ACCO.506<br />                JOB COSTING SYSTEM<br /> JOSE CINTRON,MBA<br />
JOB COSTING<br />Job order costing differs from Process costing in that the flow of costs is traced by job instead of by p...
Building-Block Conceptsof  Job Costing Systems<br />Cost object<br />Direct costs<br />of a cost object<br />Indirect cost...
Building-Block Conceptsof Job Costing Systems<br />Cost Assignment<br />Direct<br />Costs<br />Cost<br />Object<br />Cost ...
Building-Block Conceptsof Costing Systems<br />Cost pool<br />Cost allocation base<br />
Seven-Step Approachto Job Costing<br />Step 1:<br />Identify the chosen cost object.<br />Step 2:<br />Identify the direct...
Seven-Step Approachto Job Costing<br />Step 5:<br />Compute the rate per unit.<br />Step 6:<br />Compute the indirect cost...
General Approach to Job Costing<br />A manufacturing company is planning to sell<br />a batch of 25 special machines (Job ...
General Approach to Job Costing<br />Step 3:<br />The cost allocation base is machine-hours.<br />Job 506 used 500 machine...
General Approach to Job Costing<br />Step 5:<br />Actual indirect cost rate is<br />$65,100 ÷ 2,480 = $26.25 per machine-h...
General Approach to Job Costing<br />Step 7:<br />Direct materials					$50,000<br />Direct labor					  19,000<br />Factory...
General Approach to Job Costing<br />What is the gross margin of this job?<br />Revenues				$114,800<br />Cost of goods so...
Source Documents<br />Job cost record<br />Materials requisition record<br />Labor time record<br />
JOSE IS GOING TO TELL YOU HOW TO<br />Distinguish actual costing<br />from normal costing.<br />
Costing Systems<br />Actual costing is a system that uses actual<br />costs to determine the cost of individual jobs.<br /...
Costing Systems<br />Normal costing is a method that allocates<br />indirect costs based on the  budgeted<br />indirect-co...
Normal Costing<br />Assume that the manufacturing company budgets<br />$60,000 for total manufacturing overhead costs<br /...
Normal Costing<br />What is the cost of Job 506 under normal costing?<br />Direct materials		$50,000<br />Direct labor		  ...
JOSE IS GOING TO TELL YOU HOW TO<br />Track the flow of costs<br />in a job-costing system.<br />
Transactions<br />Purchase of materials and other manufacturing inputs<br />Conversion into work in process inventory<br /...
Transactions<br />Materials costing $75,000 were sent to the<br />manufacturing plant floor. <br />$50,000 were issued to ...
Transactions<br />Work in Process Control:<br />Job No. 506						50,000<br />Job No. 507						10,000<br />Factory Overhead...
Transactions<br />Total manufacturing payroll for<br />the period  was $27,000. <br /> Job No. 506 incurred direct labor c...
Transactions<br />Work in Process Control:<br />Job No. 506									19,000<br />Job No. 507									  3,000<br />Manufactu...
Transactions<br />Wages payable were paid.<br />Wages Payable Control     27,000<br />	Cash Control                       ...
Transactions<br />Assume that depreciation for the<br />period is $26,000. <br />Other manufacturing overhead<br />incurre...
Transactions<br />Manufacturing Overhead Control	   45,100<br />	Accumulated Depreciation<br />	Control											  26,000...
Transactions<br />Jobs costing $104,000 were completed and<br />transferred to finished goods, including Job 506.<br />
Transactions<br />Job 506 was sold for $114,800.<br />What is the journal entry?<br />Accounts Receivable Control	114,800<...
Transactions<br />What is the balance in the Finished Goods<br />Control account?<br />$104,000 – $81,500 = $22,500<br />A...
Transactions<br />Marketing and Administrative Costs	  19,000<br />	Salaries Payable Control						19,000<br />
Transactions<br />Direct Materials Used		$60,000<br />Direct Labor and Overhead	$84,000<br />+<br />Cost of Goods Manufact...
Transactions<br />Cost of Goods Manufactured	$104,000<br />Ending Finished Goods Inventory $22,500<br />–<br />Cost of Goo...
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Job Costing, Job Costing System, Normal costing, ABC Costing

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Job Costing, Job Costing System, Normal costing, ABC Costing

  1. 1. ACCO.506<br />  JOB COSTING SYSTEM<br /> JOSE CINTRON,MBA<br />
  2. 2. JOB COSTING<br />Job order costing differs from Process costing in that the flow of costs is traced by job instead of by process. Accumulation of costs is make by specific jobs, contracts, or orders. This costing method is appropriate when direct costs can be identify with specific units of production.<br />
  3. 3. Building-Block Conceptsof Job Costing Systems<br />Cost object<br />Direct costs<br />of a cost object<br />Indirect costs<br />of a cost object<br />
  4. 4. Building-Block Conceptsof Job Costing Systems<br />Cost Assignment<br />Direct<br />Costs<br />Cost<br />Object<br />Cost Tracing<br />Indirect<br />Costs<br />Cost Allocation<br />
  5. 5. Building-Block Conceptsof Costing Systems<br />Cost pool<br />Cost allocation base<br />
  6. 6. Seven-Step Approachto Job Costing<br />Step 1:<br />Identify the chosen cost object.<br />Step 2:<br />Identify the direct costs of the job.<br />Step 3:<br />Select the cost-allocation bases.<br />Step 4:<br />Identify the indirect costs.<br />
  7. 7. Seven-Step Approachto Job Costing<br />Step 5:<br />Compute the rate per unit.<br />Step 6:<br />Compute the indirect costs.<br />Step 7:<br />Compute the total cost of the job.<br />
  8. 8. General Approach to Job Costing<br />A manufacturing company is planning to sell<br />a batch of 25 special machines (Job 506) to a<br />retailer for $114,800.<br />Step 1:<br />The cost object is Job 506.<br />Step 2:<br />Direct costs are: Direct materials = $50,000<br />Direct manufacturing labor = $19,000<br />
  9. 9. General Approach to Job Costing<br />Step 3:<br />The cost allocation base is machine-hours.<br />Job 506 used 500 machine-hours.<br />2,480 machine-hours were used by all jobs.<br />Step 4:<br />Manufacturing overhead costs were $65,100.<br />
  10. 10. General Approach to Job Costing<br />Step 5:<br />Actual indirect cost rate is<br />$65,100 ÷ 2,480 = $26.25 per machine-hour.<br />Step 6:<br />$26.25 per machine-hour × 500 hours = $13,125<br />
  11. 11. General Approach to Job Costing<br />Step 7:<br />Direct materials $50,000<br />Direct labor 19,000<br />Factory overhead 13,125<br />Total $82,125<br />
  12. 12. General Approach to Job Costing<br />What is the gross margin of this job?<br />Revenues $114,800<br />Cost of goods sold 82,125<br />Gross margin $ 32,675<br />What is thegross margin percentage?<br />$32,675 ÷ $114,800 = 28.5%<br />
  13. 13. Source Documents<br />Job cost record<br />Materials requisition record<br />Labor time record<br />
  14. 14. JOSE IS GOING TO TELL YOU HOW TO<br />Distinguish actual costing<br />from normal costing.<br />
  15. 15. Costing Systems<br />Actual costing is a system that uses actual<br />costs to determine the cost of individual jobs.<br />It allocates indirect costs based on the actual<br />indirect-cost rate(s) times the actual quantity<br />of the cost-allocation base(s).<br />
  16. 16. Costing Systems<br />Normal costing is a method that allocates<br />indirect costs based on the budgeted<br />indirect-cost rate(s) times the actual<br />quantity of the cost allocation base(s).<br />
  17. 17. Normal Costing<br />Assume that the manufacturing company budgets<br />$60,000 for total manufacturing overhead costs<br />and 2,400 machine-hours.<br />What is the budgeted indirect-cost rate?<br />$60,000 ÷ 2,400 = $25 per hour<br />How much indirect cost was allocated to Job 506?<br />500 machine-hours × $25 = $12,500<br />
  18. 18. Normal Costing<br />What is the cost of Job 506 under normal costing?<br />Direct materials $50,000<br />Direct labor 19,000<br />Factory overhead 12,500<br />Total $81,500<br />
  19. 19. JOSE IS GOING TO TELL YOU HOW TO<br />Track the flow of costs<br />in a job-costing system.<br />
  20. 20. Transactions<br />Purchase of materials and other manufacturing inputs<br />Conversion into work in process inventory<br />Conversion into finished goods inventory<br />Sale of finished goods<br />
  21. 21. Transactions<br />Materials costing $75,000 were sent to the<br />manufacturing plant floor. <br />$50,000 were issued to Job No. 506 and<br />$10,000 to Job 507.<br />$15,000 of indirect materials were issued.<br />What is the journal entry?<br />
  22. 22. Transactions<br />Work in Process Control:<br />Job No. 506 50,000<br />Job No. 507 10,000<br />Factory Overhead Control 15,000<br /> Materials Control 75,000<br />
  23. 23. Transactions<br />Total manufacturing payroll for<br />the period was $27,000. <br /> Job No. 506 incurred direct labor costs<br />of $19,000 and Job No. 507 incurred<br />direct labor costs of $3,000.<br />$5,000 of indirect labor was also incurred.<br />What is the journal entry?<br />
  24. 24. Transactions<br />Work in Process Control:<br />Job No. 506 19,000<br />Job No. 507 3,000<br />Manufacturing Overhead Control 5,000<br /> Wages Payable 27,000<br />
  25. 25. Transactions<br />Wages payable were paid.<br />Wages Payable Control 27,000<br /> Cash Control 27,000 <br />Wages Payable<br />Control<br />Cash<br />Control<br />4. 27,000<br />4. 27,000<br />3. 27,000<br />
  26. 26. Transactions<br />Assume that depreciation for the<br />period is $26,000. <br />Other manufacturing overhead<br />incurred amounted to $19,100.<br />What is the journal entry?<br />
  27. 27. Transactions<br />Manufacturing Overhead Control 45,100<br /> Accumulated Depreciation<br /> Control 26,000<br /> Various Accounts 19,100<br />
  28. 28. Transactions<br />Jobs costing $104,000 were completed and<br />transferred to finished goods, including Job 506.<br />
  29. 29. Transactions<br />Job 506 was sold for $114,800.<br />What is the journal entry?<br />Accounts Receivable Control 114,800<br /> Revenues 114,800<br />Cost of Goods Sold 81,500<br /> Finished Goods Control 81,500<br />
  30. 30. Transactions<br />What is the balance in the Finished Goods<br />Control account?<br />$104,000 – $81,500 = $22,500<br />Assume that marketing and administrative<br />salaries were $9,000 and $10,000.<br />What is the journal entry?<br />
  31. 31. Transactions<br />Marketing and Administrative Costs 19,000<br /> Salaries Payable Control 19,000<br />
  32. 32. Transactions<br />Direct Materials Used $60,000<br />Direct Labor and Overhead $84,000<br />+<br />Cost of Goods Manufactured $104,000<br />–<br />Ending WIP Inventory $40,000<br />=<br />
  33. 33. Transactions<br />Cost of Goods Manufactured $104,000<br />Ending Finished Goods Inventory $22,500<br />–<br />Cost of Goods Sold $81,500<br />=<br />

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