Professional Documents
Culture Documents
Manufacturing
Direct Materials Direct Labor Overhead
Raw material, The cost of
parts, and paying Indirect material
components that employees who
Indirect labor
can be observed convert direct
being used to make materials into Other overhead
a specific product. finished product.
Manufacturing Companies
Cost of Cost of
Date Purchases Transfers
3-Feb $8,000 $5,000
10-Feb $12,000 $11,000
15-Feb $14,000 $7,000
What is Ending 20-Feb $6,000
Inventory in 22-Feb $9,000
February? 27-Feb $16,000
Stages of Production and the
Flow of Costs - Example
R a w M a te ria ls
Axel Electronics makes toasters. On
$15,000 February 1, Axel has $15,000 of raw
A dd: 43,000 material on hand. Axel’s purchase
= $58,000 and transfers to the production floor
Les s : 45,000 are indicated below.
= $13,000
Cost of Cost of
Date Purchases Transfers
3-Feb $8,000 $5,000
10-Feb $12,000 $11,000
15-Feb $14,000 $7,000
Now let’s look at 20-Feb $6,000
Work-in-Process. 22-Feb $9,000
27-Feb $16,000
Stages of Production and the
Flow of Costs - Example
R a w M a te ria ls W o rk-In-P ro ce ss On February 1, Axel
$15,000 B eg. W IP Inventory
had WIP of $30,000
A dd: 43,000 A dd:Raw M aterials
= $58,000 Trans ferred In
on the factory floor.
Les s : 45,000 Direc t Labor During February,
= $13,000 M anufac turing Axel paid $92,000 in
O verhead direct labor wages.
= Total M anufac turing Overhead is applied
What is the Cos ts Inc urred at 150% of direct
amount of cost Les s :Cos t of G oods
Com pleted and
labor. On 2/28,
transferred to $22,000 is still in
Trans ferred to
Finished Goods in F inis hed G oods WIP.
February? = E nding W IP
Inventory
Stages of Production and the
Flow of Costs - Example
R a w M a te ria ls W o rk-In -P ro ce ss On February 1, Axel
$15,000 $30,000 had WIP of $30,000
A dd: 43,000 A dd: 45,000
= $58,000
on the factory floor.
92,000
Les s : 45,000 138,000
During February,
= $13,000 = $305,000
Axel paid $92,000 in
Les s : 283,000 direct labor wages.
= $22,000 Overhead is applied
Now let’s at 150% of direct
look at labor. On 2/28,
Finished Transferred $22,000 is still in
Goods. to Finished WIP.
Goods
Stages of Production and the
Flow of Costs - Example
R a w M a te ria ls W o rk-In -P ro ce ss Finishe d Goods
$15,000 Beg. Inventory
$30,000
A dd: 43,000 Add: Cost of Goods
A dd: 45,000
Completed and
= $58,000 92,000 Transferred from
Les s : 45,000 138,000 W IP
= $13,000 = $305,000 = Goods Available for
Les s : 283,000 Sale
= $22,000 Less: Cost of Goods Sold
= Ending Inventory
produced.
Many costs can be directly traced
to each job.
Basic Cost Accounting
Procedures
Process Job Order
Costing Costing
w Building construction
w Hospitals
w Law firms
Basic Cost Accounting
Procedures
Process Job Order
Costing Costing
v Paint manufacturer
v Paper mill
Job Order Costing
Manufacturing
overhead (OH)
Applied to each
Direct Tra job using a
ced predetermined
materials
to e directl rate (POHR)
ach y
job
THE JOB
c t l y
d ir e
ce d o b
Tr a c h j
Direct e a
to
labor
Job Order Costing
Let’s investigate
The Job Cost Sheet
The Job Cost Sheet
The Job Cost Sheet
Accumulate
direct labor
costs by
means of a
work record,
such as a time
ticket, for each
employee.
The Job Cost Sheet
Apply manufacturing overhead to jobs using a
predetermined overhead rate (POHR) based on
direct labor hours (DLH).
Job Order Costing
Document Flow Summary
Let’s summarize
the document
flow we have
been discussing
in a job order
costing system.
Job Order Costing
Document Flow Summary
The materials Direct Job Cost
requisition materials Job
Job Cost
Cost
Sheets
Job Cost
Sheets
indicates the Sheets
Sheets
cost of direct Materials
material Materials
Ledger Cards
Materials
Ledger Cards
to charge to Materials
Ledger Cards
jobs Requisition
and the cost of
Manufacturing
indirect material Overhead
to charge to Indirect Account
overhead. materials
Job Order Costing
Document Flow Summary
Direct
Employee time Labor Job Cost
Job Cost
tickets indicate Job Cost
Sheets
Job Cost
Sheets
the cost of direct Sheets
Sheets
labor Employee Time
Employee Time
Ticket
to charge to Employee Time
Ticket
jobs Employee Time
Ticket
Ticket
and the cost
of indirect labor Manufacturing
to charge to Overhead
overhead. Indirect Account
Labor
Job Order Costing
Document Flow Summary
Employee Indirect
Time Ticket Labor
Overhead
Other Manufacturing Applied Job Cost
Actual OH Overhead with Sheets
Charges Account POHR
Materials Indirect
Requisition Material
Flow of Cost in Job Costing
Flow of Costs in Job Costing
Material
Mfg. Overhead
Indirect
•
Material
Flow of Costs in Job Costing
Labor Labor
•Overhead
Applied
Mfg. Overhead
When
•Indirect Overhead
•
Actual Applied
Material Applied to
•Indirect Work in overhead
/
factory = factory
overhead
Labor Process the difference is closed
to cost of goods sold.
Closing Under- or Overapplied
Manufacturing Overhead
Flow of Costs in Job Costing
Now let’s
complete the
goods and sell
them. Still with
me?
Flow of Costs in Job Costing
Work in Process
(Job Cost Sheet) 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