Accounting JOB-COST RECORD
Job Number F16 Description 80 deluxe alum. fishing boats
Date Started Nov. 1, 20x1 Date Completed Nov. 22, 20x1
Number of Units Completed 80
Direct Material
Date Requisition Number Quantity Unit Price Cost
11/1/x1 352 7,200 sq ft $2.50 $18,000
Direct Labor
Date Requisition Number Quantity Unit Price Cost
Manufacturing Overhead
Date Requisition Number Quantity Unit Price Cost
Cost Summary
Cost Item Amount
Total direct material $18,000
Total direct labor
Total manufacturing overhead
Total cost
Unit cost
Shipping Summary
Units Remaining
Date Units Shipped in Inventory Cost Balance
3-13
Job-Order Cost Accounting
JOB-COST RECORD
Job Number F16 Description 80 deluxe alum. fishing boats
Date Started Nov. 1, 20x1 Date Completed Nov. 22, 20x1
Number of Units Completed 80
Direct Material
Date Requisition Number Quantity Unit Price Cost
11/1 803 7,200 sq ft $2.50 $18,000 Accumulate
Direct Labor direct labor
Date Requisition Number Quantity Unit Price Cost
costs by
means of a
Manufacturing Overhead
Date Requisition Number Quantity Unit Price Cost work record,
such as a time
Cost Summary
Cost Item Amount ticket, for each
Total direct material $18,000
Total direct labor employee.
Total manufacturing overhead
Total cost
Unit cost
3-14
Employee Time Ticket
3-15
Job-Order Cost Accounting
JOB-COST RECORD
Job Number F16 Description 80 deluxe alum. fishing boats
Date Started Nov. 1, 20x1 Date Completed Nov. 22, 20x1
Number of Units Completed 80
Direct Material
Date Requisition Number Quantity Unit Price Cost
11/1 803 7,200 sq ft $2.50 $18,000
Direct Labor
Date Time Cards Quantity Unit Price Cost
Various
dates Various time cards 600 $20 $12,000
Manufacturing Overhead
Date Requisition Number Quantity Unit Price Cost
Cost Summary
Cost Item Amount
Total direct material $18,000
Total direct labor 12,000
Total manufacturing overhead
Total cost
Unit cost
Shipping Summary
Units Remaining
Date Units Shipped in Inventory Cost Balance
3-16
Job-Order Cost Accounting
JOB-COST RECORD
Job Number F16 Description 80 deluxe alum. fishing boats
Date Started Nov. 1, 20x1 Date Completed Nov. 22, 20x1
Number of Units Completed 80
Direct Material
Date Requisition Number Quantity Unit Price Cost
11/1 803 7,200 sq ft $2.50 $18,000
Direct Labor
Date Requisition Number Quantity Unit Price Cost
Various
dates Various time cards 600 $20 $12,000
Manufacturing Overhead
Date Requisition Number Quantity Unit Price Cost
Cost Summary
Cost Item Amount
Total direct material $18,000
Apply manufacturing overhead to jobs using a
Total direct labor
Total manufacturing overhead
12,000
3-17
Job-Order Cost Accounting
JOB-COST RECORD
Job Number F16 Description 80 deluxe alum. fishing boats
Date Started Nov. 1, 20x1 Date Completed Nov. 22, 20x1
Number of Units Completed 80
Direct Material
Date Requisition Number Quantity Unit Price Cost
11/1 803 7,200 sq ft $2.50 $18,000
Direct Labor
Date Requisition Number Quantity Unit Price Cost
Various
dates Various time cards 600 $20 $12,000
Manufacturing Overhead
Date Requisition Number Quantity Unit Price Cost
11/30 Direct Labor Hours 600 $30.00 $18,000
Cost Summary
Cost Item Amount
Total direct material $18,000
Total direct labor 12,000
Total manufacturing overhead 18,000
Total cost
Unit cost
Shipping Summary
Units Remaining
Date Units Shipped in Inventory Cost Balance
3-18
Job-Order Cost Accounting JOB-COST RECORD
Job Number F16 Description 80 deluxe alum. fishing boats
Date Started Nov. 1, 20x1 Date Completed Nov. 22, 20x1
Number of Units Completed 80
Direct Material
Date Requisition Number Quantity Unit Price Cost
11/1 803 7,200 sq ft $2.50 $18,000
Direct Labor
Date Requisition Number Quantity Unit Price Cost
Various
dates Various time cards 600 $20 $12,000
Manufacturing Overhead
Date Requisition Number Quantity Unit Price Cost
11/30 Direct Labor Hours 600 $30.00 $18,000
Cost Summary
Cost Item Amount
Total direct material $18,000
Total direct labor 12,000
Total manufacturing overhead 18,000
Total cost $48,000
Unit cost $600
Shipping Summary
Units Remaining
Date Units Shipped in Inventory Cost Balance
11/30 60 20 $12,000
3-19
Job-Order Cost Accounting JOB-COST RECORD
Job Number F16 Description 80 deluxe alum. fishing boats
Date Started Nov. 1, 20x1 Date Completed Nov. 22, 20x1
Number of Units Completed 80
Direct Material
Date Requisition Number Quantity Unit Price Cost
11/1 803 7,200 sq ft $2.50 $18,000
Direct Labor
Date Requisition Number Quantity Unit Price Cost
Various
dates Various time cards 600 $20 $12,000
Manufacturing Overhead
Date Requisition Number Quantity Unit Price Cost
11/30 Direct Labor Hours 600 $30.00 $18,000
Cost Summary
Cost Item Amount
Total direct material $18,000
Total direct labor 12,000
Total manufacturing overhead 18,000
Total cost $48,000
Unit cost $600
Shipping Summary
Units Remaining
Date Units Shipped in Inventory Cost Balance
11/30 60 20 $12,000
3-20
Learning Objective 3-4 – Compute a predetermined
overhead rate and explain its use in job-order costing for job-
shop and batch-production environments.
3-21
Manufacturing Overhead Costs
Overhead is applied to jobs using a predetermined overhead
rate based on estimates made at the beginning of the
accounting period.
Predetermined Budgeted manufacturing overhead cost
Rate = Budgeted amount of cost driver (or activity base)
3-23
Learning Objective 3-5 – Prepare journal entries to
record the costs of direct material, direct labor, and
manufacturing overhead in a job-order costing system.
3-24
Job-Order Costing
Document Flow Summary
Production The production order for the job authorizes the start
Order for Job of the production process.
3-25
Job-Order System Cost Flows
Work in Process
Raw Materials (Job-Cost Record)
•Material •Direct •Direct
Purchases Material Material
•Indirect
Material
Mfg. Overhead
•Indirect
Material
3-26
Journal Entry
Purchases of Raw Materials
Journal Entry
Use of Direct Materials
Journal Entry
Use of Indirect Materials
Job-Order System Cost Flows
Mfg. Overhead
•Indirect
Material
•Indirect
Labor
3-31
Journal Entry
Use of Direct Labor
Journal Entry
Use of Indirect Labor
Journal Entry
Manufacturing Costs Incurred
Job-Order System Cost Flows
Work in Process
Wages Payable (Job-Cost Record)
•Direct •Direct
Labor Material
•Indirect •Direct
Labor Labor
•Overhead
Applied
Mfg. Overhead Actual and applied
•Indirect •Overhead manufacturing overhead are
Material Applied to usually not equal so a year-
•Indirect Work in end adjustment is required.
Labor Process We will look at the
procedure to accomplish
this later. 3-35
Application of Overhead
Actual use of machine hours for the two jobs were as follows:
Journal Entry
Application of Manufacturing
Overhead
Summary of Manufacturing
Overhead
Journal Entry
Selling and Administrative Costs
Actual Costs Incurred
Now let’s
complete the
goods and sell
them. Still with
me?
3-40
Job-Order System Cost Flows
Work in Process
(Job-Cost Record) Finished Goods
•Direct
Material •Cost of •Cost of •Cost of
•Direct Goods Goods Goods
Mfd. Mfd. Sold
Labor
•Overhead
Applied
Cost of Goods Sold
•Cost of
Goods
Sold
3-41
Journal Entry
Completion of a Production Job
Journal Entry
Sale of Goods
Job-Order System Cost Flows
3-44
Underapplied and Overapplied
Overhead
Overapplied and Underapplied
Manufacturing Overhead -
Summary
Alternative 1 Alternative 2
If Manufacturing Close to Cost
Overhead is . . . Allocation of Goods Sold
3-46
Learning Objective 3-6 – Prepare a schedule of cost of
goods manufactured, a schedule of cost of goods sold, and an
income statement for a manufacturer.
3-47
Schedule of Cost of Goods Manufactured
Schedule of Cost of Goods Manufactured
Direct material:
Raw material inventory, beginning $xxx
Add: Raw material purchases xxx
Raw material available for use $xxx
Deduct: Raw material, ending xxx
Raw material used $xxx
Manufacturing overhead
Indirect material $xxx
Indirect labor xxx
Other actual overhead charges xxx
Total actual manufacturing overhead $xxx
Add: Overapplied overhead
or Deduct: Underapplied overhead xxx
Overhead applied to work-in-process xxx
3-49
The Income Statement
Learning Objective 3-7 – Describe the two-stage
allocation process used to assign manufacturing overhead
costs to production jobs.
3-51
Two-Stage Cost Allocation
Indirect Indirect Other
Stage One: Labor Materials Overhead
Costs assigned
to pools
3-52
Departmental Overhead Rates
Indirect Indirect Other
Stage One: Labor Materials Overhead
Costs assigned
to pools
Department Department Department
Cost pools
1 2 3
Direct Machine Raw
Stage Two: Labor Hours Materials
Costs applied Hours Cost
to products
Products
Departmental Allocation Bases
3-53
Learning Objective 3-8 – Describe the process of project
costing used in service industry firms and nonprofit
organizations.
3-54
Job-Order Costing in
Nonmanufacturing Organizations
THE JOB
Cases Missions
Programs Contracts
3-55
End of Chapter 3
3-56