Use only with permission of Susan Crosson Chapter 3 Costing Systems: Job Order Costing Fall 2007 Crosson

Use only with permission of Susan Crosson

Chapter 3Chapter 3Costing Systems: Costing Systems: Job Order CostingJob Order Costing

Fall 2007

Crosson


Learning Objectives:

How much does it cost?Types of Product Costing SystemsCost Flows in a Job Order Costing System in T-accounts and Journal entriesCompleting a Job Order Cost CardComputing a Job Order’s Product Unit Cost


In Chapter 2 the question was:

How much does it cost?

Unit cost of a product or service under Normal Costing:

Costs of Goods Manufactured*

Units produced

*Actual DM, Actual DL, Applied OH


Question refined:How much does a job cost?

_______Cost of Job*_____

Number of Units Produced

*DM+DL+OH


Types of Product Cost SystemsTable 1

Job Order Costing

Process Costing

Income Statement format the same


Financial Reporting of Costs

Manufacturing Income Statement

Sales

-Cost of Goods Sold (COGS)

=Gross Margin

-SAG

=Net Income

Chapter 2 Exhibit 1 in text Example: Chapter 2 E3 or E8.


What Do You Know?Chapter 3 E 7 Starke CompanyChapter 3 E 7 Starke Company

Sales

-COGS

=GM

-SAG

=NI

+Beg. DM

+DM purchased

-End DM

+DM used

+DL

+OH

=Current Mfg Costs

+Beg. WIP

-End. WIP

=COGM

+Beg. FG

=COGAS

-End. FG

COGS

+$42,000

+A

+$38,000

=$168,000

+$382,000

+B=80%(DL)

=$?

+$66,000

-$138,600

=$C

+$29,000

=$?

-D

$808,000


What Do You Know?E 7 Starke CompanyE 7 Starke Company

Sales

-COGS

=GM

-SAG

=NI

+Beg. DM

+DM purchased

-End DM

=DM used

+DL

+OH

=Current Mfg Costs

+Beg. WIP

-End. WIP

=COGM

+Beg. FG

=COGAS

-End. FG

=COGS

+$42,000

+A

+$38,000

=$168,000

+$382,000

+B=80%(DL)

=$?

+$66,000

-$138,600

=$C

+$29,000

=$?

-D

$808,000

A=164,000

B=305,600

$855,600

C=783,000

$812,000

D=4,000


Financial Reporting of Costs

Where do Manufacturing Income Statements come from?


Inventory Accounts and Job Order Cost Flows

Exhibit 13 Inventory Accounts:

Materials Work in Process Finished Goods

Cookie Example


The Materials Account:the account that summarizes all material purchases

Material InventoryMaterial InventoryBeginning Balance

+DM Purchased

+IDM Purchased

DM used (to WIP)

IDM used (to OH)

Ending Balance


The Work in Process Account: the account that summarizes of all in process Job Order Cards

WIP Inventory WIP Inventory Beginning Balance

+DM used

+DL used

+OH used

Cost of Goods* Manufactured or Completed

(COGM to FG)

Ending Balance

*JOBS*JOBS

Current ManufacturingCosts

Info. for the I/S’s COGM comes from this account!


The Finished Goods Account: the account that summarizes all completed job order cards

Finished Goods InventoryFinished Goods InventoryBeginning Balance(BB)

+Cost of Goods* Manufactured

(COGM from WIP)

Cost of Goods* Sold

(to COGS)

Ending Balance

*JOBS*JOBS

BB+COGM=COGAS


BB

+DM Purchased

+IDM Purchased

DM used (to WIP)

IDM used (to OH)

EB

BB

+DM

+DL

+OH

COGM

EB

BB

+COGM

COGS

EB

Material Inventory

Work in Process Inventory

Finished Goods Inventory


RECAP:

Good follow up is SE 5, SE6, or P2.Look and listen to journal entries SE4.


What Do You Know?Now Do E 7 Starke Company using T-accountsNow Do E 7 Starke Company using T-accounts

Sales

-COGS

=GM

-SAG

=NI

+Beg. DM

+DM purchased

-End DM

=DM used

+DL

+OH

=Current Mfg Costs

+Beg. WIP

-End. WIP

=COGM

+Beg. FG

=COGAS

-End. FG

=COGS

+$42,000

+A

+$38,000

=$168,000

+$382,000

+B=80%(DL)

=$?

+$66,000

-$138,600

=$C

+$29,000

=$?

-D

$808,000

A=164,000

B=305,600

$855,600

C=783,000

$812,000

D=4,000


BB 42,000

+DM Purchased

A=

DM used

168,000

EB

BB 66,000

+DM 168,000

+DL 382,000

+OH 80%(DL)

COGM = C

EB 138,600

BB 29,000

+COGM = C

COGS 808,000

EB = D

Material Inventory




E 7 in T accounts:


BB 42,000

+M Purchased

A= 164,000

DM used

168,000

EB

BB 66,000

+DM 168,000

+DL 382,000

+OH 80%(DL)=305,600

COGM

C =783,000

EB 138,600

BB 29,000

+COGM

C = 783,000

COGS 808,000

EB

D = 4,000

Material Inventory




E 7 in T accounts:


BB

+DM Purchased

+IDM Purchased

DM used (to WIP)

IDM used (to OH)

EB

BB

+DM

+DL

+OH

COGM

EB

BB

+COGM

COGS

EB

Material Inventory




Try E 6 for June…


BB 33,939+DM Purchased

57,100

DM used (to WIP)

59,025

EB 32,014

BB 89,605

+DM 59,025

+DL 48,760

+OH 58,512

COGM 154,701

EB 101,201

BB 79,764

+COGM 154,701

COGS 166,805

EB 67,660

Material Inventory




E 6 for June…


BB 32,014 (from June)

+DM Purchased

60,216

DM requested

= 64,602

EB 27,628

BB 101,201(from June)

+DM 64,602

+DL 54,540

+OH = 65,448*

COGM 231,861

EB = 53,930

BB 67,660

+COGM 231,861

COGS = 269,006

EB 30,515

Material Inventory




E 6 for July…

*120% of 54,540


BB

+DM Purchased

+IDM Purchased

DM used (to WIP)

IDM used (to OH)

EB

BB

+DM

+DL

+OH

COGM

EB

BB

+COGM

COGS

EB

Material Inventory




Now Try P6…Know Journal entries and T-accounts!!!

Hint: create a WIP account for each Job.


Where does Work in Process Information come from?


Job Cost CardJob Order Cost Card

Job Order #: Batch Custom

Customer: Specifications:

Date of Order: Date of Completion:

Costs Charged to Job Previous Month Current Month Total Cost

TotalsUnits Completed:

Product Unit Cost:Profit Factor:

Revenue Generated:


Job Cost Card Format

Figure 2-Product Figure 3-Service Review Problem

Good follow up exercises are SE8, SE10, E12, E15.

Look and listen to SE8.


SE 10 Job Cost CardJob Order Cost Card

Job Order #: 2003-A7Batch Custom

Customer: Arthur Farnsworth Specifications: Annual Individual Tax Return

Date of Order: 3/24/x8Date of Completion: 4/8/x8


Client Interview Preparation of Return Delivery

Profit Factor: 25%Revenue Generated:

10+50+20= 60+24=

16+12+240+120

12

$$$

$$

$$Totals


SE 10 Job Cost CardJob Order Cost Card

Job Order #: 2003-A7Batch Custom

Customer: Arthur Farnsworth Specifications: Annual Individual Tax Return

Date of Order: 3/24/x8Date of Completion: 4/8/x8


Client Interview Preparation of Return Delivery

Profit Factor: 25%Revenue Generated:

10+50+20 60+24

16+12+240+120

12

$164$388

$12

$564

$705

TotalsProfit= $141


Check figure: Contract Revenue

$1,801.50

What Do You Know? : E 13


BB

+DM Purchased

+IDM Purchased

DM used (to WIP)

IDM used (to OH)

EB

BB

+DM

+DL

+OH

COGM

EB

BB

+COGM

COGS

EB

Material Inventory




Try P5 Job P-12…Know Job Cards and T-accounts!!!

Homework Hint: create a WIP account for each Job.


P5 Job Cost Card for P-12…Job Order Cost Card

Job Order #: Batch Custom

Customer: Specifications:

Date of Order: Date of Completion:


TotalsUnits Completed:

Product Unit Cost:Profit Factor:

Revenue Generated:


Homework:

Problem 2


Build Your Own Business with LEGOS Form groups of 4 students Obtain a 2 sets of Legos (return at end of BYOB) Assign each student member a team role:

Manager (instructions and picture of product) Employee (product builder) Accountant (must have job cost card) Customer (quality control)

Each team will build 2 products with accountant recording costs on job card

In your group, how much does one unit cost? Compare results with other teams, do all the

cost cards agree? Why not?


Put all Legos, instructions, picture, etc. back in the bag.

Return bags to front of class.

Before you leave…..


Example of Job Order Costing

http://inst.sfcc.edu/~scrosson/w2002/6E/Chilly, Group E Website/index.html

Documents

Use only with permission of Susan Crosson Chapter 3 Costing Systems: Job Order Costing Fall 2007 Crosson