job costing and process costing problems

Job Costing

Lecture 17

Chapter 7 * Modified from PPT slides of McGraw-Hill/Irwin

Overhead Allocation to Jobs Work-In-Process

Overhead Total

WIP

OH costs applied to each job using the POHR.

Job 1

Job 2

Job 3

Recap of what we covered last class

•Overhead - Control

•Overhead - Applied

Used to track all actual

overhead expenses.

Used to allocate overhead

to jobs based on the

predetermined OH rate

Over and Under Applied Overhead

The excess of actual overhead costs incurred over applied

overhead costs

The excess of applied overhead costs over actual overhead

costs incurred

Underapplied Overhead

Overapplied Overhead

Over and Under Applied Overhead

Not balance sheet accounts

Combined ending balance must be ZERO

Combined OH is $2,450

underapplied

MOH - Applied

49,000

49,000

MOH - Control

12,000

51,450

9,500

13,750

5,000

11,200

Ending Balance in MOH Accounts

MOH - Applied

49,000

51,450

2,450

COGS

2,450

106,450

104,000

After entry, the Applied and Control Overhead accounts sum to zero!

MOH - Control

51,450

12,000

9,500

13,750

5,000

11,200

49,000

Ending Balance (One MOH Account)

Some firms use only one OH account. In this condition, the debit side of the OH account contains actual data and the credit side applied data.

Overhead

12,000

51,450

9,500

13,750

5,000

11,200

49,000

2,450

51,450

COGS

2,450

106,450

104,000

Either condition, Actual must equal Applied at the end of the period!

Control Applied

InShape: Allocating Over/Underapplied MOH

Accounts at January 31st

COGS 104,000

WIP $31,500

Finished Goods 208,500

% of total

Total $344,000

30.2%

9.2%

60.6%

100%

Costs

If the over/underapplied MOH is material, it must be allocated to WIP, FG, and COGS.

Ending Balance in MOH Accounts

Allocate underapplied overhead to finished goods, cost of

good sold and WIP.

Overhead

49,00051,450

2,450

COGS

104,000

WIP

31,500

Finished Goods

208,500

225 1,485 740

2,450 x .092 2,450 x .606 2,450 x .302

If the 2,450 underapplied MOH is material

Normal, Actual and Standard Costing

Normal

Actual

Standard

Cost of job determined by actual direct

material, actual direct labor and applied

overhead using the POHR and the actual

allocation base.

Cost of job determined by actual direct

material, actual direct labor and applied

overhead using actual overhead rate and

the actual allocation base.

Cost of job determined by standard

(budgeted) direct material, standard direct

labor and applied overhead using the

POHR and a standard (budgeted)

allocation base.

Service Organization

Job Client

Direct Labor

Indirect Labor

Labor

Overhead

WIP

Client A

Client B

Client C

Total

WIP

Managing Projects

A project is a complex job that often takes months or years to complete and requires the work of many departments, divisions, or subcontractors.

Chapter 7

Job Costing Practice Problems

Practice Problem 1: Assigning Costs to Jobs

The following transactions occurred last month at a furniture manufacturer

The following balances appear in its accounts:

(On credit)

(On credit)

Practice Problem 1: Assigning Costs to Jobs

Journal Entries

Account Debit Credit

(On credit)

Practice Problem 1: Assigning Costs to Jobs

Practice Problem 1: Assigning Costs to Jobs

The following transactions occurred last month at a furniture manufacturer

The following balances appear in its accounts:

(On credit)

(On credit)

Practice Problem 1: Assigning Costs to Jobs

(On credit)

RM Inventory

14,820

8,000

BB

(1)

5,600(3)

4000 (2)

6,800 (5)

(On credit)

Practice Problem 1: Assigning Costs to Jobs

(On credit)

WIP

3,300BB

6,8005

10,0006

12,5008

(On credit)

Practice Problem 1: Assigning Costs to Jobs

(On credit)

MOH-Control

4002

10,6007

5,0009

Practice Problem 1: Assigning Costs to Jobs

(On credit)

MOH-Applied

12,500 8

Practice Problem 1: Assigning Costs to Jobs

(On credit)

A/P

8,000 1

5,600 3

8,0004

(On credit)

Practice Problem 1: Assigning Costs to Jobs

(On credit)

Cash

8,000 4

10,600 7

Practice Problem 1: Assigning Costs to Jobs

(On credit)

Payroll Payable

10,000 6

Practice Problem 1: Assigning Costs to Jobs

(On credit)

Depreciation

5,000 9

Practice Problem 1: Assigning Costs to Jobs

RM Inventory

14,820

8,000

BB

(1)

5,600(3)

21,220EB

400 2

2,800 5

Practice Problem 1: Assigning Costs to Jobs

WIP

3,300BB

6,8005

10,0006

12,5008

? T-out to FG

?EB

Practice Problem 1: Assigning Costs to Jobs

FG

16,600BB

24,060Goods completed

14,320EB

26,340 T-out to COGS

TI = EB -BB + TO =14,320 -16,600 + 26,340 = 24,060

Practice Problem 1: Assigning Costs to Jobs

WIP

3,300BB

6,8005

10,0006

12,5008

24,060 T-out to FG

8,540EB

Practice Problem 1: Assigning Costs to Jobs

COGS

26,340EB