cost accounting 301
Najwa 
Eldenburg_Wolcott_Wk05_ch05.ppt© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 1
Cost Management
Measuring, Monitoring, and Motivating Performance
Chapter 5
Job Costing
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 2
Chapter 5: Job Costing
Learning objectives
Q1: How are costs assigned to customized goods and services?
Q2: How is overhead allocated to individual jobs?
Q3: How does job costing information affect managers’ incentives and decisions?
Q4: How are spoilage, rework, and scrap handled in job costing?
Q5: What are the quality and behavioral implications of spoilage?
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 3
Q1: Job Costing versus Process Costing
Job Costing
Used when products can be distinguished from one another
Process Costing
Used when similar products are mass produced
Hybrid Costing
Includes characteristics of both job and process costing
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 4
Q1: Job Costing versus Process Costing
This slide has no animation
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 5
Q1: Assigning Costs to Jobs
Cost
Assign-
ment
Indirect
Costs
Cost Tracing
Cost
Object
(Job)
Direct
Costs
Cost Allocation
This slide is entirely automated.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 6
Q1: Job Cost Records
Each job’s costs are maintained on a job cost record.
The job cost records form the subsidiary ledger for Work in process inventory.
This information comes from Materials Requisition Forms
This information comes from Labor Time Reports
Overhead costs must be allocated to each job
The first click brings in the materials requisition forms label; this is hidden after the next mouse click
The second click brings in the labor time reports label; this is hidden after the next mouse click
The third click brings in the overhead allocation label
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 7
Q2: Allocating Overhead Costs to Jobs
Direct costs are traced to the individual jobs using source documents.
Overhead costs are indirect and cannot be traced to individual jobs; they must be allocated.
An overhead allocation base must be chosen.
The overhead allocation base should be some measure of activity; it should be a reasonably good cost driver for overhead costs.
The first bullet point is automated. Then, one click is required for each remaining bullet point.
Identify the relevant cost object.
Identify one or more overhead cost pools and allocation bases.
For each overhead cost pool, calculate an overhead allocation rate.
For each overhead cost pool, allocate costs to the cost object.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 8
Q2: Steps in Allocating Overhead
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 9
Q2: Overhead Allocation Rates
Companies may use an actual or an estimated overhead allocation rate.
The actual allocation rate cannot be computed until the accounting period is over.
The estimated allocation rate can be computed at the beginning of the accounting period (normal costing).
The first click brings in the bullet that states the actual allocation rate cannot be computed until the end of the year.
The second click brings in the bullet that states the estimated allocation rate can be computed at the beginning of the year.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 10
Chausse Manufacturing makes road paving equipment. At the beginning of the year, overhead costs were estimated to be $450,000. However, actual overhead was $504,000. Chausse uses direct labor hours as the cost allocation base. At the beginning of the year, total direct labor hours were estimated at 10,000 hours, but actual direct labor hours for the year totaled 12,000 hours. Compute the actual overhead rate and the estimated overhead rate.
Q2: Overhead Allocation Rates
The first click brings in “actual allocation rate =“.
The second click brings in the computation of the actual allocation rate.
The third click brings in “estimated allocation rate =“.
The fourth click brings in the computation of the estimated allocation rate.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 11
Q2: Actual and Normal Costing
In normal costing, annual budgeted rates are used
smoothing effect on numerator
smoothing effect on denominator
This slide is entirely automated.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 12
Serena-Sturm is an architectural firm with a professional staff of 5 architects and a support staff of 7. Some projects are done for a fixed fee, while others are billed for the actual hours spent on the project. You are given the following information for Serena-Sturm (SS) for 2005. What is the estimated indirect cost rate if # of projects is used as the cost allocation base? Is this a good choice for the cost allocation base?
Q2: Job Costing Example (Service Sector)
Estimated indirect cost rate =
$450,000/1,000 projects =
$450/project
Terrible choice for a cost allocation base; ignores resource consumption of the projects.
The given information is automated.
The first click reveals the computation of the indirect cost rate.
The second click brings in the text box about “terrible choice”.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 13
SS has a costing system with a single direct cost pool. If SS uses a single indirect cost pool, determine both the estimated and actual indirect cost rates using (a) number of professional labor hours and (b) number of blueprints prepared as cost allocation bases.
Q2: Job Costing Example (Service Sector)
$450,000
10,000 hrs
= $45/hr
$504,000
4,000 bpts
= $126/bpt
$504,000
12,000 hrs
= $42/hr
$450,000
3,600 bpts
= $125/bpt
The given info and the table for the solution are automated.
The first click reveals the answer for the actual rate column.
The second click reveals the answer for the estimated rate column.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 14
SS was asked to prepare a fixed fee bid for an out-of-town project called The Culebra Complex. The budgeted professional hours for this project was 400, and the job is expected to require the preparation of 7 blueprints. Compute the budgeted project cost using (a) professional labor hours and (b) number of blue prints prepared as a cost driver for indirect costs.
Q2: Job Costing Example (Service Sector)
$40/hr x
400 hrs =
$16,000
$40/hr x
400 hrs =
$16,000
$45/hr x
400 hrs =
$18,000
$125/bpt x
7 bpts =
$875
$34,000
$16,875
The given information, the estimated rates computed on the prior slide, and the table for the solutions are all automated.
The first click shows the computation for the direct cost row of the table.
The second click shows the computation for the indirect cost row and the total row of the table.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 15
Why do the different cost allocation bases yield vastly different project costs?
Q2: Why Are Costs so Different?
If professional labor hours is a good measure of activity, then this project is expected to be 400 hrs/10,000 hrs, or 4% of the year’s activity.
If # of blueprints is a good measure of activity, then this project is expected to be 7 bpts/3,600 bpts, or less than 0.2% of the year’s activity.
Most of this slide is automated. The first click brings in the top text box about professional labor hours as a measure of activity, which disappears on the next mouse click.
The second click brings in the bottom text box about # blueprints as a measure of activity.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 16
Shipping & Receiving
Q2: Job Costing in Manufacturing
Logo lamps makes desk lamps stamped with the customer’s logo.
Materials
Storage
Sheet Metal Stamping
Painting
Area
Finished Goods
Storage
Inspection & Packing
Assembly
Area
This slide is entirely automated. I use it as an example about how the flow of work matches the flow of costs.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 17
Q2: Journal Entries in Job Costing
Flow of costs matches flow of the goods through the factory
debit Overhead cost control for actual overhead costs
credit Overhead cost control when overhead allocated to WIP
Source documents used to update accounts for direct costs
Normal costing is used, so overhead is charged to jobs based on estimated overhead rates
Overhead cost control is a temporary account used in normal costing
The first bullet is animated.
The first click brings in the second bullet.
The second click brings in the third bullet.
The third click brings in the fourth bullet, and its two secondary bullets are automated.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 18
Shipping & Receiving
Q2: Flow of Costs in Job Costing
Materials
Storage
Sheet Metal Stamping
Painting
Area
Finished Goods
Storage
Inspection & Packing
Assembly
Area
When raw materials are received, costs are debited to raw materials inventory; no distinction between direct and indirect materials is made at this stage.
This slide has no animation.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 19
Shipping & Receiving
Q2: Flow of Costs in Job Costing
Materials
Storage
Sheet Metal Stamping
Painting
Area
Finished Goods
Storage
Inspection & Packing
Assembly
Area
When raw materials are sent to the factory floor, direct materials costs (per materials requisition forms) are debited to Work in process inventory.
Indirect materials costs are debited to Overhead cost control.
This slide has no animation.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 20
Shipping & Receiving
Q2: Flow of Costs in Job Costing
Materials
Storage
Sheet Metal Stamping
Painting
Area
Finished Goods
Storage
Inspection & Packing
Assembly
Area
When labor costs are incurred, direct labor costs (per time records) are debited to Work in process inventory.
Indirect labor costs are debited to Overhead cost control.
This slide has no animation.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 21
Shipping & Receiving
Q2: Flow of Costs in Job Costing
Materials
Storage
Sheet Metal Stamping
Painting
Area
Finished Goods
Storage
Inspection & Packing
Assembly
Area
When a job is completed, costs are removed from WIP inventory and transferred to FG inventory.
This slide has no animation.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 22
Shipping & Receiving
Q2: Flow of Costs in Job Costing
Materials
Storage
Sheet Metal Stamping
Painting
Area
Finished Goods
Storage
Inspection & Packing
Assembly
Area
When a job is shipped to a customer, costs are removed from FG inventory and transferred to CGS;
The revenue and the receivable are also recorded.
This slide has no animation.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 23
Q2: Journal Entries in Job Costing
The materials storeroom receives a shipment of direct and indirect materials that cost $12,500. Prepare the journal entry.
Materials are sent to the stamping and assembly areas. The cost of the direct materials is $1,400 and the cost of the indirect materials is $800. Prepare the journal entry.
Raw materials inventory 12,500
Accounts payable 12,500
Overhead cost control 800
Raw materials inventory 2,200
Work in process inventory 1,400
The first click reveals the first journal entry.
The second click reveals the second journal entry.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 24
Q2: Journal Entries in Job Costing
Wages totaling $2,000 are accrued; 75% of these costs are direct labor and 25% are indirect labor. Prepare the journal entry.
Overhead costs are allocated to work in process using an allocation rate of 200% of direct labor costs. Prepare the journal entry.
Work in process inventory 3,000
Overhead cost control 3,000
Overhead cost control 500
Wages Payable 2,000
Work in process inventory 1,500
The first click reveals the first journal entry.
The second click reveals the second journal entry.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 25
Q2: Journal Entries in Job Costing
Job #1208, with a total cost of $2,200 is completed. Prepare the journal entry.
Job #1208 is shipped to the customer, who is billed for $4,000. Prepare the journal entry.
Cost of goods sold 2,200
Finished goods inventory 2,200
Work in process inventory 2,200
Finished goods inventory 2,200
Accounts receivable 4,000
Sales 4,000
The first click reveals the first journal entry.
The second click reveals the second journal entry.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 26
Under normal costing, actual overhead is different from allocated overhead.
Misallocated overhead is the difference between actual and allocated overhead.
At the end of the year, the Overhead cost control account is closed out to WIP, FG & CGS.
Misallocated overhead (if material) is prorated to the 3 accounts based on a ratio of their account balances; if immaterial it is closed to CGS.
Q2: Disposition of Misallocated Overhead
The first bullet is animated.
The first click brings in the second bullet.
The second click brings in the third bullet.
The third click brings in the fourth bullet.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 27
Suppose budgeted overhead was $100,000 fixed overhead plus variable overhead of $10/DL hour. Expected DL hours were 50,00, so that the estimated overhead rate was $12/DL hour. Actual DL hours totaled 40,000 for the year and actual overhead was $550,000. At the end of the year, WIP, FG & CGS had the account balances shown below. Prepare the year-end entry to close the Overhead cost control account.
Overhead cost control 70,000
Q2: Disposition of Misallocated Overhead
WIP $ 100,000
FG 200,000
CGS 1,700,000
$2,000,000
Cost of goods sold 59,500
Finished goods inventory 7,000
Work in process inventory 3,000
5%
10%
85%
Overhead cost control
$550,000
$480,000 ($12/DL hr x 40,000 DL hrs)
$70,000
The given information is automated.
The first click reveals the t-account.
The second click reveals the journal entry & the %.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 28
Q3: Uses & Limitations of Job Costing Information
Job cost information is used for
Financial statement preparation
Income tax returns
Bidding for jobs
Comparing expected to actual costs (diagnostic control)
Job cost information may not be useful for non-routine short term decision making as allocated fixed costs may not be relevant
Accountant’s judgment is used to determine:
Direct vs. allocated costs
Type and number of overhead pools
Type of cost driver
The first primary bullet and its secondary bullets are automated.
The first click brings in the second primary bullet and its secondary bullet
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 29
Spoilage – unacceptable units that are discarded or sold for disposal costs
Q4: Job Costing and Spoilage - Terminology
Reworked units - unacceptable units that are reprocessed and sold
Scrap – left over direct materials that are discarded or sold for a minimal amount
Normal spoilage arises under efficient operating conditions & is treated as an inventoriable cost
Abormal spoilage is not part of normal operations & is treated as a period cost
The first primary bullet, and its two secondary bullets are automated.
The first click brings in the second bullet.
The second click brings in the third bullet.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 30
Q4: Job Costing and Spoilage
In job costing, spoilage could be normal spoilage that coincidentally occurred on this job, but was not due to any demanding aspects of this job
spoilage costs removed from Work in process inventory
spoilage costs are debited to Overhead cost control
in this case a job without spoilage has the same manufacturing cost per unit as a job where spoilage occurred
This slide is entirely automated.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 31
Q4: Job Costing and Spoilage
In job costing, spoilage could be abnormal spoilage that coincidentally occurred on this job, but was not due to any demanding aspects of this job
spoilage costs removed from Work in process inventory
spoilage costs are debited to Loss from abnormal spoilage
in this case a job without spoilage has the same manufacturing cost per unit as a job where spoilage occurred
This slide is entirely automated.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 32
Q4: Job Costing and Spoilage
In job costing, spoilage could be spoilage that occurred on this job due to the job’s demanding specifications
spoilage costs are not removed from Work in process inventory
in this case a job without spoilage has a lower manufacturing cost per unit than a job where this type of spoilage occurred
This slide is entirely automated.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 33
On January 1 Leia Corp. budgeted the following factory overhead:
Factory rent $40,000 Leia expected to use 28,000 DL hours this
Utilities 10,000 year; overhead is allocated to WIP using
Normal spoilage 6,000 DL hours. Job #3 shows total costs of
$56,000 $12,200. An inspection reveals that 20%
of Job #3 must be scrapped and sold for $100. Prepare the journal entry to record the spoilage and the sale of the scrap if the spoilage is considered normal and is not due to the demanding specifications of Job #3. If Job #3 was originally a batch of 10,000 units, what is the manufacturing cost per unit for the good units in Job #3?
Work in process inventory 2,440 (20% x $12,200)
Cash 100
Overhead cost control 2,340
Q4: Job Costing and Spoilage Example
Mfg cost/unit = ($12,200 - $2,440)/8,000 good units = $1.22/unit.
The given information is automated.
The first click reveals the journal entry.
The second click reveals the computation of the cost/unit.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 34
On January 1 Leia Corp. budgeted the following factory overhead:
Factory rent $40,000 Leia expected to use 28,000 DL hours this
Utilities 10,000 year; overhead is allocated to WIP using
Normal spoilage 6,000 DL hours. Job #3 shows total costs of
$56,000 $12,200. An inspection reveals that 20%
of Job #3 must be scrapped and sold for $100. Prepare the journal entry to record the spoilage and the sale of the scrap if the spoilage is considered abnormal. If Job #3 was originally a batch of 10,000 units, what is the manufacturing cost per unit for the good units in Job #3?
Work in process inventory 2,440 (20% x $12,200)
Cash 100
Loss from abnormal spoilage 2,340
Q4: Job Costing and Spoilage Example
Mfg cost/unit = ($12,200 - $2,440)/8,000 good units = $1.22/unit.
The given information is automated.
The first click reveals the journal entry.
The second click reveals the computation of the cost/unit.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 35
On January 1 Leia Corp. budgeted the following factory overhead:
Factory rent $40,000 Leia expected to use 28,000 DL hours this
Utilities 10,000 year; overhead is allocated to WIP using
Normal spoilage 6,000 DL hours. Job #3 shows total costs of
$56,000 $12,200. An inspection reveals that 20%
of Job #3 must be scrapped and sold for $100. Prepare the journal entry to record the spoilage and the sale of the scrap if the spoilage occurred to the demanding specifications of Job #3. If Job #3 was originally a batch of 10,000 units, what is the manufacturing cost per unit for the good units in Job #3?
Work in process inventory 100
Cash 100
Q4: Job Costing and Spoilage Example
Mfg cost/unit = ($12,200 - $100)/8,000 good units = $1.5125/unit.
The given information is automated.
The first click reveals the journal entry.
The second click reveals the computation of the cost/unit.
© John Wiley & Sons, 2011
Chapter 5: Job Costing
Eldenburg & Wolcott’s Cost Management, 2e
Slide # 36
Q5: Effect of Spoilage Accounting on Manager Behavior
If spoilage costs are ignored, there is no incentive for managers to control these costs.
If company has a zero defect policy, all spoilage is considered abnormal; the loss on the income statement may force managers to control spoilage.
If rework costs are not accounted for separately, managers may rework units that should be scrapped.
The first bullet is automated. One click for each remaining bullet.
Job CostingProcess Costing
OperationsDiscreteContinuous
ProductFewer unitsMany units
UnitsReadily identifiableFungible
Cost objectJob or batch
Processing
department
# of WIP
accounts
One
Same as the # of
processing
departments
Sheet1
| Job Costing | Process Costing | |
| Operations | Discrete | Continuous |
| Product | Fewer units | Many units |
| Units | Readily identifiable | Fungible |
| Cost object | Job or batch | Processing department |
| # of WIP accounts | One | Same as the # of processing departments |
Sheet2
Sheet3
DateDir. MaterialsDir. LaborOverheadTotal
job vs process
| Job Costing | Process Costing | ||
| Operations | Discrete | Continuous | |
| Product | Fewer units | Many units | |
| Units | Readily identifiable | Fungible | |
| Cost object | Job or batch | Processing department | |
| # of WIP accounts | One | Same as the # of processing departments |
job cost record
| Date | Dir. Materials | Dir. Labor | Overhead | Total |
Sheet3
Actual overhead cost
Actual allocation rate =
Actual quantity of the allocation base
Estimated overhead cost
Estimated allocation rate =
Estimated quantity of the allocation bas
e
Actual allocation rate =
$504,000
$42/hr
12,000 hours
=
Estimated allocation rate =
$450,000
$45/hr
10,000 hours
=
Actual CostingNormal Costing
Direct costsActual costsActual costs
Indirect costs
Actual rate
x actual usage
of cost
allocation base
Estimated rate
x actual usage
of cost
allocation base
job vs process
| Job Costing | Process Costing | ||
| Operations | Discrete | Continuous | |
| Product | Fewer units | Many units | |
| Units | Readily identifiable | Fungible | |
| Cost object | Job or batch | Processing department | |
| # of WIP accounts | One | Same as the # of processing departments |
job cost record
| Date | Dir. Materials | Dir. Labor | Overhead | Total |
act vs norm cstg
| Actual Costing | Normal Costing | ||
| Direct costs | Actual costs | Actual costs | |
| Indirect costs | Actual rate x actual usage of cost allocation base | Estimated rate x actual usage of cost allocation base |
Sheet3
BUDGETEDACTUAL
Direct Costs:
Professional labor costs$400,000$420,000
Professional labor hours10,00012,000
Professional labor rate/hour$40$35
Indirect Costs:
Designers, drafters$360,000$360,000
Office costs40,00080,000
Office salaries & wages45,00056,800
Travel & entertainment5,0007,200
Total indirect costs$450,000$504,000
Other Information:
Number of projects1,0001,200
Number of blueprints prepared3,6004,000
Sheet1
| BUDGETED | ACTUAL | |
| Direct Costs: | ||
| Professional labor costs | $400,000 | $420,000 |
| Professional labor hours | 10,000 | 12,000 |
| Professional labor rate/hour | $40 | $35 |
| Indirect Costs: | ||
| Designers, drafters | $360,000 | $360,000 |
| Office costs | 40,000 | 80,000 |
| Office salaries & wages | 45,000 | 56,800 |
| Travel & entertainment | 5,000 | 7,200 |
| Total indirect costs | $450,000 | $504,000 |
| Other Information: | ||
| Number of projects | 1,000 | 1,200 |
| Number of blueprints prepared | 3,600 | 4,000 |
Potential Cost
Allocation Base
Actual
Rate
Estimated
Rate
Professional
labor hours
Number of
blueprints
job vs process
| Job Costing | Process Costing | ||
| Operations | Discrete | Continuous | |
| Product | Fewer units | Many units | |
| Units | Readily identifiable | Fungible | |
| Cost object | Job or batch | Processing department | |
| # of WIP accounts | One | Same as the # of processing departments |
job cost record
| Date | Dir. Materials | Dir. Labor | Overhead | Total |
act vs norm cstg
| Actual Costing | Normal Costing | ||
| Direct costs | Actual costs | Actual costs | |
| Indirect costs | Actual rate x actual usage of cost allocation base | Estimated rate x actual usage of cost allocation base |
Act budg rates
| Potential Cost Allocation Base | Actual Rate | Estimated Rate | |
| Professional labor hours | |||
| Number of blueprints |
Sheet3
Sheet1
| BUDGETED | ACTUAL | |
| Direct Costs: | ||
| Professional labor costs | $400,000 | $420,000 |
| Professional labor hours | 10,000 | 12,000 |
| Professional labor rate/hour | $40 | $35 |
| Indirect Costs: | ||
| Designers, drafters | $360,000 | $360,000 |
| Office costs | 40,000 | 80,000 |
| Office salaries & wages | 45,000 | 56,800 |
| Travel & entertainment | 5,000 | 7,200 |
| Total indirect costs | $450,000 | $504,000 |
| Other Information: | ||
| Number of projects | 1,000 | 1,200 |
| Number of blueprints prepared | 3,600 | 4,000 |
Costs
Professional
labor hours
Number of
blueprints
Direct costs
Indirect costs
Total
Cost Allocation Base
Potential Cost
Allocation Base
Estimated
Rate
Professional
labor hours
$45/hr
Number of
blueprints
$125/bpt
job vs process
| Job Costing | Process Costing | ||
| Operations | Discrete | Continuous | |
| Product | Fewer units | Many units | |
| Units | Readily identifiable | Fungible | |
| Cost object | Job or batch | Processing department | |
| # of WIP accounts | One | Same as the # of processing departments |
job cost record
| Date | Dir. Materials | Dir. Labor | Overhead | Total |
act vs norm cstg
| Actual Costing | Normal Costing | ||
| Direct costs | Actual costs | Actual costs | |
| Indirect costs | Actual rate x actual usage of cost allocation base | Estimated rate x actual usage of cost allocation base |
Act budg rates
| Potential Cost Allocation Base | Actual Rate | Estimated Rate | |
| Professional labor hours | |||
| Number of blueprints |
estd rate
| Potential Cost Allocation Base | Estimated Rate | |
| Professional labor hours | $45/hr | |
| Number of blueprints | $125/bpt |
Culebra project
| Cost Allocation Base | |||
| Costs | Professional labor hours | Number of blueprints | |
| Direct costs | |||
| Indirect costs | |||
| Total |
Sheet3
job vs process
| Job Costing | Process Costing | ||
| Operations | Discrete | Continuous | |
| Product | Fewer units | Many units | |
| Units | Readily identifiable | Fungible | |
| Cost object | Job or batch | Processing department | |
| # of WIP accounts | One | Same as the # of processing departments |
job cost record
| Date | Dir. Materials | Dir. Labor | Overhead | Total |
act vs norm cstg
| Actual Costing | Normal Costing | ||
| Direct costs | Actual costs | Actual costs | |
| Indirect costs | Actual rate x actual usage of cost allocation base | Estimated rate x actual usage of cost allocation base |
Act budg rates
| Potential Cost Allocation Base | Estimated Rate | |
| Professional labor hours | $45/hr | |
| Number of blueprints | $125/bpt |
Sheet3
BUDGETED
Direct Costs:
Professional labor costs$400,000
Professional labor hours10,000
Professional labor rate/hour$40
Indirect Costs:
Designers, drafters$360,000
Office costs40,000
Office salaries & wages45,000
Travel & entertainment5,000
Total indirect costs$450,000
Other Information:
Number of projects1,000
Number of blueprints prepared3,600
Costs
Professional
labor hours
Number of
blueprints
Direct costs$16,000 $16,000
Indirect costs$18,000 $875
Total$34,000 $16,875
Cost Allocation Base
Sheet1
| BUDGETED | |
| Direct Costs: | |
| Professional labor costs | $400,000 |
| Professional labor hours | 10,000 |
| Professional labor rate/hour | $40 |
| Indirect Costs: | |
| Designers, drafters | $360,000 |
| Office costs | 40,000 |
| Office salaries & wages | 45,000 |
| Travel & entertainment | 5,000 |
| Total indirect costs | $450,000 |
| Other Information: | |
| Number of projects | 1,000 |
| Number of blueprints prepared | 3,600 |
job vs process
| Job Costing | Process Costing | ||
| Operations | Discrete | Continuous | |
| Product | Fewer units | Many units | |
| Units | Readily identifiable | Fungible | |
| Cost object | Job or batch | Processing department | |
| # of WIP accounts | One | Same as the # of processing departments |
job cost record
| Date | Dir. Materials | Dir. Labor | Overhead | Total |
act vs norm cstg
| Actual Costing | Normal Costing | ||
| Direct costs | Actual costs | Actual costs | |
| Indirect costs | Actual rate x actual usage of cost allocation base | Estimated rate x actual usage of cost allocation base |
Act budg rates
| Potential Cost Allocation Base | Actual Rate | Estimated Rate | |
| Professional labor hours | |||
| Number of blueprints |
estd rate
| Potential Cost Allocation Base | Estimated Rate | |
| Professional labor hours | $45/hr | |
| Number of blueprints | $125/bpt |
Culebra project
| Cost Allocation Base | |||
| Costs | Professional labor hours | Number of blueprints | |
| Direct costs | $16,000 | $16,000 | |
| Indirect costs | $18,000 | $875 | |
| Total | $34,000 | $16,875 |
