JOB ORDER COST ACCOUNTING.ppt

1、Chapter 19,Job Order Cost Accounting,Used for production of large, unique, or high-cost items. Built to order rather than mass produced. Many costs can be directly traced to each job.,Cost Accounting Systems,Chapter 20,C 1,Typical job order cost applications: Special-order printing Building construc

2、tion Also used in service industry Hospitals Law firms,Chapter 20,Job Order Production,C 1,Receive order from customer.,Predict cost to complete job.,Negotiate a sales price and decide whether to pursue the job.,Schedule production of the job.,Events in Job Order Costing,C 1,Goods in Process,Labor,M

3、aterials,Indirect,Indirect,FactoryOverhead,Direct,Direct,Allocate,Job Order Production Activities,C 1,Job Order Cost Documents,The primary document for tracking the costs associated with a given job is the job cost sheet.,C 2,Job Cost Sheet,C 2,Job Cost Sheet,Lets see one,A materials requisition is

4、used to authorize the use of materials on a job.,C 2,Materials Requisition,C. Luther,P 1,C. Luther,Materials Requisition,Properauthorization,Cost of material is charged to Job B15.,P 1,C. Luther,Materials Requisition,Type and quantity of material charged to Job B15.,Pre-printed, sequentially numbere

5、d form,P 1,C. Luther,Materials Requisition,The materials requisition form also serves as the source document for recording material usage in the accounting records.,P 1,Materials Ledger Card,P 1,Job Cost Sheet,P 1,Job Cost Sheet,P 2,Labor Time Ticket,C. Luther,P 2,Job Cost Sheet,P 2,Job Cost Sheet,P

6、 3,Job Cost Sheet,P 3,Road Warriors uses a predetermined overhead rate (POHR) based on direct labor cost to apply overhead to jobs.,Predetermined Overhead Rate,P 3,Job Order Cost Flows and Reports,Lets summarize the document flow we have been discussing in a job-order costing system.,Materials Ledge

7、r Cards,Materials Ledger Cards,Materials Ledger Cards,MaterialsRequisition,Direct materials,The materials requisition indicates the cost of direct materialsto charge tojobsand the cost of indirect materials to charge to overhead.,Indirect materials,Material Cost Flows and Documents,P 1,Employee time

8、 tickets indicate the cost of direct laborto charge tojobsand the cost of indirect labor to charge to overhead.,Job Cost Sheets,Factory Overhead Account,Job Cost Sheets,Job Cost Sheets,Job Cost Sheets,Direct Labor,Indirect Labor,Employee Time Ticket,Employee Time Ticket,Employee Time Ticket,Employee

9、 Time Ticket,Labor Cost Flows and Documents,P 2,Summary of Cost Flows,Lets examine the cost flows in a job order system.We will useT-accounts and start with materials.,Material Purchases,Dr Cr,Dr Cr,Dr Cr,Summary of Cost Flows,P 1,Incurred,DirectMaterial,Dr Cr,Dr Cr,Dr Cr,Summary of Cost Flows,P 2,P

10、 3,DirectMaterialDirectLaborOverhead,Dr Cr,Dr Cr,Dr Cr,Summary of Cost Flows,P 3,Overhead Application,P 4,Overhead Application,Reasons for using a POHR(predetermined overhead rate),P 4,Adjustment of Overapplied or Underapplied Overhead,P 4,Adjustment of Overapplied or Underapplied Overhead,P 4,Adjus

11、tment of Overapplied or Underapplied Overhead,P 4,Adjusting Cost of Goods Sold for underapplied or overapplied overhead,Adjustment of Overapplied or Underapplied Overhead,P 4,Global View,Expensive European sports cars are often built according to individual customer specifications. Customers place o

12、rders for their dream cars, and then each car is built to order and shipped to the customer.,Pricing for Services,Pricing for services is based on direct labor. Any material costs are usually incidental and are a part of overhead.,Acme Consulting prepared the following bid for a jobthat will require

13、 a total of 1,000 hours of direct labor.,A 1,Lets look at summary accounting journal entries for the job order cost system at Road Warriors. The dollar amounts are from Exhibit 19.12 in your textbook.,Entries for Job OrderProduction Costs,Entries for Job OrderProduction Costs,P 1,Entries for Job Ord

14、erProduction Costs,P 1,P 2,Entries for Job OrderProduction Costs,P 2,Entries for Job OrderProduction Costs,P 3,Entries for Job OrderProduction Costs,P 3,End of Chapter 19,Chapter 21,Cost Allocation and Performance Measurement,Allocating Costs forProduct Costing,One of the most difficult tasks in com

15、puting accurate unit costs lies in determining the proper amount of overhead cost to assign to each job.,Jobs,Stage Two: Costs applied to jobs,Stage One: Costs assigned to departments,Two-Stage Cost Allocation,ServiceDept. 2,ServiceDept. 3,Service Dept. 1,P 1,Illustration of Two-StageCost Allocation

16、,First, determine the unit cost of each model using traditional costing methods.,Ames Company manufactures hammers in regular and deluxe models. Overhead is assigned on the basis of direct labor hours. Budgeted overhead for the currentyear is $2,000,000. Other information includes:,P 1,P 1,Illustrat

17、ion of Two-StageCost Allocation,P 1,Illustration of Two-StageCost Allocation,With the Activity-BasedCosting (ABC) method, we recognize that many activities within a department drive overhead costs.,Activity-Based Cost Allocation,Identify activities and assign indirect costs to those activities. Cent

18、ral idea . . . Products require activities. Activities consume resources.,P 2,More detailed measures of costs. Better understanding of activities. More accurate product costs for . . . Pricing decisions. Product elimination decisions. Managing activities that cause costs. Benefits should always be c

19、omparedto costs of implementation.,Activity-Based Costing Benefits,P 2,Activity-Based Costing Steps,Identify activities that consume resources. Assign costs to a cost pool for each activity. Identify cost drivers associated with each activity. Compute overhead rate for each cost pool: Assign costs t

20、o products:,P 2,Ames Company plans to adopt activity-based costing. Using the following activity center data, determine the unit cost of the two products using activity-based costing.,P 2,Illustration of Activity-Based Costing,Total units of activity for both products.,P 2,Illustration of Activity-B

21、ased Costing,Total overhead = $720,000 + $1,280,000 = $2,000,000Recall that $2,000,000 was the original amount of overhead assigned to the products using traditional overhead costing.,P 2,Illustration of Activity-Based Costing,P 2,Illustration of Activity-Based Costing,This result is not uncommon wh

22、en activity-based costing is used. Many companies have found that low-volume, specialized products have greater overhead costs than previously realized.,Comparison of Two-Stage and ABC Allocation,P 2,Primarygoals,Departmental Accounting,C 1,Large complex businesses are divided into departments enabl

23、ing managers to have a smaller effective span of control.,Motivation forDepartmentalization,C 1,Departmental Evaluation,The accounting system provides information about resources used and outputs achieved. Managers use this information to control operations, appraise performance, allocate resources,

24、 and plan strategy. The type of accounting information provided depends on whether the department is a . . .,C 1,Direct expenses are incurred for the sole benefit of a specific department. Indirect expenses benefit more than one department and are allocated among departments benefited.,Departmental

25、Expense Allocation,C 1,Illustration of IndirectExpense Allocation,Classic Jewelry pays its janitorial service $300 per month to clean its store. Management allocates this cost to its three departments according to the floor space each occupies.,C 1,Allocation of Indirect Expenses,Indirect expenses c

26、an be allocated to departmentsusing a number of allocation bases. Some common indirectexpenses and their allocation bases are:,C 1,Service department costs are shared, indirect expenses that support the activities of two or more production departments.,Service Department Expenses,C 1,Departmental In

27、come Statements,P 3,Lets prepare departmental income statements using the following steps: Direct expense accumulation. Indirect expense allocation. Service department expense allocation.,Service Dept. One,Service Dept. Two,Direct expenses are traced to eachdepartment without allocation.,Step 1: Dir

28、ect ExpenseAccumulation,P 3,Operating Dept. One,Operating Dept. Two,Indirect expenses are allocated to all departmentsusing appropriate allocation bases.,Allocation,Allocation,Allocation,Allocation,Step 2: IndirectExpense Allocation,P 3,Operating Dept. One,Operating Dept. Two,Service Dept. One,Servi

29、ce Dept. Two,Operating Dept. One,Operating Dept. Two,Service department total expenses (original direct expenses + allocated indirect expenses) areallocated to operating departments.,Allocation,Allocation,Step 3: Service Department Expense Allocation,P 3,Service Dept. One,Service Dept. Two,Departmen

30、tal ExpenseAllocation Spreadsheet,Step 1: Direct expenses are traced to service departments and sales departments without allocation.,P 3,Departmental ExpenseAllocation Spreadsheet,Step 2: Indirect expenses are allocated to both the service and the sales departments based on floor space occupied.,Of

31、 a total of 2,000 square feet, the service departments occupy 200 square feet each, sales department one occupies 600 square feet, and sales department two occupies 1,000 square feet.,P 3,Sales department one has $40,000 in sales and sales department two has $48,000 in sales.,Step 3: Service departm

32、ent total expenses (original direct expenses + allocated indirect expenses) are allocated to sales departments.,Departmental ExpenseAllocation Spreadsheet,P 3,Departmental ExpenseAllocation Spreadsheet,Sales department one has 28 employees and sales department two has 40 employees.,Step 3: Service d

33、epartment total expenses (original direct expenses + allocated indirect expenses) are allocated to sales departments.,P 3,DepartmentalIncome Statements,P 3,Departmental contribution . . . Is used to evaluate departmental performance. Is not a function of arbitrary allocations of indirect expenses.,D

34、epartmental revenue Direct expenses = Departmental contribution,Departmental Contributionto Overhead,A department may be a candidate for elimination when its departmental contribution is negative.,P 3,Departmental Contributionto Overhead,Net income for the company is still $17,500.,P 3,Investment Ce

35、nter Returnon Total Assets (ROI),LCD Division earned more dollars of income, but it was lessefficient in using its assets to generate income comparedto S-Phone Division.,A 1,ResidualIncome,Investment CenterNet Income,Target InvestmentCenter Net Income,=,Investment CenterResidual Income,The target ne

36、t income is 8% of divisional assets.,A 1,Innovation and LearningHow can we continuallyimprove and create value?,Internal Business Processes In which activities must we excel?,Balanced Scorecard,Performance Measures,Financial Perspective How do we lookto the firms owners?,Customer Perspective How do

37、our customers see us?,A 1,Controllable versusDirect Costs,Costs are controllable if the manager has the power to determine, or strongly influence, the amounts incurred. A managers performance evaluation should be based on controllable costs.,Direct costs are traced to departments, but may not be con

38、trollable by the department manager. Example: Department managers usuallyhave no control over their own salaries.,C 2,An accounting system thatprovides information . . .,Responsibility Accounting System,C 2,Responsibility Accounting,Successful implementation of responsibility accounting may use orga

39、nization charts with clear lines of authority and clearly defined levels of responsibility.,C 2,Amount of detail varies according to the level in the organization.,A department manager receives detailed reports.,A store manager receives summarized information from each department.,Responsibility Acc

40、ountingPerformance Reports,C 2,To be of maximum benefit, responsibility reports should . . . Be timely. Be issued regularly. Be understandable. Compare budgetedand actual amounts.,Responsibility AccountingPerformance Reports,C 2,Global View,LOreal is an international cosmetics company incorporated i

41、n France. With multiple brands and operations in over 100 countries, the company uses concepts of departmental accounting and controllable costs to evaluate performance. A recent annual report shows the following for the major divisions in LOreals Cosmetics branch:,LOreals non-allocated costs includ

42、e costs that are not controllable by division managers. Excluding noncontrollable costs enables LOreal to prepare more meaningful division performance evaluations.,Investment Center Profit Marginand Investment Turnover,A 2,A transfer price is the amount charged when onedivision sells goods or services to another division.,LCD Division,S-Phone Division,Appen