Accounting
Santosh_2102
Hilton_11e_Chap003_PPT.pptProduct Costing and Cost Accumulation in a Batch Production Environment
Chapter 3
Copyright © 2014
by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Reviewer (R) - Slide 1 NN Added the title of the chapter.
Reviewer (R) - CHAPTER 3 CORRECTIONS REQUIRED Note that pagination of the slides is inconsistent. Some slides have a slide number (bottom right), while other slides have no slide number.
Chapter 3: Product Costing and Cost Accumulation in a Batch Production Environment
Product and Service Costing
Financial Accounting
Product costs are used to value inventory on the balance sheet and to compute cost of
goods sold on the income statement.
Managerial Accounting and Cost Management
Product costs are used for planning, control, directing, and management decision making.
3-*
Other Interested Organizations
There is an ever increasing need to use data in external organizations as well.
Product costing is the assignment of production costs to all output of the organization. A product-costing system accumulates the costs incurred in a production process and assigns those costs to the organization’s outputs. Product costing produces data that are needed for a variety of purposes in financial accounting, managerial accounting, and cost management.
Use in Financial Accounting – Products costs are used to value inventory on the balance sheet and to compute the cost of goods sold on the income statement.
Use in Managerial Accounting - Product costs are needed to help management plan, control, and direct operations. In addition, they are needed to help with management decision making.
Use in Reporting to Interested Organizations – There is an ever-growing need for product cost information in relationships between firms and outside organizations. (LO 3-1)
Flow of Costs in Manufacturing Firm
3-*
Manufacturing costs consist of direct material, direct labor, and manufacturing overhead. As production takes place, all manufacturing costs are added to the Work-in-Process Inventory (WIP) account with a debit. As soon as products are completed, their product costs are transferred from Work-in-Process Inventory to Finished-Goods Inventory with a credit to Work in Process and a debit to Finished Goods. During the time period when products are sold, the product cost of the inventory sold is removed from Finished Goods and added to Cost of Goods Sold, which is an expense of the period in which the sale occurred. A credit to Finished Goods and a debit to Cost of Goods Sold completes this step. Cost of Goods Sold is closed into the Income Summary account at the end of the accounting period, along with all other expenses and revenues of the period. We will look at this in more detail and go through each journal entry recorded as the costs progress through the accounting system. (LO 3-2)
Sheet1
| Work-in-Process Inventory | Finished Goods Inventory | |||
| Direct material cost | Product cost transferred | |||
| Direct labor cost | ||||
| Manufacturing overhead | when product is finished | |||
| Cost of Goods Sold | Income Summary | |||
| Expense closed into | ||||
| Income Summary at end | ||||
| of accounting period |
Sheet2
Sheet3
Process
Costing
Job-Order
Costing
Types of Product-Costing Systems
3-*
- Used for production of large, unique, high-cost items.
- Built to order rather than mass produced.
- Many costs can be directly traced to each job.
- TWO TYPES:
- Job-shop operations
- Products manufactured in very low volumes or one at
a time.
- Batch-production operations
- Multiple products in batches of relatively small
quantity.
Reviewer (R) - Slide 7 NN First paragraph, first sentence: Changed the words 'Job-order costing' to bold font.
Job-order costing is used by companies with job-shop operations or batch-production operations. In a job-shop environment, products are manufactured in very low volumes or one at a time. In job-order costing, each distinct batch of production is called a job or job order. The cost-accounting procedures are designed to assign costs to each job. Then the total costs assigned to each job are divided by the units of production in the job to obtain an average cost per unit. Examples of job-shop environments include film production, custom home building, and aircraft manufacturing.
In a batch-production environment, multiple products are produced in batches of relatively small quantity. Examples include furniture manufacture, printing, agricultural equipment, and pleasure boat production. (LO 3-3)
Process
Costing
Job-Order
Costing
Types of Product-Costing Systems
3-*
- Used for production of small, identical, low cost
items.
- Mass produced in automated continuous
production process.
- Costs cannot be directly traced to each unit of
product.
- Typical process cost applications:
- Petrochemical refinery
- Paint manufacturer
- Paper mill
Process costing is used by companies that produce large numbers of identical units. A process-costing system accumulates all the production costs for a large number of units of output, and then these costs are averaged over all of the units.
Firms that produce chemicals, microchips, gasoline, beer, fertilizer, textiles, processed food, and electricity are among those using process costing. In these kinds of firms, there is no need to trace costs to specific batches of production because the products in the different batches are identical. (LO 3-3)
The primary document for tracking the costs associated with a given job is the
job-cost record.
Accumulating Costs in a
Job-Order Costing System
3-*
In a job-order costing system, costs of direct material, direct labor, and manufacturing overhead are assigned to each production job. These costs comprise the inputs of the product-costing system. As costs are incurred, they are added to the Work-in-Process Inventory account in the ledger. To keep track of the manufacturing costs assigned to each job, a subsidiary ledger is maintained. The subsidiary ledger account assigned to each job is a document called a job-cost record. (LO 3-3)
Job-Order Cost Accounting
3-*
Three major sections on the job-cost record are used to accumulate the costs of direct material, direct labor, and manufacturing overhead assigned to the job. The other two sections are used to record the total cost and average unit cost for the job, and to keep track of units shipped to customers. A job-cost record may be a paper document upon which the entries for direct material, direct labor, and manufacturing overhead are written. Increasingly, it is a computer file where entries are made using a computer. (LO 3-3)
Sheet1
| Managerial Accounting | Financial Accounting | |
| Users of Information | Managers, within the organization. | Interested parties, outside the organization. |
| Regulation | Not required and unregulated, since it is intended only for management. | Required and must conform to generally accepted accounting principles. Regulated by the Financial Accounting Standards Board, and, to a lesser degree, the Securities and Exchange Commission. |
| Source of Data | The organization's basic accounting system, plus various other sources, such as rates of effective products manufactured, physical quantities of material and labor used in production, occupancy rates in hotels and hospitals, and average take-off delays | Almost exclusively drawn from the organization's basic accounting system, which accumulates financial information. |
| Nature of Reports and Procedures | Reports often focus on subunits within the organization, such as departments, divisions, geographical regions, or product lines. Based on a combination of historical data, estimates, and projections of future events. | Reports focus on the enterprise in its entirety. Based almost exclusively on historical transaction data. |
Sheet2
| One Production Department | |||||||||||||||||||||||
| Work-in-Process | Finished Goods | ||||||||||||||||||||||
| Inventory | Inventory | Cost of Goods Sold | |||||||||||||||||||||
| Direct material | Cost of goods completed | Cost of goods sold | |||||||||||||||||||||
| Direct labor | Two Sequential Production Departments | ||||||||||||||||||||||
| Applied manufacturing | and transferred to | Work-in-Process Inventory | Work-in-Process Inventory | ||||||||||||||||||||
| overhead | finished goods | Production Department A | Production Department B | ||||||||||||||||||||
| Direct material | Cost of goods completed in department A and | Cost of goods completed | |||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | transferred to | and transferred to | |||||||||||||||||||||
| overhead | department B | finished goods | |||||||||||||||||||||
| Direct material | |||||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | |||||||||||||||||||||||
| overhead | |||||||||||||||||||||||
| Finished Goods Inventory | Cost of Goods Sold | ||||||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| during current period | |||||||||||||||||||||||
| One Production Department | |||||||||||||||||||||||
| Work-in-Process Inventory | Finished Goods Inventory | ||||||||||||||||||||||
| Direct material | Cost of goods completed | Cost of goods completed | |||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | and transferred to | and transferred to | |||||||||||||||||||||
| overhead | Finished goods | finished goods | |||||||||||||||||||||
| Direct material | |||||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | |||||||||||||||||||||||
| overhead |
Sheet3
| Cost of goods completed and transferred during March | Cost of goods completed and transferred during March | Cost of goods completed and transferred during March | |||||||||||||||||||||||
| 40,000 units x $7.26 per equivalent unit | $ 290,400 | 40,000 units x $7.26 per equivalent unit | $ 290,400 | 40,000 units x $7.26 per equivalent unit | $ 290,400 | ||||||||||||||||||||
| Costs remaining in work-in-process on March 31 | Costs remaining in work-in-process on March 31 | Costs remaining in work-in-process on March 31 | |||||||||||||||||||||||
| Direct Material: | Direct Material: | Direct Material: | |||||||||||||||||||||||
| 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | ||||||||||||||||||||
| Convserion: | Convserion: | Convserion: | |||||||||||||||||||||||
| 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | ||||||||||||||||||||
| Total cost of March 31 work-in-process | 50,300 | Total cost of March 31 work-in-process | 50,300 | Total cost of March 31 work-in-process | 50,300 | ||||||||||||||||||||
| Total costs accounted for | $ 340,700 | Total costs accounted for | $ 340,700 | Total costs accounted for | $ 340,700 | ||||||||||||||||||||
| Cost of goods completed and transferred out of Stitching Dept. during March | |||||||||||||||||||||||||
| 30,000 units x $12.228 per equivalent unit | $ 366,840 | ||||||||||||||||||||||||
| Costs remaining in work-in-process in Stitching Dept. on March 31 | |||||||||||||||||||||||||
| Direct Material: | |||||||||||||||||||||||||
| 20,000 equivalent units x $7.028 per equivalent unit | $ 140,560 | ||||||||||||||||||||||||
| Convserion: | |||||||||||||||||||||||||
| 18,000 equivalent units x $4.95 per equivalent unit | 89,100 | ||||||||||||||||||||||||
| Total cost of March 31 work-in-process | 229,660 | ||||||||||||||||||||||||
| Total costs accounted for | $ 596,500 |
Sheet4
| Conversion | ||||||||||||||
| Physical | Physical | Percentage | Transferred | Direct | ||||||||||
| Units | Units | Completion | In | Material | Conversion | |||||||||
| Work in process, March 1 | 10,000 | Work in process, March 1 | 10,000 | 20% | ||||||||||
| Units transferred in during March | 40,000 | Units transferred in during March | 40,000 | |||||||||||
| Total units to account for | 50,000 | Total units to account for | 50,000 | |||||||||||
| Units completed and transferred out during March | 30,000 | Units completed and transferred out during March | 30,000 | 30,000 | 30,000 | 30,000 | ||||||||
| Work in process, March 31 | 20,000 | Work in process, March 31 | 20,000 | 90% | 20,000 | -0- | 18,000 | |||||||
| Total units accounted for | 50,000 | Total units accounted for | 50,000 | |||||||||||
| Total equivalent units | 50,000 | 30,000 | 48,000 | |||||||||||
| Physical | ||||||||||||||
| Units | ||||||||||||||
| Work in process, March 1 | 10,000 | |||||||||||||
| Units transferred in during March | 40,000 | |||||||||||||
| Total units to account for | 50,000 | |||||||||||||
| Units completed and transferred out during March | 30,000 | |||||||||||||
| Work in process, March 31 | 20,000 | |||||||||||||
| Total units accounted for | 50,000 |
Sheet5
| Work-in-Process Inventory: | Work-in-Process Inventory: | ||||||||||||||||||
| Transferred | Direct | Cutting Department | Stitching Department | ||||||||||||||||
| In | Material | Conversion | Total | Direct material | Cost of goods | Transferred- | |||||||||||||
| completed and | in costs | ||||||||||||||||||
| Work in Process, March 1 | $ 61,000 | -0- | $ 7,600 | $ 68,600 | Conversion: | transferred out | |||||||||||||
| Costs incurred during March | 290,400 | $ 7,500 | 230,000 | 527,900 | Direct labor | Direct material | |||||||||||||
| Total costs to account for | $ 351,400 | $ 7,500 | $ 237,600 | $ 596,500 | Manufacturing | ||||||||||||||
| overhead | Conversion: | ||||||||||||||||||
| Equivalent units | 50,000 | 30,000 | 48,000 | Direct labor | |||||||||||||||
| Cost per equivalent unit | $ 7.028 | $ 0.25 | $ 4.95 | $ 12.228 | Manufacturing | ||||||||||||||
| overhead | |||||||||||||||||||
| $351,400 | $7,500 | $237,600 | $ 7.028 | ||||||||||||||||
| 50,000 | 30,000 | 48,000 | + $.25 | ||||||||||||||||
| + $4.95 |
Sheet6
| MVP SPORTS EQUIPMENT COMPANY | ||||||||
| Production Report: Cutting Department | ||||||||
| Percentage of | ||||||||
| Completion | Equivalent Units | |||||||
| Physical | with Respect to | Direct | ||||||
| Units | Conversion | Material | Conversion | |||||
| Work in process, March 1 | 20,000 | 10% | ||||||
| Units started during March | 30,000 | |||||||
| Total units to account for | 50,000 | |||||||
| Units completed and transferred | 40,000 | 100% | 40,000 | 40,000 | ||||
| Work in process, March 31 | 10,000 | 50% | 10,000 | 5,000 | ||||
| Total units accounted for | 50,000 | |||||||
| Total equivalent units | 50,000 | 45,000 | ||||||
| Direct | ||||||||
| Material | Conversion | Total | ||||||
| Work in Process, March 1 | $ 50,000 | $ 7,200 | $ 57,200 | |||||
| Costs incurred during March | 90,000 | 193,500 | 283,500 | |||||
| Total costs to account for | $ 140,000 | $ 200,700 | $ 340,700 | |||||
| Equivalent units | 50,000 | 45,000 | ||||||
| Cost per equivalent unit | $ 2.80 | $ 4.46 | $ 7.26 | |||||
| Cost of goods completed and transferred during March | ||||||||
| 40,000 units x $7.26 per equivalent unit | $ 290,400 | |||||||
| Costs remaining in work-in-process on March 31 | ||||||||
| Direct Material: | ||||||||
| 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | |||||||
| Conversion: | ||||||||
| 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | |||||||
| Total cost of March 31 work-in-process | 50,300 | |||||||
| Total costs accounted for | $ 340,700 |
Sheet7
| 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 | ||||||||||||||
| Date | Units Shipped | Units Remaining in Inventory | Cost Balance |
Cost of goods completed and transferred during March
40,000 units × $7.26 per equivalent unit290,400$
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units × $2.80 per equivalent unit28,000$
Conversion:
5,000 equivalent units × $4.46 per equivalent unit22,300
Total cost of March 31 work in process50,300
Total costs accounted for340,700$
MBD000FE9F8.xls
Sheet1
| Cost of goods completed and transferred during March | |||
| 40,000 units × $7.26 per equivalent unit | $ 290,400 | ||
| Costs remaining in work-in-process on March 31 | |||
| Direct Material: | |||
| 10,000 equivalent units × $2.80 per equivalent unit | $ 28,000 | ||
| Conversion: | |||
| 5,000 equivalent units × $4.46 per equivalent unit | 22,300 | ||
| Total cost of March 31 work in process | 50,300 | ||
| Total costs accounted for | $ 340,700 |
Sheet2
Sheet3
Sheet4
Sheet5
Sheet6
Sheet7
Sheet8
Sheet9
Sheet10
Sheet11
Sheet12
Sheet13
Sheet14
Sheet15
Sheet16
Job-Order Cost Accounting
3-*
Let’s see one
A materials requisition form is used to authorize the use of materials on a job.
As raw materials are needed for the production process, they are transferred from the warehouse to the production department. To authorize the release of materials, the production department supervisor completes a material requisition form and presents it to the warehouse supervisor. (LO 3-3)
Sheet1
| Managerial Accounting | Financial Accounting | |
| Users of Information | Managers, within the organization. | Interested parties, outside the organization. |
| Regulation | Not required and unregulated, since it is intended only for management. | Required and must conform to generally accepted accounting principles. Regulated by the Financial Accounting Standards Board, and, to a lesser degree, the Securities and Exchange Commission. |
| Source of Data | The organization's basic accounting system, plus various other sources, such as rates of effective products manufactured, physical quantities of material and labor used in production, occupancy rates in hotels and hospitals, and average take-off delays | Almost exclusively drawn from the organization's basic accounting system, which accumulates financial information. |
| Nature of Reports and Procedures | Reports often focus on subunits within the organization, such as departments, divisions, geographical regions, or product lines. Based on a combination of historical data, estimates, and projections of future events. | Reports focus on the enterprise in its entirety. Based almost exclusively on historical transaction data. |
Sheet2
| One Production Department | |||||||||||||||||||||||
| Work-in-Process | Finished Goods | ||||||||||||||||||||||
| Inventory | Inventory | Cost of Goods Sold | |||||||||||||||||||||
| Direct material | Cost of goods completed | Cost of goods sold | |||||||||||||||||||||
| Direct labor | Two Sequential Production Departments | ||||||||||||||||||||||
| Applied manufacturing | and transferred to | Work-in-Process Inventory | Work-in-Process Inventory | ||||||||||||||||||||
| overhead | finished goods | Production Department A | Production Department B | ||||||||||||||||||||
| Direct material | Cost of goods completed in department A and | Cost of goods completed | |||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | transferred to | and transferred to | |||||||||||||||||||||
| overhead | department B | finished goods | |||||||||||||||||||||
| Direct material | |||||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | |||||||||||||||||||||||
| overhead | |||||||||||||||||||||||
| Finished Goods Inventory | Cost of Goods Sold | ||||||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| during current period | |||||||||||||||||||||||
| One Production Department | |||||||||||||||||||||||
| Work-in-Process Inventory | Finished Goods Inventory | ||||||||||||||||||||||
| Direct material | Cost of goods completed | Cost of goods completed | |||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | and transferred to | and transferred to | |||||||||||||||||||||
| overhead | Finished goods | finished goods | |||||||||||||||||||||
| Direct material | |||||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | |||||||||||||||||||||||
| overhead |
Sheet3
| Cost of goods completed and transferred during March | Cost of goods completed and transferred during March | Cost of goods completed and transferred during March | |||||||||||||||||||||||
| 40,000 units x $7.26 per equivalent unit | $ 290,400 | 40,000 units x $7.26 per equivalent unit | $ 290,400 | 40,000 units x $7.26 per equivalent unit | $ 290,400 | ||||||||||||||||||||
| Costs remaining in work-in-process on March 31 | Costs remaining in work-in-process on March 31 | Costs remaining in work-in-process on March 31 | |||||||||||||||||||||||
| Direct Material: | Direct Material: | Direct Material: | |||||||||||||||||||||||
| 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | ||||||||||||||||||||
| Convserion: | Convserion: | Convserion: | |||||||||||||||||||||||
| 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | ||||||||||||||||||||
| Total cost of March 31 work-in-process | 50,300 | Total cost of March 31 work-in-process | 50,300 | Total cost of March 31 work-in-process | 50,300 | ||||||||||||||||||||
| Total costs accounted for | $ 340,700 | Total costs accounted for | $ 340,700 | Total costs accounted for | $ 340,700 | ||||||||||||||||||||
| Cost of goods completed and transferred out of Stitching Dept. during March | |||||||||||||||||||||||||
| 30,000 units x $12.228 per equivalent unit | $ 366,840 | ||||||||||||||||||||||||
| Costs remaining in work-in-process in Stitching Dept. on March 31 | |||||||||||||||||||||||||
| Direct Material: | |||||||||||||||||||||||||
| 20,000 equivalent units x $7.028 per equivalent unit | $ 140,560 | ||||||||||||||||||||||||
| Convserion: | |||||||||||||||||||||||||
| 18,000 equivalent units x $4.95 per equivalent unit | 89,100 | ||||||||||||||||||||||||
| Total cost of March 31 work-in-process | 229,660 | ||||||||||||||||||||||||
| Total costs accounted for | $ 596,500 |
Sheet4
| Conversion | ||||||||||||||
| Physical | Physical | Percentage | Transferred | Direct | ||||||||||
| Units | Units | Completion | In | Material | Conversion | |||||||||
| Work in process, March 1 | 10,000 | Work in process, March 1 | 10,000 | 20% | ||||||||||
| Units transferred in during March | 40,000 | Units transferred in during March | 40,000 | |||||||||||
| Total units to account for | 50,000 | Total units to account for | 50,000 | |||||||||||
| Units completed and transferred out during March | 30,000 | Units completed and transferred out during March | 30,000 | 30,000 | 30,000 | 30,000 | ||||||||
| Work in process, March 31 | 20,000 | Work in process, March 31 | 20,000 | 90% | 20,000 | -0- | 18,000 | |||||||
| Total units accounted for | 50,000 | Total units accounted for | 50,000 | |||||||||||
| Total equivalent units | 50,000 | 30,000 | 48,000 | |||||||||||
| Physical | ||||||||||||||
| Units | ||||||||||||||
| Work in process, March 1 | 10,000 | |||||||||||||
| Units transferred in during March | 40,000 | |||||||||||||
| Total units to account for | 50,000 | |||||||||||||
| Units completed and transferred out during March | 30,000 | |||||||||||||
| Work in process, March 31 | 20,000 | |||||||||||||
| Total units accounted for | 50,000 |
Sheet5
| Work-in-Process Inventory: | Work-in-Process Inventory: | ||||||||||||||||||
| Transferred | Direct | Cutting Department | Stitching Department | ||||||||||||||||
| In | Material | Conversion | Total | Direct material | Cost of goods | Transferred- | |||||||||||||
| completed and | in costs | ||||||||||||||||||
| Work in Process, March 1 | $ 61,000 | -0- | $ 7,600 | $ 68,600 | Conversion: | transferred out | |||||||||||||
| Costs incurred during March | 290,400 | $ 7,500 | 230,000 | 527,900 | Direct labor | Direct material | |||||||||||||
| Total costs to account for | $ 351,400 | $ 7,500 | $ 237,600 | $ 596,500 | Manufacturing | ||||||||||||||
| overhead | Conversion: | ||||||||||||||||||
| Equivalent units | 50,000 | 30,000 | 48,000 | Direct labor | |||||||||||||||
| Cost per equivalent unit | $ 7.028 | $ 0.25 | $ 4.95 | $ 12.228 | Manufacturing | ||||||||||||||
| overhead | |||||||||||||||||||
| $351,400 | $7,500 | $237,600 | $ 7.028 | ||||||||||||||||
| 50,000 | 30,000 | 48,000 | + $.25 | ||||||||||||||||
| + $4.95 |
Sheet6
| MVP SPORTS EQUIPMENT COMPANY | ||||||||
| Production Report: Cutting Department | ||||||||
| Percentage of | ||||||||
| Completion | Equivalent Units | |||||||
| Physical | with Respect to | Direct | ||||||
| Units | Conversion | Material | Conversion | |||||
| Work in process, March 1 | 20,000 | 10% | ||||||
| Units started during March | 30,000 | |||||||
| Total units to account for | 50,000 | |||||||
| Units completed and transferred | 40,000 | 100% | 40,000 | 40,000 | ||||
| Work in process, March 31 | 10,000 | 50% | 10,000 | 5,000 | ||||
| Total units accounted for | 50,000 | |||||||
| Total equivalent units | 50,000 | 45,000 | ||||||
| Direct | ||||||||
| Material | Conversion | Total | ||||||
| Work in Process, March 1 | $ 50,000 | $ 7,200 | $ 57,200 | |||||
| Costs incurred during March | 90,000 | 193,500 | 283,500 | |||||
| Total costs to account for | $ 140,000 | $ 200,700 | $ 340,700 | |||||
| Equivalent units | 50,000 | 45,000 | ||||||
| Cost per equivalent unit | $ 2.80 | $ 4.46 | $ 7.26 | |||||
| Cost of goods completed and transferred during March | ||||||||
| 40,000 units x $7.26 per equivalent unit | $ 290,400 | |||||||
| Costs remaining in work-in-process on March 31 | ||||||||
| Direct Material: | ||||||||
| 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | |||||||
| Conversion: | ||||||||
| 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | |||||||
| Total cost of March 31 work-in-process | 50,300 | |||||||
| Total costs accounted for | $ 340,700 |
Sheet7
| 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 | ||||||||||||||
| Date | Units Shipped | Units Remaining in Inventory | Cost Balance |
Cost of goods completed and transferred during March
40,000 units × $7.26 per equivalent unit290,400$
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units × $2.80 per equivalent unit28,000$
Conversion:
5,000 equivalent units × $4.46 per equivalent unit22,300
Total cost of March 31 work in process50,300
Total costs accounted for340,700$
MBD000FE9F8.xls
Sheet1
| Cost of goods completed and transferred during March | |||
| 40,000 units × $7.26 per equivalent unit | $ 290,400 | ||
| Costs remaining in work-in-process on March 31 | |||
| Direct Material: | |||
| 10,000 equivalent units × $2.80 per equivalent unit | $ 28,000 | ||
| Conversion: | |||
| 5,000 equivalent units × $4.46 per equivalent unit | 22,300 | ||
| Total cost of March 31 work in process | 50,300 | ||
| Total costs accounted for | $ 340,700 |
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Timothy Williams
Job-Order Cost Accounting
3-*
A copy of the material requisition form goes to the cost accounting department. (LO 3-3)
Sheet1
| RoseCo Materials Requisition Form | |||||
| Requisition No. 352 | Date 11/1/x1 | ||||
| Job Number to Be Charged F16 | Dept. Painting | ||||
| Department Supervisor Timothy Williams | |||||
| Item | Quantity | Unit Cost | Amount | ||
| Aluminum | 7,200 sq ft | $ 2.50 | $ 18,000.00 | ||
| Authorized | |||||
| Signature |
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Sheet16
Accumulate direct labor costs by means of a work record, such as a time ticket, for each employee.
Let’s see one
Job-Order Cost Accounting
3-*
The assignment of direct-labor costs to jobs is based on time records filled out by employees. (LO 3-3)
Sheet1
| Managerial Accounting | Financial Accounting | |
| Users of Information | Managers, within the organization. | Interested parties, outside the organization. |
| Regulation | Not required and unregulated, since it is intended only for management. | Required and must conform to generally accepted accounting principles. Regulated by the Financial Accounting Standards Board, and, to a lesser degree, the Securities and Exchange Commission. |
| Source of Data | The organization's basic accounting system, plus various other sources, such as rates of effective products manufactured, physical quantities of material and labor used in production, occupancy rates in hotels and hospitals, and average take-off delays | Almost exclusively drawn from the organization's basic accounting system, which accumulates financial information. |
| Nature of Reports and Procedures | Reports often focus on subunits within the organization, such as departments, divisions, geographical regions, or product lines. Based on a combination of historical data, estimates, and projections of future events. | Reports focus on the enterprise in its entirety. Based almost exclusively on historical transaction data. |
Sheet2
| One Production Department | |||||||||||||||||||||||
| Work-in-Process | Finished Goods | ||||||||||||||||||||||
| Inventory | Inventory | Cost of Goods Sold | |||||||||||||||||||||
| Direct material | Cost of goods completed | Cost of goods sold | |||||||||||||||||||||
| Direct labor | Two Sequential Production Departments | ||||||||||||||||||||||
| Applied manufacturing | and transferred to | Work-in-Process Inventory | Work-in-Process Inventory | ||||||||||||||||||||
| overhead | finished goods | Production Department A | Production Department B | ||||||||||||||||||||
| Direct material | Cost of goods completed in department A and | Cost of goods completed | |||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | transferred to | and transferred to | |||||||||||||||||||||
| overhead | department B | finished goods | |||||||||||||||||||||
| Direct material | |||||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | |||||||||||||||||||||||
| overhead | |||||||||||||||||||||||
| Finished Goods Inventory | Cost of Goods Sold | ||||||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| during current period | |||||||||||||||||||||||
| One Production Department | |||||||||||||||||||||||
| Work-in-Process Inventory | Finished Goods Inventory | ||||||||||||||||||||||
| Direct material | Cost of goods completed | Cost of goods completed | |||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | and transferred to | and transferred to | |||||||||||||||||||||
| overhead | Finished goods | finished goods | |||||||||||||||||||||
| Direct material | |||||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | |||||||||||||||||||||||
| overhead |
Sheet3
| Cost of goods completed and transferred during March | Cost of goods completed and transferred during March | Cost of goods completed and transferred during March | |||||||||||||||||||||||
| 40,000 units x $7.26 per equivalent unit | $ 290,400 | 40,000 units x $7.26 per equivalent unit | $ 290,400 | 40,000 units x $7.26 per equivalent unit | $ 290,400 | ||||||||||||||||||||
| Costs remaining in work-in-process on March 31 | Costs remaining in work-in-process on March 31 | Costs remaining in work-in-process on March 31 | |||||||||||||||||||||||
| Direct Material: | Direct Material: | Direct Material: | |||||||||||||||||||||||
| 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | ||||||||||||||||||||
| Convserion: | Convserion: | Convserion: | |||||||||||||||||||||||
| 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | ||||||||||||||||||||
| Total cost of March 31 work-in-process | 50,300 | Total cost of March 31 work-in-process | 50,300 | Total cost of March 31 work-in-process | 50,300 | ||||||||||||||||||||
| Total costs accounted for | $ 340,700 | Total costs accounted for | $ 340,700 | Total costs accounted for | $ 340,700 | ||||||||||||||||||||
| Cost of goods completed and transferred out of Stitching Dept. during March | |||||||||||||||||||||||||
| 30,000 units x $12.228 per equivalent unit | $ 366,840 | ||||||||||||||||||||||||
| Costs remaining in work-in-process in Stitching Dept. on March 31 | |||||||||||||||||||||||||
| Direct Material: | |||||||||||||||||||||||||
| 20,000 equivalent units x $7.028 per equivalent unit | $ 140,560 | ||||||||||||||||||||||||
| Convserion: | |||||||||||||||||||||||||
| 18,000 equivalent units x $4.95 per equivalent unit | 89,100 | ||||||||||||||||||||||||
| Total cost of March 31 work-in-process | 229,660 | ||||||||||||||||||||||||
| Total costs accounted for | $ 596,500 |
Sheet4
| Conversion | ||||||||||||||
| Physical | Physical | Percentage | Transferred | Direct | ||||||||||
| Units | Units | Completion | In | Material | Conversion | |||||||||
| Work in process, March 1 | 10,000 | Work in process, March 1 | 10,000 | 20% | ||||||||||
| Units transferred in during March | 40,000 | Units transferred in during March | 40,000 | |||||||||||
| Total units to account for | 50,000 | Total units to account for | 50,000 | |||||||||||
| Units completed and transferred out during March | 30,000 | Units completed and transferred out during March | 30,000 | 30,000 | 30,000 | 30,000 | ||||||||
| Work in process, March 31 | 20,000 | Work in process, March 31 | 20,000 | 90% | 20,000 | -0- | 18,000 | |||||||
| Total units accounted for | 50,000 | Total units accounted for | 50,000 | |||||||||||
| Total equivalent units | 50,000 | 30,000 | 48,000 | |||||||||||
| Physical | ||||||||||||||
| Units | ||||||||||||||
| Work in process, March 1 | 10,000 | |||||||||||||
| Units transferred in during March | 40,000 | |||||||||||||
| Total units to account for | 50,000 | |||||||||||||
| Units completed and transferred out during March | 30,000 | |||||||||||||
| Work in process, March 31 | 20,000 | |||||||||||||
| Total units accounted for | 50,000 |
Sheet5
| Work-in-Process Inventory: | Work-in-Process Inventory: | ||||||||||||||||||
| Transferred | Direct | Cutting Department | Stitching Department | ||||||||||||||||
| In | Material | Conversion | Total | Direct material | Cost of goods | Transferred- | |||||||||||||
| completed and | in costs | ||||||||||||||||||
| Work in Process, March 1 | $ 61,000 | -0- | $ 7,600 | $ 68,600 | Conversion: | transferred out | |||||||||||||
| Costs incurred during March | 290,400 | $ 7,500 | 230,000 | 527,900 | Direct labor | Direct material | |||||||||||||
| Total costs to account for | $ 351,400 | $ 7,500 | $ 237,600 | $ 596,500 | Manufacturing | ||||||||||||||
| overhead | Conversion: | ||||||||||||||||||
| Equivalent units | 50,000 | 30,000 | 48,000 | Direct labor | |||||||||||||||
| Cost per equivalent unit | $ 7.028 | $ 0.25 | $ 4.95 | $ 12.228 | Manufacturing | ||||||||||||||
| overhead | |||||||||||||||||||
| $351,400 | $7,500 | $237,600 | $ 7.028 | ||||||||||||||||
| 50,000 | 30,000 | 48,000 | + $.25 | ||||||||||||||||
| + $4.95 |
Sheet6
| MVP SPORTS EQUIPMENT COMPANY | ||||||||
| Production Report: Cutting Department | ||||||||
| Percentage of | ||||||||
| Completion | Equivalent Units | |||||||
| Physical | with Respect to | Direct | ||||||
| Units | Conversion | Material | Conversion | |||||
| Work in process, March 1 | 20,000 | 10% | ||||||
| Units started during March | 30,000 | |||||||
| Total units to account for | 50,000 | |||||||
| Units completed and transferred | 40,000 | 100% | 40,000 | 40,000 | ||||
| Work in process, March 31 | 10,000 | 50% | 10,000 | 5,000 | ||||
| Total units accounted for | 50,000 | |||||||
| Total equivalent units | 50,000 | 45,000 | ||||||
| Direct | ||||||||
| Material | Conversion | Total | ||||||
| Work in Process, March 1 | $ 50,000 | $ 7,200 | $ 57,200 | |||||
| Costs incurred during March | 90,000 | 193,500 | 283,500 | |||||
| Total costs to account for | $ 140,000 | $ 200,700 | $ 340,700 | |||||
| Equivalent units | 50,000 | 45,000 | ||||||
| Cost per equivalent unit | $ 2.80 | $ 4.46 | $ 7.26 | |||||
| Cost of goods completed and transferred during March | ||||||||
| 40,000 units x $7.26 per equivalent unit | $ 290,400 | |||||||
| Costs remaining in work-in-process on March 31 | ||||||||
| Direct Material: | ||||||||
| 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | |||||||
| Conversion: | ||||||||
| 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | |||||||
| Total cost of March 31 work-in-process | 50,300 | |||||||
| Total costs accounted for | $ 340,700 |
Sheet7
| 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 | ||||||||||
| 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 | ||||||||||||||
| Date | Units Shipped | Units Remaining in Inventory | Cost Balance |
Cost of goods completed and transferred during March
40,000 units × $7.26 per equivalent unit290,400$
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units × $2.80 per equivalent unit28,000$
Conversion:
5,000 equivalent units × $4.46 per equivalent unit22,300
Total cost of March 31 work in process50,300
Total costs accounted for340,700$
MBD000FE9F8.xls
Sheet1
| Cost of goods completed and transferred during March | |||
| 40,000 units × $7.26 per equivalent unit | $ 290,400 | ||
| Costs remaining in work-in-process on March 31 | |||
| Direct Material: | |||
| 10,000 equivalent units × $2.80 per equivalent unit | $ 28,000 | ||
| Conversion: | |||
| 5,000 equivalent units × $4.46 per equivalent unit | 22,300 | ||
| Total cost of March 31 work in process | 50,300 | ||
| Total costs accounted for | $ 340,700 |
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Employee Time Ticket
3-*
A time record is a form that records the amount of time an employee spends on each production job. (LO 3-3)
Sheet1
| Employee | Ron Bradley | Date 11/5/20x1 | |||||
| Employee Number 12 | Department Painting | ||||||
| Station | |||||||
| Time Started | Time Stopped | Job Number | |||||
| 8:00 | 11:30 | F16 | |||||
| 11:30 | 12:00 | Shop cleanup | |||||
| 1:00 | 5:00 | A26 | |||||
| Totals | 8.00 | $ 11.00 | $ 88.00 | A-143 |
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Apply manufacturing overhead to jobs using a
predetermined overhead rate based on direct labor hours (DLH).
Let’s do it
Job-Order Cost Accounting
3-*
Manufacturing overhead is a pool of indirect production costs, such as indirect material, indirect labor, utility costs, and depreciation. These costs often bear no obvious relationship to individual jobs or units of product, but they must be incurred for production to take place. (LO 3-3)
Sheet1
| Managerial Accounting | Financial Accounting | |
| Users of Information | Managers, within the organization. | Interested parties, outside the organization. |
| Regulation | Not required and unregulated, since it is intended only for management. | Required and must conform to generally accepted accounting principles. Regulated by the Financial Accounting Standards Board, and, to a lesser degree, the Securities and Exchange Commission. |
| Source of Data | The organization's basic accounting system, plus various other sources, such as rates of effective products manufactured, physical quantities of material and labor used in production, occupancy rates in hotels and hospitals, and average take-off delays | Almost exclusively drawn from the organization's basic accounting system, which accumulates financial information. |
| Nature of Reports and Procedures | Reports often focus on subunits within the organization, such as departments, divisions, geographical regions, or product lines. Based on a combination of historical data, estimates, and projections of future events. | Reports focus on the enterprise in its entirety. Based almost exclusively on historical transaction data. |
Sheet2
| One Production Department | |||||||||||||||||||||||
| Work-in-Process | Finished Goods | ||||||||||||||||||||||
| Inventory | Inventory | Cost of Goods Sold | |||||||||||||||||||||
| Direct material | Cost of goods completed | Cost of goods sold | |||||||||||||||||||||
| Direct labor | Two Sequential Production Departments | ||||||||||||||||||||||
| Applied manufacturing | and transferred to | Work-in-Process Inventory | Work-in-Process Inventory | ||||||||||||||||||||
| overhead | finished goods | Production Department A | Production Department B | ||||||||||||||||||||
| Direct material | Cost of goods completed in department A and | Cost of goods completed | |||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | transferred to | and transferred to | |||||||||||||||||||||
| overhead | department B | finished goods | |||||||||||||||||||||
| Direct material | |||||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | |||||||||||||||||||||||
| overhead | |||||||||||||||||||||||
| Finished Goods Inventory | Cost of Goods Sold | ||||||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| during current period | |||||||||||||||||||||||
| One Production Department | |||||||||||||||||||||||
| Work-in-Process Inventory | Finished Goods Inventory | ||||||||||||||||||||||
| Direct material | Cost of goods completed | Cost of goods completed | |||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | and transferred to | and transferred to | |||||||||||||||||||||
| overhead | Finished goods | finished goods | |||||||||||||||||||||
| Direct material | |||||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | |||||||||||||||||||||||
| overhead |
Sheet3
| Cost of goods completed and transferred during March | Cost of goods completed and transferred during March | Cost of goods completed and transferred during March | |||||||||||||||||||||||
| 40,000 units x $7.26 per equivalent unit | $ 290,400 | 40,000 units x $7.26 per equivalent unit | $ 290,400 | 40,000 units x $7.26 per equivalent unit | $ 290,400 | ||||||||||||||||||||
| Costs remaining in work-in-process on March 31 | Costs remaining in work-in-process on March 31 | Costs remaining in work-in-process on March 31 | |||||||||||||||||||||||
| Direct Material: | Direct Material: | Direct Material: | |||||||||||||||||||||||
| 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | ||||||||||||||||||||
| Convserion: | Convserion: | Convserion: | |||||||||||||||||||||||
| 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | ||||||||||||||||||||
| Total cost of March 31 work-in-process | 50,300 | Total cost of March 31 work-in-process | 50,300 | Total cost of March 31 work-in-process | 50,300 | ||||||||||||||||||||
| Total costs accounted for | $ 340,700 | Total costs accounted for | $ 340,700 | Total costs accounted for | $ 340,700 | ||||||||||||||||||||
| Cost of goods completed and transferred out of Stitching Dept. during March | |||||||||||||||||||||||||
| 30,000 units x $12.228 per equivalent unit | $ 366,840 | ||||||||||||||||||||||||
| Costs remaining in work-in-process in Stitching Dept. on March 31 | |||||||||||||||||||||||||
| Direct Material: | |||||||||||||||||||||||||
| 20,000 equivalent units x $7.028 per equivalent unit | $ 140,560 | ||||||||||||||||||||||||
| Convserion: | |||||||||||||||||||||||||
| 18,000 equivalent units x $4.95 per equivalent unit | 89,100 | ||||||||||||||||||||||||
| Total cost of March 31 work-in-process | 229,660 | ||||||||||||||||||||||||
| Total costs accounted for | $ 596,500 |
Sheet4
| Conversion | ||||||||||||||
| Physical | Physical | Percentage | Transferred | Direct | ||||||||||
| Units | Units | Completion | In | Material | Conversion | |||||||||
| Work in process, March 1 | 10,000 | Work in process, March 1 | 10,000 | 20% | ||||||||||
| Units transferred in during March | 40,000 | Units transferred in during March | 40,000 | |||||||||||
| Total units to account for | 50,000 | Total units to account for | 50,000 | |||||||||||
| Units completed and transferred out during March | 30,000 | Units completed and transferred out during March | 30,000 | 30,000 | 30,000 | 30,000 | ||||||||
| Work in process, March 31 | 20,000 | Work in process, March 31 | 20,000 | 90% | 20,000 | -0- | 18,000 | |||||||
| Total units accounted for | 50,000 | Total units accounted for | 50,000 | |||||||||||
| Total equivalent units | 50,000 | 30,000 | 48,000 | |||||||||||
| Physical | ||||||||||||||
| Units | ||||||||||||||
| Work in process, March 1 | 10,000 | |||||||||||||
| Units transferred in during March | 40,000 | |||||||||||||
| Total units to account for | 50,000 | |||||||||||||
| Units completed and transferred out during March | 30,000 | |||||||||||||
| Work in process, March 31 | 20,000 | |||||||||||||
| Total units accounted for | 50,000 |
Sheet5
| Work-in-Process Inventory: | Work-in-Process Inventory: | ||||||||||||||||||
| Transferred | Direct | Cutting Department | Stitching Department | ||||||||||||||||
| In | Material | Conversion | Total | Direct material | Cost of goods | Transferred- | |||||||||||||
| completed and | in costs | ||||||||||||||||||
| Work in Process, March 1 | $ 61,000 | -0- | $ 7,600 | $ 68,600 | Conversion: | transferred out | |||||||||||||
| Costs incurred during March | 290,400 | $ 7,500 | 230,000 | 527,900 | Direct labor | Direct material | |||||||||||||
| Total costs to account for | $ 351,400 | $ 7,500 | $ 237,600 | $ 596,500 | Manufacturing | ||||||||||||||
| overhead | Conversion: | ||||||||||||||||||
| Equivalent units | 50,000 | 30,000 | 48,000 | Direct labor | |||||||||||||||
| Cost per equivalent unit | $ 7.028 | $ 0.25 | $ 4.95 | $ 12.228 | Manufacturing | ||||||||||||||
| overhead | |||||||||||||||||||
| $351,400 | $7,500 | $237,600 | $ 7.028 | ||||||||||||||||
| 50,000 | 30,000 | 48,000 | + $.25 | ||||||||||||||||
| + $4.95 |
Sheet6
| MVP SPORTS EQUIPMENT COMPANY | ||||||||
| Production Report: Cutting Department | ||||||||
| Percentage of | ||||||||
| Completion | Equivalent Units | |||||||
| Physical | with Respect to | Direct | ||||||
| Units | Conversion | Material | Conversion | |||||
| Work in process, March 1 | 20,000 | 10% | ||||||
| Units started during March | 30,000 | |||||||
| Total units to account for | 50,000 | |||||||
| Units completed and transferred | 40,000 | 100% | 40,000 | 40,000 | ||||
| Work in process, March 31 | 10,000 | 50% | 10,000 | 5,000 | ||||
| Total units accounted for | 50,000 | |||||||
| Total equivalent units | 50,000 | 45,000 | ||||||
| Direct | ||||||||
| Material | Conversion | Total | ||||||
| Work in Process, March 1 | $ 50,000 | $ 7,200 | $ 57,200 | |||||
| Costs incurred during March | 90,000 | 193,500 | 283,500 | |||||
| Total costs to account for | $ 140,000 | $ 200,700 | $ 340,700 | |||||
| Equivalent units | 50,000 | 45,000 | ||||||
| Cost per equivalent unit | $ 2.80 | $ 4.46 | $ 7.26 | |||||
| Cost of goods completed and transferred during March | ||||||||
| 40,000 units x $7.26 per equivalent unit | $ 290,400 | |||||||
| Costs remaining in work-in-process on March 31 | ||||||||
| Direct Material: | ||||||||
| 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | |||||||
| Conversion: | ||||||||
| 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | |||||||
| Total cost of March 31 work-in-process | 50,300 | |||||||
| Total costs accounted for | $ 340,700 |
Sheet7
| 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 | |||||||||||||
| Total direct labor | 12,000 | |||||||||||||
| Total manufacturing overhead | ||||||||||||||
| Total cost | ||||||||||||||
| Unit cost | ||||||||||||||
| Shipping Summary | ||||||||||||||
| Date | Units Shipped | Units Remaining in Inventory | Cost Balance |
Cost of goods completed and transferred during March
40,000 units × $7.26 per equivalent unit290,400$
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units × $2.80 per equivalent unit28,000$
Conversion:
5,000 equivalent units × $4.46 per equivalent unit22,300
Total cost of March 31 work in process50,300
Total costs accounted for340,700$
MBD000FE9F8.xls
Sheet1
| Cost of goods completed and transferred during March | |||
| 40,000 units × $7.26 per equivalent unit | $ 290,400 | ||
| Costs remaining in work-in-process on March 31 | |||
| Direct Material: | |||
| 10,000 equivalent units × $2.80 per equivalent unit | $ 28,000 | ||
| Conversion: | |||
| 5,000 equivalent units × $4.46 per equivalent unit | 22,300 | ||
| Total cost of March 31 work in process | 50,300 | ||
| Total costs accounted for | $ 340,700 |
Sheet2
Sheet3
Sheet4
Sheet5
Sheet6
Sheet7
Sheet8
Sheet9
Sheet10
Sheet11
Sheet12
Sheet13
Sheet14
Sheet15
Sheet16
Job-Order Cost Accounting
3-*
Therefore, it is necessary to assign manufacturing-overhead costs to jobs in order to have a complete picture of product costs. This process of assigning manufacturing-overhead costs to production jobs is called overhead application. A predetermined overhead rate is used to apply overhead on the job-cost record. (LO 3-3)
Sheet1
| Managerial Accounting | Financial Accounting | |
| Users of Information | Managers, within the organization. | Interested parties, outside the organization. |
| Regulation | Not required and unregulated, since it is intended only for management. | Required and must conform to generally accepted accounting principles. Regulated by the Financial Accounting Standards Board, and, to a lesser degree, the Securities and Exchange Commission. |
| Source of Data | The organization's basic accounting system, plus various other sources, such as rates of effective products manufactured, physical quantities of material and labor used in production, occupancy rates in hotels and hospitals, and average take-off delays | Almost exclusively drawn from the organization's basic accounting system, which accumulates financial information. |
| Nature of Reports and Procedures | Reports often focus on subunits within the organization, such as departments, divisions, geographical regions, or product lines. Based on a combination of historical data, estimates, and projections of future events. | Reports focus on the enterprise in its entirety. Based almost exclusively on historical transaction data. |
Sheet2
| One Production Department | |||||||||||||||||||||||
| Work-in-Process | Finished Goods | ||||||||||||||||||||||
| Inventory | Inventory | Cost of Goods Sold | |||||||||||||||||||||
| Direct material | Cost of goods completed | Cost of goods sold | |||||||||||||||||||||
| Direct labor | Two Sequential Production Departments | ||||||||||||||||||||||
| Applied manufacturing | and transferred to | Work-in-Process Inventory | Work-in-Process Inventory | ||||||||||||||||||||
| overhead | finished goods | Production Department A | Production Department B | ||||||||||||||||||||
| Direct material | Cost of goods completed in department A and | Cost of goods completed | |||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | transferred to | and transferred to | |||||||||||||||||||||
| overhead | department B | finished goods | |||||||||||||||||||||
| Direct material | |||||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | |||||||||||||||||||||||
| overhead | |||||||||||||||||||||||
| Finished Goods Inventory | Cost of Goods Sold | ||||||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| during current period | |||||||||||||||||||||||
| One Production Department | |||||||||||||||||||||||
| Work-in-Process Inventory | Finished Goods Inventory | ||||||||||||||||||||||
| Direct material | Cost of goods completed | Cost of goods completed | |||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | and transferred to | and transferred to | |||||||||||||||||||||
| overhead | Finished goods | finished goods | |||||||||||||||||||||
| Direct material | |||||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | |||||||||||||||||||||||
| overhead |
Sheet3
| Cost of goods completed and transferred during March | Cost of goods completed and transferred during March | Cost of goods completed and transferred during March | |||||||||||||||||||||||
| 40,000 units x $7.26 per equivalent unit | $ 290,400 | 40,000 units x $7.26 per equivalent unit | $ 290,400 | 40,000 units x $7.26 per equivalent unit | $ 290,400 | ||||||||||||||||||||
| Costs remaining in work-in-process on March 31 | Costs remaining in work-in-process on March 31 | Costs remaining in work-in-process on March 31 | |||||||||||||||||||||||
| Direct Material: | Direct Material: | Direct Material: | |||||||||||||||||||||||
| 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | ||||||||||||||||||||
| Convserion: | Convserion: | Convserion: | |||||||||||||||||||||||
| 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | ||||||||||||||||||||
| Total cost of March 31 work-in-process | 50,300 | Total cost of March 31 work-in-process | 50,300 | Total cost of March 31 work-in-process | 50,300 | ||||||||||||||||||||
| Total costs accounted for | $ 340,700 | Total costs accounted for | $ 340,700 | Total costs accounted for | $ 340,700 | ||||||||||||||||||||
| Cost of goods completed and transferred out of Stitching Dept. during March | |||||||||||||||||||||||||
| 30,000 units x $12.228 per equivalent unit | $ 366,840 | ||||||||||||||||||||||||
| Costs remaining in work-in-process in Stitching Dept. on March 31 | |||||||||||||||||||||||||
| Direct Material: | |||||||||||||||||||||||||
| 20,000 equivalent units x $7.028 per equivalent unit | $ 140,560 | ||||||||||||||||||||||||
| Convserion: | |||||||||||||||||||||||||
| 18,000 equivalent units x $4.95 per equivalent unit | 89,100 | ||||||||||||||||||||||||
| Total cost of March 31 work-in-process | 229,660 | ||||||||||||||||||||||||
| Total costs accounted for | $ 596,500 |
Sheet4
| Conversion | ||||||||||||||
| Physical | Physical | Percentage | Transferred | Direct | ||||||||||
| Units | Units | Completion | In | Material | Conversion | |||||||||
| Work in process, March 1 | 10,000 | Work in process, March 1 | 10,000 | 20% | ||||||||||
| Units transferred in during March | 40,000 | Units transferred in during March | 40,000 | |||||||||||
| Total units to account for | 50,000 | Total units to account for | 50,000 | |||||||||||
| Units completed and transferred out during March | 30,000 | Units completed and transferred out during March | 30,000 | 30,000 | 30,000 | 30,000 | ||||||||
| Work in process, March 31 | 20,000 | Work in process, March 31 | 20,000 | 90% | 20,000 | -0- | 18,000 | |||||||
| Total units accounted for | 50,000 | Total units accounted for | 50,000 | |||||||||||
| Total equivalent units | 50,000 | 30,000 | 48,000 | |||||||||||
| Physical | ||||||||||||||
| Units | ||||||||||||||
| Work in process, March 1 | 10,000 | |||||||||||||
| Units transferred in during March | 40,000 | |||||||||||||
| Total units to account for | 50,000 | |||||||||||||
| Units completed and transferred out during March | 30,000 | |||||||||||||
| Work in process, March 31 | 20,000 | |||||||||||||
| Total units accounted for | 50,000 |
Sheet5
| Work-in-Process Inventory: | Work-in-Process Inventory: | ||||||||||||||||||
| Transferred | Direct | Cutting Department | Stitching Department | ||||||||||||||||
| In | Material | Conversion | Total | Direct material | Cost of goods | Transferred- | |||||||||||||
| completed and | in costs | ||||||||||||||||||
| Work in Process, March 1 | $ 61,000 | -0- | $ 7,600 | $ 68,600 | Conversion: | transferred out | |||||||||||||
| Costs incurred during March | 290,400 | $ 7,500 | 230,000 | 527,900 | Direct labor | Direct material | |||||||||||||
| Total costs to account for | $ 351,400 | $ 7,500 | $ 237,600 | $ 596,500 | Manufacturing | ||||||||||||||
| overhead | Conversion: | ||||||||||||||||||
| Equivalent units | 50,000 | 30,000 | 48,000 | Direct labor | |||||||||||||||
| Cost per equivalent unit | $ 7.028 | $ 0.25 | $ 4.95 | $ 12.228 | Manufacturing | ||||||||||||||
| overhead | |||||||||||||||||||
| $351,400 | $7,500 | $237,600 | $ 7.028 | ||||||||||||||||
| 50,000 | 30,000 | 48,000 | + $.25 | ||||||||||||||||
| + $4.95 |
Sheet6
| MVP SPORTS EQUIPMENT COMPANY | ||||||||
| Production Report: Cutting Department | ||||||||
| Percentage of | ||||||||
| Completion | Equivalent Units | |||||||
| Physical | with Respect to | Direct | ||||||
| Units | Conversion | Material | Conversion | |||||
| Work in process, March 1 | 20,000 | 10% | ||||||
| Units started during March | 30,000 | |||||||
| Total units to account for | 50,000 | |||||||
| Units completed and transferred | 40,000 | 100% | 40,000 | 40,000 | ||||
| Work in process, March 31 | 10,000 | 50% | 10,000 | 5,000 | ||||
| Total units accounted for | 50,000 | |||||||
| Total equivalent units | 50,000 | 45,000 | ||||||
| Direct | ||||||||
| Material | Conversion | Total | ||||||
| Work in Process, March 1 | $ 50,000 | $ 7,200 | $ 57,200 | |||||
| Costs incurred during March | 90,000 | 193,500 | 283,500 | |||||
| Total costs to account for | $ 140,000 | $ 200,700 | $ 340,700 | |||||
| Equivalent units | 50,000 | 45,000 | ||||||
| Cost per equivalent unit | $ 2.80 | $ 4.46 | $ 7.26 | |||||
| Cost of goods completed and transferred during March | ||||||||
| 40,000 units x $7.26 per equivalent unit | $ 290,400 | |||||||
| Costs remaining in work-in-process on March 31 | ||||||||
| Direct Material: | ||||||||
| 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | |||||||
| Conversion: | ||||||||
| 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | |||||||
| Total cost of March 31 work-in-process | 50,300 | |||||||
| Total costs accounted for | $ 340,700 |
Sheet7
| 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 | ||||||||||||||
| Date | Units Shipped | Units Remaining in Inventory | Cost Balance |
Cost of goods completed and transferred during March
40,000 units × $7.26 per equivalent unit290,400$
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units × $2.80 per equivalent unit28,000$
Conversion:
5,000 equivalent units × $4.46 per equivalent unit22,300
Total cost of March 31 work in process50,300
Total costs accounted for340,700$
MBD000FE9F8.xls
Sheet1
| Cost of goods completed and transferred during March | |||
| 40,000 units × $7.26 per equivalent unit | $ 290,400 | ||
| Costs remaining in work-in-process on March 31 | |||
| Direct Material: | |||
| 10,000 equivalent units × $2.80 per equivalent unit | $ 28,000 | ||
| Conversion: | |||
| 5,000 equivalent units × $4.46 per equivalent unit | 22,300 | ||
| Total cost of March 31 work in process | 50,300 | ||
| Total costs accounted for | $ 340,700 |
Sheet2
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Sheet7
Sheet8
Sheet9
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Sheet11
Sheet12
Sheet13
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Sheet15
Sheet16
Overhead is applied to jobs using a predetermined overhead rate based on estimates made at the beginning of the accounting period.
Overhead applied = Rate × Actual activity
Based on estimates, and determined before the period begins
Actual amount of the allocation base, such as direct labor hours, incurred during the period
Manufacturing Overhead Costs
3-*
Predetermined
Rate =
Budgeted manufacturing overhead cost
Budgeted amount of cost driver (or activity base)
The accounting department chooses some measure of productive activity to use as the basis for overhead application. In traditional product-costing systems, this measure is usually some volume-based cost driver (or activity base), such as direct-labor hours, direct-labor cost, or machine hours. An estimate is made of (1) the amount of manufacturing overhead that will be incurred during a specified period of time and (2) the amount of the cost driver (or activity base) that will be used or incurred during the same time period. (LO 3-4)
Job-Order Cost Accounting
3-*
Reviewer (R) - Slide 19 NN First sentence: Added a comma after the word 'costs' (total direct labor costs).
Once manufacturing overhead has been applied, the cost summary can be completed. Total direct material costs, total direct labor costs, and total manufacturing overhead costs are added together to determine total costs. These costs are divided by the number of units completed to arrive at the unit cost. (LO 3-3)
Sheet1
| Managerial Accounting | Financial Accounting | |
| Users of Information | Managers, within the organization. | Interested parties, outside the organization. |
| Regulation | Not required and unregulated, since it is intended only for management. | Required and must conform to generally accepted accounting principles. Regulated by the Financial Accounting Standards Board, and, to a lesser degree, the Securities and Exchange Commission. |
| Source of Data | The organization's basic accounting system, plus various other sources, such as rates of effective products manufactured, physical quantities of material and labor used in production, occupancy rates in hotels and hospitals, and average take-off delays | Almost exclusively drawn from the organization's basic accounting system, which accumulates financial information. |
| Nature of Reports and Procedures | Reports often focus on subunits within the organization, such as departments, divisions, geographical regions, or product lines. Based on a combination of historical data, estimates, and projections of future events. | Reports focus on the enterprise in its entirety. Based almost exclusively on historical transaction data. |
Sheet2
| One Production Department | |||||||||||||||||||||||
| Work-in-Process | Finished Goods | ||||||||||||||||||||||
| Inventory | Inventory | Cost of Goods Sold | |||||||||||||||||||||
| Direct material | Cost of goods completed | Cost of goods sold | |||||||||||||||||||||
| Direct labor | Two Sequential Production Departments | ||||||||||||||||||||||
| Applied manufacturing | and transferred to | Work-in-Process Inventory | Work-in-Process Inventory | ||||||||||||||||||||
| overhead | finished goods | Production Department A | Production Department B | ||||||||||||||||||||
| Direct material | Cost of goods completed in department A and | Cost of goods completed | |||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | transferred to | and transferred to | |||||||||||||||||||||
| overhead | department B | finished goods | |||||||||||||||||||||
| Direct material | |||||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | |||||||||||||||||||||||
| overhead | |||||||||||||||||||||||
| Finished Goods Inventory | Cost of Goods Sold | ||||||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| during current period | |||||||||||||||||||||||
| One Production Department | |||||||||||||||||||||||
| Work-in-Process Inventory | Finished Goods Inventory | ||||||||||||||||||||||
| Direct material | Cost of goods completed | Cost of goods completed | |||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | and transferred to | and transferred to | |||||||||||||||||||||
| overhead | Finished goods | finished goods | |||||||||||||||||||||
| Direct material | |||||||||||||||||||||||
| Direct labor | |||||||||||||||||||||||
| Applied manufacturing | |||||||||||||||||||||||
| overhead |
Sheet3
| Cost of goods completed and transferred during March | Cost of goods completed and transferred during March | Cost of goods completed and transferred during March | |||||||||||||||||||||||
| 40,000 units x $7.26 per equivalent unit | $ 290,400 | 40,000 units x $7.26 per equivalent unit | $ 290,400 | 40,000 units x $7.26 per equivalent unit | $ 290,400 | ||||||||||||||||||||
| Costs remaining in work-in-process on March 31 | Costs remaining in work-in-process on March 31 | Costs remaining in work-in-process on March 31 | |||||||||||||||||||||||
| Direct Material: | Direct Material: | Direct Material: | |||||||||||||||||||||||
| 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | ||||||||||||||||||||
| Convserion: | Convserion: | Convserion: | |||||||||||||||||||||||
| 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | ||||||||||||||||||||
| Total cost of March 31 work-in-process | 50,300 | Total cost of March 31 work-in-process | 50,300 | Total cost of March 31 work-in-process | 50,300 | ||||||||||||||||||||
| Total costs accounted for | $ 340,700 | Total costs accounted for | $ 340,700 | Total costs accounted for | $ 340,700 | ||||||||||||||||||||
| Cost of goods completed and transferred out of Stitching Dept. during March | |||||||||||||||||||||||||
| 30,000 units x $12.228 per equivalent unit | $ 366,840 | ||||||||||||||||||||||||
| Costs remaining in work-in-process in Stitching Dept. on March 31 | |||||||||||||||||||||||||
| Direct Material: | |||||||||||||||||||||||||
| 20,000 equivalent units x $7.028 per equivalent unit | $ 140,560 | ||||||||||||||||||||||||
| Convserion: | |||||||||||||||||||||||||
| 18,000 equivalent units x $4.95 per equivalent unit | 89,100 | ||||||||||||||||||||||||
| Total cost of March 31 work-in-process | 229,660 | ||||||||||||||||||||||||
| Total costs accounted for | $ 596,500 |
Sheet4
| Conversion | ||||||||||||||
| Physical | Physical | Percentage | Transferred | Direct | ||||||||||
| Units | Units | Completion | In | Material | Conversion | |||||||||
| Work in process, March 1 | 10,000 | Work in process, March 1 | 10,000 | 20% | ||||||||||
| Units transferred in during March | 40,000 | Units transferred in during March | 40,000 | |||||||||||
| Total units to account for | 50,000 | Total units to account for | 50,000 | |||||||||||
| Units completed and transferred out during March | 30,000 | Units completed and transferred out during March | 30,000 | 30,000 | 30,000 | 30,000 | ||||||||
| Work in process, March 31 | 20,000 | Work in process, March 31 | 20,000 | 90% | 20,000 | -0- | 18,000 | |||||||
| Total units accounted for | 50,000 | Total units accounted for | 50,000 | |||||||||||
| Total equivalent units | 50,000 | 30,000 | 48,000 | |||||||||||
| Physical | ||||||||||||||
| Units | ||||||||||||||
| Work in process, March 1 | 10,000 | |||||||||||||
| Units transferred in during March | 40,000 | |||||||||||||
| Total units to account for | 50,000 | |||||||||||||
| Units completed and transferred out during March | 30,000 | |||||||||||||
| Work in process, March 31 | 20,000 | |||||||||||||
| Total units accounted for | 50,000 |
Sheet5
| Work-in-Process Inventory: | Work-in-Process Inventory: | ||||||||||||||||||
| Transferred | Direct | Cutting Department | Stitching Department | ||||||||||||||||
| In | Material | Conversion | Total | Direct material | Cost of goods | Transferred- | |||||||||||||
| completed and | in costs | ||||||||||||||||||
| Work in Process, March 1 | $ 61,000 | -0- | $ 7,600 | $ 68,600 | Conversion: | transferred out | |||||||||||||
| Costs incurred during March | 290,400 | $ 7,500 | 230,000 | 527,900 | Direct labor | Direct material | |||||||||||||
| Total costs to account for | $ 351,400 | $ 7,500 | $ 237,600 | $ 596,500 | Manufacturing | ||||||||||||||
| overhead | Conversion: | ||||||||||||||||||
| Equivalent units | 50,000 | 30,000 | 48,000 | Direct labor | |||||||||||||||
| Cost per equivalent unit | $ 7.028 | $ 0.25 | $ 4.95 | $ 12.228 | Manufacturing | ||||||||||||||
| overhead | |||||||||||||||||||
| $351,400 | $7,500 | $237,600 | $ 7.028 | ||||||||||||||||
| 50,000 | 30,000 | 48,000 | + $.25 | ||||||||||||||||
| + $4.95 |
Sheet6
| MVP SPORTS EQUIPMENT COMPANY | ||||||||
| Production Report: Cutting Department | ||||||||
| Percentage of | ||||||||
| Completion | Equivalent Units | |||||||
| Physical | with Respect to | Direct | ||||||
| Units | Conversion | Material | Conversion | |||||
| Work in process, March 1 | 20,000 | 10% | ||||||
| Units started during March | 30,000 | |||||||
| Total units to account for | 50,000 | |||||||
| Units completed and transferred | 40,000 | 100% | 40,000 | 40,000 | ||||
| Work in process, March 31 | 10,000 | 50% | 10,000 | 5,000 | ||||
| Total units accounted for | 50,000 | |||||||
| Total equivalent units | 50,000 | 45,000 | ||||||
| Direct | ||||||||
| Material | Conversion | Total | ||||||
| Work in Process, March 1 | $ 50,000 | $ 7,200 | $ 57,200 | |||||
| Costs incurred during March | 90,000 | 193,500 | 283,500 | |||||
| Total costs to account for | $ 140,000 | $ 200,700 | $ 340,700 | |||||
| Equivalent units | 50,000 | 45,000 | ||||||
| Cost per equivalent unit | $ 2.80 | $ 4.46 | $ 7.26 | |||||
| Cost of goods completed and transferred during March | ||||||||
| 40,000 units x $7.26 per equivalent unit | $ 290,400 | |||||||
| Costs remaining in work-in-process on March 31 | ||||||||
| Direct Material: | ||||||||
| 10,000 equivalent units x $2.80 per equivalent unit | $ 28,000 | |||||||
| Conversion: | ||||||||
| 5,000 equivalent units x $4.46 per equivalent unit | 22,300 | |||||||
| Total cost of March 31 work-in-process | 50,300 | |||||||
| Total costs accounted for | $ 340,700 |
Sheet7
| 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 | ||||||||||||||
| Date | Units Shipped | Units Remaining in Inventory | Cost Balance | |||||||||||
| 11/30 | 60 | 20 | $12,000 |
Cost of goods completed and transferred during March
40,000 units × $7.26 per equivalent unit290,400$
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units × $2.80 per equivalent unit28,000$
Conversion:
5,000 equivalent units × $4.46 per equivalent unit22,300
Total cost of March 31 work in process50,300
Total costs accounted for340,700$
MBD000FE9F8.xls
Sheet1
| Cost of goods completed and transferred during March | |||
| 40,000 units × $7.26 per equivalent unit | $ 290,400 | ||
| Costs remaining in work-in-process on March 31 | |||
| Direct Material: | |||
| 10,000 equivalent units × $2.80 per equivalent unit | $ 28,000 | ||
| Conversion: | |||
| 5,000 equivalent units × $4.46 per equivalent unit | 22,300 | ||
| Total cost of March 31 work in process | 50,300 | ||
| Total costs accounted for | $ 340,700 |
Sheet2
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Sheet15
Sheet16
Overhead is applied to jobs using a predetermined overhead rate (POHR) based on estimates made at the beginning of the accounting period.
$360,000 / 40,000 hours = $9 per machine hour
Overhead applied = Hours on Job = 30 X $9 per hour = $270
Manufacturing Overhead Costs
3-*
Rate =
Budgeted manufacturing overhead cost
Budgeted amount of cost driver (or activity base)
Reviewer (R) - Slide 23 Bottom text box: Added a space after the value '30.'
So if we assume that the company has budgeted manufacturing overhead for the period of $360,000 and they expect to use a total of 40,000 machine hours over that same period, then the pre-determined rate would be computed by taking the estimated overhead of $360,000 and dividing it by the number of machine hours to be used over that same period – in this case 40,000 hours. This equates to a rate of $9 per machine hour that will be used to charge overhead to all of the jobs. If one specific job took 30 machine hours to complete, then a total of $270 or 30 hours multiplied by 9 per hour would be charged to the job. (LO 3-4)
Production Order for Job
The materials requisition indicates the cost of direct material to charge to jobs and the cost of indirect material to charge to overhead.
Material Requisition
The production order for the job authorizes the start of the production process.
Labor Time Records
Employee time tickets indicate the cost of direct labor to charge to jobs and the cost of indirect labor to charge to overhead.
Actual Cost Driver (or Activity Base)
X
Predetermined Overhead Rate
Apply Manufacturing Overhead
Job-Order Costing
Document Flow Summary
3-*
The production order for the job authorizes the start of the production process. The materials requisition form identifies the amount of direct material to add to the job-cost records and the amount of indirect materials to add to the manufacturing overhead account.
The employee time tickets identity the amount of direct labor to add to the job-cost records and the amount of indirect labor to add to the manufacturing overhead account.
Overhead is applied to the job-cost records using some cost driver or activity base and a predetermined overhead rate.
Let’s examine the cost flows in a job-order costing system. We will use T-accounts and start with materials. (LO 3-5)
Journal Entry
Purchases of Raw Materials
A company worked on two jobs during the accounting cycle. One of the jobs involved making 80 deluxe models and another job involved making 80 standard models. During the month, the company purchased, on account, $38,000 worth of materials and parts to be used in the manufacturing operation. The journal entry to record the purchase of the materials on account is shown. (LO 3-5)
Journal Entry
Use of Direct Materials
During the month, materials were requisitioned for use to manufacture the products. One job (Job D42) requisitioned $34,000 of direct materials and the second job (Job S116) requisitioned $28,000 of direct materials. The journal entries record the release of the materials requested into production. (LO 3-5)
Journal Entry
Use of Indirect Materials
Reviewer (R) - Slide 29 NN First sentence: Added a comma after the word 'month.'
During the month, indirect materials were requisitioned into use. These materials are used on all types of jobs and the cost incurred is relatively small. Since the amounts cannot be easily traced to specific jobs, the company makes the decision to charge the amounts to the Manufacturing Overhead account. (An example of such a material would be epoxy or glue products.) (LO 3-5)
Journal Entry
Use of Direct Labor
Reviewer (R) - Slide 32 & Slide 32 NN CORRECTION REQUIRED This slide and the narration notes does not make sense. The slide shows $31,000, while the narration notes discusses $28,000 ($16,000 + $12,000).
The cost accounting department uses the labor time records filed during the month to determine the following direct labor costs of all jobs. One job (Job D42) used $16,000 worth of direct labor costs and the other job (Job S116) used $12,000 of direct labor costs. The journal entry to record these costs is shown. (LO 3-5)
Journal Entry
Use of Indirect Labor
The analysis of labor time records also revealed that the company incurred $14,000 of labor costs that were not charged out to any particular job. This labor cost comprises some production supervisor time and wages of various employees who spent some of their time on maintenance and general clean up of the factory. This journal entry records the indirect labor costs to manufacturing overhead. (LO 3-5)
Journal Entry
Manufacturing Costs Incurred
The company incurred various overhead costs or indirect production costs provided during the month. After analyzing the costs, the compound entry is made to record these overhead costs. (LO 3-5)
- Direct
Labor
Mfg. Overhead
- Indirect
Material
- Direct
Material
- Overhead
Applied to Work in
Process
Actual and applied manufacturing overhead are usually not equal so a year-end adjustment is required. We will look at the procedure to accomplish this later.
- Indirect
Labor
- Direct
Labor
- Overhead
Applied
- Indirect
Labor
Wages Payable
Work in Process
(Job-Cost Record)
Job-Order System Cost Flows
3-*
In a previous slide, we saw how overhead costs were incurred or accumulated on the debit side of the manufacturing overhead account. Overhead must be applied to each job-cost record based on the predetermined overhead rate and the actual activity for that job. The overhead applied is also recorded in the work-in-process account with a debit. The manufacturing overhead account is decreased by the amount of overhead applied with a credit. The actual overhead cost incurred and the amount of applied overhead rarely will match. This is caused by errors in the estimates of overhead and activity used to compute the predetermined overhead rate. Let’s see how overhead is applied through the journal entry process. (LO 3-5)
Application of Overhead
Actual use of machine hours for the two jobs were as follows:
Reviewer (R) - Slide 36 NN Second paragraph, third sentence: Changed the value '1800' to read '1,800.'
Recall that we discussed the pre-determined overhead rate earlier. The rate was computed by taking the company’s estimated manufacturing overhead and dividing by the total budgeted machine hours. We computed the rate per machine hour to be $9.00.
The company reviewed factory machine usage records that indicated that the actual machine usage was as shown. Now let’s make a journal entry to reflect the application of the overhead costs to the jobs. Job number D42 used 1,800 machine hours and so that job will be charged with $16,200 in overhead costs. Job S116 used 2,000 machine hours and so that job will be charged with $18,000 in overhead costs. The journal entry to show how the overhead is applied will be shown next. (LO 3-5)
Journal Entry
Application of Manufacturing Overhead
The journal entry to add applied manufacturing overhead to Work-In-Process using the previous computations includes a debit to WIP and a credit to Manufacturing Overhead. (LO 3-5)
Journal Entry
Selling and Administrative Costs
Actual Costs Incurred
Journal Entry to record the costs
During the month the company incurred some typical selling and administrative costs as shown. Remember that these costs are period costs, not product costs. They are NOT manufacturing costs and so they do NOT go through the WIP account. They are instead treated as expenses of the accounting period in which they are incurred. Take a moment to review the costs incurred and the resulting journal entry. (LO 3-5)
Journal Entry
Completion of a Production Job
Job Number S116 was completed during the period, whereas Job umber D42 remained in process at the end of the period. As the job cost record (or Cost Summary) for Job S116 indicates, the total cost of job S116 was $48,000. Since this job was completed, the cost of $48,000 is transferred out of the WIP account and into Finished-Goods. (LO 3-5)
Journal Entry
Sale of Goods
Sixty of the standard product in job number S116 were sold for $900 each during the period. The cost of each unit sold was $600 as shown in the job record. The following journal entries are made. The first one for $54,000 records the revenue generated by the sale and can be computed by taking the sixty units sold multiplied by the selling price of $900 each. Next, the per unit cost associated with the sale was $600 each. So the $36,000 or $600 multiplied by 60 units was taken out of the Finished Goods inventory and charged to Cost of Goods Sold. The remaining unsold units are still in Finished Goods account and will remain there until the units are sold. (LO 3-5)
Underapplied and Overapplied Overhead
Remember that the company incurred actual manufacturing overhead of $34,450, but only applied $34,200 to the jobs in Work-In-Process. The amount by which the actual overhead exceeded the applied overhead was $250 as shown. This is referred to as underapplied overhead. This means that the pre-determined overhead rate was underestimated by just a small amount. If the actual overhead had been less than the applied overhead, then we would have overapplied overhead. If the amount is immaterial, you can close it to cost of goods sold. In this case, the $250 would be disposed of by the journal entry shown. (LO 3-5)
Overapplied and Underapplied Manufacturing Overhead - Summary
3-*
This table summarizes the disposition of underapplied or overapplied overhead. (LO 3-5)
Sheet: Sheet1
Sheet: Sheet2
Sheet: Sheet3
Sheet: Sheet4
Sheet: Sheet5
Sheet: Sheet6
Sheet: Sheet7
Sheet: Sheet8
Sheet: Sheet9
Sheet: Sheet10
Sheet: Sheet11
Sheet: Sheet12
Sheet: Sheet13
Sheet: Sheet14
Sheet: Sheet15
Sheet: Sheet16
Alternative 1
Alternative 2
If Manufacturing
Close to Cost
Overhead is . . .
Allocation
of Goods Sold
UNDERAPPLIED
INCREASE
INCREASE
Work in Process
Cost of Goods Sold
(Applied OH is less
Finished Goods
than actual OH)
Cost of Goods Sold
OVERAPPLIED
DECREASE
DECREASE
Work in Process
Cost of Goods Sold
(Applied OH is greater
Finished Goods
than actual OH)
Cost of Goods Sold
Schedule of Cost of Goods Manufactured
3-*
The schedule of cost of goods manufactured details the costs of direct material, direct labor, and manufacturing overhead applied to work in process during the period and shows the change in Work-in-Process Inventory. It is basically a summary of what went into and out of the Work-In-Process account. The cost of goods manufactured is shown in the last line of the schedule. This is the amount transferred from Work-in-Process Inventory to Finished-Goods Inventory during the period. (LO 3-6)
Sheet1
| Work-in-Process Inventory | Finished Goods Inventory | |||
| Direct material cost | Product cost transferred | |||
| Direct labor cost | ||||
| Manufacturing overhead | when product is finished | |||
| Cost of Goods Sold | Income Summary | |||
| Expense closed into | ||||
| Income Summary at end | ||||
| of accounting period |
Sheet2
| 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 | ||||||||||
| Direct labor | 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 | ||||||||||
| Total manufacturing costs | $xxx | ||||||||||
| Add: Work-in-process inventory, beginning | xxx | ||||||||||
| Subtotal | $xxx | ||||||||||
| Deduct: Work-in-process inventory, ending | xxx | ||||||||||
| Cost of goods manufactured | $xxx |
Sheet3
Schedule of Cost of Goods Sold
3-*
This schedule shows the cost of goods sold for the period and details the changes in Finished-Goods Inventory during the month. The adjusted cost of goods sold appears as an expense on the income statement. (LO 3-6)
Sheet1
| Work-in-Process Inventory | Finished Goods Inventory | |||
| Direct material cost | Product cost transferred | |||
| Direct labor cost | ||||
| Manufacturing overhead | when product is finished | |||
| Cost of Goods Sold | Income Summary | |||
| Expense closed into | ||||
| Income Summary at end | ||||
| of accounting period |
Sheet2
| 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 | ||||||||||
| Direct labor | 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 | ||||||||||
| Total manufacturing costs | $xxx | ||||||||||
| Add: Work-in-process inventory, beginning | xxx | ||||||||||
| Subtotal | $xxx | ||||||||||
| Deduct: Work-in-process inventory, ending | xxx | ||||||||||
| Cost of goods manufactured | $xxx | ||||||||||
| Schedule of Cost of Goods Sold | |||||||||||
| Finished goods inventory, beginning | $xxx | ||||||||||
| Add: Cost of goods manufactured* | xxx | ||||||||||
| Cost of goods available for sale | $xxx | ||||||||||
| Deduct: Finished goods inventory, ending | xxx | ||||||||||
| Cost of goods sold | $xxx | ||||||||||
| Add: Underapplied overhead | |||||||||||
| xxx | |||||||||||
| Cost of goods sold (adjusted) | $xxx | ||||||||||
| * From Cost of Goods Manufactured Schedule |
Sheet3
The Income Statement
Reviewer (R) - Slide 50 NN Added the LO '(LO 3-6).'
This is an example of an income statement. The Cost of Goods Sold line item would have been transferred over from the schedule of cost of goods sold. (LO 3-6)
Direct material costProduct cost transferred
Direct labor cost
Manufacturing overheadwhen product is finished
Expense closed into
Income Summary at end
of accounting period
Work-in-Process InventoryFinished Goods Inventory
Cost of Goods SoldIncome Summary
Job Number F16Description
Date Started Nov. 1, 20x1Date Completed
Number of Units Completed80
DateQuantityCost
DateQuantityCost
DateQuantityCost
DateCost Balance
JOB-COST RECORD
Direct Material
Requisition NumberUnit Price
Direct Labor
Requisition NumberUnit Price
80 deluxe alum. fishing boats
Nov. 22, 20x1
Manufacturing Overhead
Requisition NumberUnit Price
Cost Item
Total direct material
Amount
Cost Summary
Total direct labor
Total manufacturing overhead
Total cost
Unit cost
Shipping Summary
Units Shipped
Units Remaining
in Inventory
Job Number F16Description
Date Started Nov. 1, 20x1Date Completed
Number of Units Completed80
DateQuantityCost
DateQuantityCost
DateQuantityCost
DateCost Balance
JOB-COST RECORD
Direct Material
Requisition NumberUnit Price
Direct Labor
Requisition NumberUnit Price
80 deluxe alum. fishing boats
Nov. 22, 20x1
Manufacturing Overhead
Requisition NumberUnit Price
Cost Item
Total direct material
Amount
Cost Summary
Total direct labor
Total manufacturing overhead
Total cost
Unit cost
Shipping Summary
Units Shipped
Units Remaining
in Inventory
Requisition No. 352Date 11/1/x1
Job Number to Be Charged F16Dept. Painting
Department Supervisor Timothy Williams
ItemQuantityUnit CostAmount
Aluminum7,200 sq ft2.50$ 18,000.00$
Authorized
Signature
Job Number F16Description
Date Started Nov. 1, 20x1Date Completed
Number of Units Completed80
DateQuantityCost
11/17,200 sq ft$18,000
DateQuantityCost
DateQuantityCost
DateCost Balance
JOB-COST RECORD
Direct Material
Requisition NumberUnit Price
$2.50
Direct Labor
Requisition NumberUnit Price
80 deluxe alum. fishing boats
Nov. 22, 20x1
Manufacturing Overhead
Requisition NumberUnit Price
803
Cost Item
Total direct material
Amount
Cost Summary
$18,000
Total direct labor
Total manufacturing overhead
Total cost
Unit cost
Shipping Summary
Units Shipped
Units Remaining
in Inventory
EmployeeRon Bradley Date 11/5/20x1
Employee Number 12 Department Painting
Station
Shop cleanup
A26
11:30
1:00
12:00
5:00
Time StartedTime StoppedJob Number
8:00F1611:30
Job Number F16Description
Date Started Nov. 1, 20x1Date Completed
Number of Units Completed80
DateQuantityCost
11/17,200 sq ft$18,000
DateQuantityCost
Various
dates600$12,000
DateQuantityCost
DateCost Balance
JOB-COST RECORD
Direct Material
Requisition NumberUnit Price
$2.50
Direct Labor
Requisition NumberUnit Price
80 deluxe alum. fishing boats
Nov. 22, 20x1
Various time cards$20
Manufacturing Overhead
Requisition NumberUnit Price
803
Cost Item
Total direct material
Amount
Cost Summary
$18,000
Total direct labor
Total manufacturing overhead
12,000
Total cost
Unit cost
Shipping Summary
Units Shipped
Units Remaining
in Inventory
Job Number F16Description
Date Started Nov. 1, 20x1Date Completed
Number of Units Completed80
DateQuantityCost
11/17,200 sq ft$18,000
DateQuantityCost
Various
dates600$12,000
DateQuantityCost
11/30600$18,000
DateCost Balance
Shipping Summary
Units Shipped
Units Remaining
in Inventory
Total cost
Unit cost
Total direct labor
Total manufacturing overhead
12,000
18,000
Cost Item
Total direct material
Amount
Cost Summary
$18,000
Direct Labor Hours$30.00
80 deluxe alum. fishing boats
Nov. 22, 20x1
Various time cards$20
Manufacturing Overhead
Requisition NumberUnit Price
803$2.50
Direct Labor
Requisition NumberUnit Price
JOB-COST RECORD
Direct Material
Requisition NumberUnit Price
Job Number F16Description
Date Started Nov. 1, 20x1Date Completed
Number of Units Completed80
DateQuantityCost
11/17,200 sq ft$18,000
DateQuantityCost
Various
dates600$12,000
DateQuantityCost
11/30600$18,000
DateCost Balance
11/30$12,000
Shipping Summary
Units Shipped
Units Remaining
in Inventory
6020
Total cost $48,000
Unit cost $600
Total direct labor
Total manufacturing overhead
12,000
18,000
Cost Item
Total direct material
Amount
Cost Summary
$18,000
Direct Labor Hours$30.00
80 deluxe alum. fishing boats
Nov. 22, 20x1
Various time cards$20
Manufacturing Overhead
Requisition NumberUnit Price
803$2.50
Direct Labor
Requisition NumberUnit Price
JOB-COST RECORD
Direct Material
Requisition NumberUnit Price
Alternative 1
Alternative 2
If Manufacturing
Close to Cost
Overhead is . . .
Allocation
of Goods Sold
UNDERAPPLIED
INCREASE
INCREASE
Work in Process
Cost of Goods Sold
(Applied OH is less
Finished Goods
than actual OH)
Cost of Goods Sold
OVERAPPLIED
DECREASE
DECREASE
Work in Process
Cost of Goods Sold
(Applied OH is greater
Finished Goods
than actual OH)
Cost of Goods Sold
Schedule of Cost of Goods Manufactured
Direct material:
Raw material inventory, beginning$xxx
Add: Raw material purchasesxxx
Raw material available for use$xxx
Deduct: Raw material, endingxxx
Raw material used$xxx
Direct laborxxx
Manufacturing overhead
Indirect material$xxx
Indirect laborxxx
Other actual overhead chargesxxx
Total actual manufacturing overhead$xxx
Add: Overapplied overhead
orDeduct: Underapplied overheadxxx
Overhead applied to work-in-processxxx
Total manufacturing costs$xxx
Add: Work-in-process inventory, beginningxxx
Subtotal$xxx
Deduct: Work-in-process inventory, endingxxx
Cost of goods manufactured$xxx
Schedule of Cost of Goods Sold
Finished goods inventory, beginning $xxx
Add: Cost of goods manufactured* xxx
Cost of goods available for sale $xxx
Deduct: Finished goods inventory, ending xxx
Cost of goods sold $xxx
Add: Underapplied overhead
or Deduct: Overapplied overhead
xxx
Cost of goods sold (adjusted) $xxx
* From Cost of Goods Manufactured Schedule
