Job Costing System

1 / 33

# Job Costing System - PowerPoint PPT Presentation

Job Costing System. Actual Costing Traces direct costs to a cost object by using the actual direct cost-rates times the actual quantities of the direct-cost inputs. Normal Costing

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.

## Job Costing System

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
1. Job Costing System • Actual Costing • Traces direct costs to a cost object by using the actual direct cost-rates times the actual quantities of the direct-cost inputs. • Normal Costing • Traces direct costs to a cost object by using the actual direct-cost rates times the actual quantities of the direct cost-inputs and that allocates indirect cost based on the budgeted indirect-cost rates times the actual quantities of the cost-allocation bases.

2. Normal Job Costing

3. Job Costing System

4. General Approach To Normal Job Costing • Step1 : Identify the Job That is Chosen Cost Object • Step 2 : Identify the Direct Cost of the Object • Step 3 : Select the Cost-Allocation Bases To Use For Allocating Indirect Costs to the Job • Step 4 : identify the Indirect Costs Associated with Each Cost-Allocation Base

5. General Approach To Normal Job Costing • Step5 : Compute the Rate per Unit of Each Cost-Allocation Base Used to Allocate Indirect Costs to the Job • Step 6 : Compute the indirect costs Allocated To The Job • Step 7 : Compute the Total Cost of the job by Adding All Direct and Indirect Costs Assigned To The Job

6. Time period Used To Compute Indirect Cost Rates • There are two reasons for using longer periods, such as year, to calculate indirect cost rates. • 1. The numerator reason(indirect-cost pool) : The shorter the period, the greater the influence of seasonal patterns on the amount of costs. • 2. The denominator reason(quantity of the cost allocation base) : Some indirect costs may be variable each month with respect to the cost allocation base(for example, supplies).

7. Budgeted Indirect Costs and End-of-Accounting Year Adjustments • Because of the numerator and denominator reasons, we do not expect actual overhead costs incurred each month to equal overhead costs allocated each month. • Underallocated Indirect Costs occur when the allocated amount of indirect costs in an accounting period is less than the actual(incurred) amount. • Overallocated Indirect Costs occur when the allocated amount of indirect costs in an accounting period is greater than the actual(incurred) amount.

8. Budgeted Indirect Costs and End-of-Accounting Year Adjustments (Cont’d) • There are three main approaches to accounting for the underallocated or overallocated overhead caused by underestimated or overestimated the quantity of cost allocation base. These are : • 1. Adjusted Allocation-Rate Approach • 2. Proration Approach • 3. Write-off to Cost of Goods Sold Approach

9. 1. Adjusted Allocation-Rate Approach • Restates all overhead entries in the general ledger and subsidiary ledgers using actual rates rather than budgeted cost rates. • Yields the benefits of both the timeliness and convenience of normal costing during the year and the accuracy of actual costing at year-end.

10. 2. Proration Approach • Spreads underallocated overhead or overallocated overhead among ending work in process, finished goods, and cost of goods sold. • Based on ending balances is frequently justified as being an expedient way of approximating the more-accurate results from using indirect costs allocated.

11. 3. Write-Off to Cost of Goods Sold Approach • The total under or overallocated overhead is included in this year’s Cost of Goods Sold.

12. Example: Allocation of Costs (Direct Method)

13. Example: Allocation of Costs (Direct Method) Cont’d • Allocation of Department X, Building and Ground Maintenance :

14. Example: Allocation of Costs(Direct Method) Cont’d • Allocation of Department Y, General Factory Administration:

15. Example: Allocation of Costs (Direct Method) Cont’d • Factory Overhead Application rate (on the basis of direct labor hours) for producing departments

16. Example: Allocation of Actual Service Department Costs To Producing Departments (Cont’d) • Total Actual Costs

17. Example: Allocation of Actual Service Department Costs To Producing Departments (Cont’d) • Additional Information

18. Example : Allocation of Actual Service Department Costs To Producing Departments(Cont’d) • Additional Information *24.58/DLH x 1,700 actual DLH

19. Example: Allocation of Actual Service Department Costs To Producing Departments (Cont’d) • Additional Information *57.21/DLH x 1,000 actual DLH

20. Example : Allocation of Actual Service Department Costs To Producing Departments(Cont’d) • Additional Information

21. Example : Allocation of Actual Service Department Costs To Producing Departments(Cont’d)

22. Example : Allocation of Actual Service Department Costs To Producing Departments (Cont’d) • Allocation of Department X, Building and Ground Maintenance :

23. Example : Allocation of Actual Service Department Costs To Producing Departments(Cont’d) • Allocation of Department Y, General Factory Administration :

24. Example : Allocation of Actual Service Department Costs To Producing Departments(Cont’d) • The Computation of under – or overapplied factory overhead as follows:

25. Example : Allocation of Actual Service Department Costs To Producing Departments(Cont’d) • The recording of underapplied factory overhead : • Factory overhead applied – machinery.............. 41,786 • Underapplied factory overhead – machinery... 5,548 • Factory overhead control – machinery................ 47,334 • (\$38,400 + \$3,667 + \$5,267 = \$47,334)

26. Example : Allocation of Actual Service Department Costs To Producing Departments(Cont’d) • The recording of overapplied factory overhead : • Factory overhead applied – assembly.............. 57,210 • Overapplied factory overhead – assembly... 3,544 • Factory overhead control – assembly................ 53,666 • (\$43,700 + \$7,333 + \$2,633 = \$53,666)

27. Accounting For the Difference Between Applied and Actual Factory Overhead • Assuming that we have the following information : • Units sold.................................................... 1,000 • Type A.... 750 & Type B..... 250 • Units in finished goods inventory............ 200 • Type A.... 150 & Type B..... 50 • Units in Work-In process Inventory......... 400 • Type A.... 300 & Type B..... 100

28. Accounting For the Difference Between Applied and Actual Factory Overhead(Cont’d) • Prorating the underapplied factory overhead cost \$5,548:

29. Accounting For the Difference Between Applied and Actual Factory Overhead(Cont’d) • After proration of underapplied factory overhead cost \$5,548 to machinery department:

30. Accounting For the Difference Between Applied and Actual Factory Overhead(Cont’d) • Prorating the overapplied factory overhead cost \$3,544:

31. Accounting For the Difference Between Applied and Actual Factory Overhead(Cont’d) • So after proration of overapplied factory overhead cost \$3,544 to assembly department:

32. Example : Allocation of Actual Service Department Costs To Producing Departments(Cont’d) • Additional Information * 24.58/DLH x 1,700 actual DLH ** Proration of Underapplied cost

33. Example: Allocation of Actual Service Department Costs To Producing Departments (Cont’d) • Additional Information * 57.21/DLH x 1,000 actual DLH ** Proration of Uverapplied Cost