ACBU 2223 Lecture 3: Lecture 3

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carminebear339

27 Jan 2017

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Job-order costing: job-order costing systems used when: Computing predetermined overhead rate: allocation based used to assign manufacturing overhead to individual jobs, predetermined overhead rate (pohr) used to apply overhead to job. (cid:1842)(cid:1841)=(cid:3032)(cid:3046)(cid:3047)(cid:3040)(cid:3028)(cid:3047)(cid:3032)(cid:3031) (cid:3047)(cid:3042)(cid:3047)(cid:3028)(cid:3039) (cid:3040)(cid:3028)(cid:3041)(cid:3048)(cid:3033)(cid:3028)(cid:3030)(cid:3047)(cid:3048)(cid:3045)(cid:3041)(cid:3034) (cid:3042)(cid:3049)(cid:3032)(cid:3045) (cid:3032)(cid:3028)(cid:3031) (cid:3030)(cid:3042)(cid:3046)(cid:3047) (cid:3033)(cid:3042)(cid:3045) (cid:3030)(cid:3042)(cid:3040)(cid:3041)(cid:3034) (cid:3043)(cid:3032)(cid:3045)(cid:3042)(cid:3031) (cid:3032)(cid:3046)(cid:3047)(cid:3040)(cid:3028)(cid:3047)(cid:3032)(cid:3031) (cid:3047)(cid:3042)(cid:3047)(cid:3028)(cid:3039) (cid:3048)(cid:3041)(cid:3047)(cid:3046) (cid:3041) (cid:3028)(cid:3039)(cid:3039)(cid:3042)(cid:3030)(cid:3028)(cid:3047)(cid:3042)(cid:3041) (cid:3029)(cid:3028)(cid:3046)(cid:3032) (cid:3033)(cid:3042)(cid:3045) (cid:3030)(cid:3042)(cid:3040)(cid:3041)(cid:3034) (cid:3043)(cid:3032)(cid:3045)(cid:3042)(cid:3031: need for pohr. Pohr that rely on estimated date often used b/c actual overhead for period not known until end of period (inhibiting ability to estimate job costs during period & actual overhead costs can fluctuate seasonally: computing. Estimate total fixed manufacturing overhead cost for coming period & variable manufacturing overhead cost per unit of allocation base. Use y=a+bx to estimate total amount of manufacturing overhead. Accounting for nonmanufacturing cost: nonmanufacturing costs not assigned to individual jobs, but are instead expensed in period incurred. Preparing schedules of cost of goods manufactured & cost of goods sold & an income statement: key concepts of schedule of cost of goods manufactured.

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EXERCISE 3-14 Computing Predetermined Overhead Rates and Job Costs [LO3-1, L03-2, L03-3, LO3-7] Moody Corporation uses a job-order costing system with a plantwide overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production ...... Fixed manufacturing overhead cost .... Variable manufacturing overhead cost per machine-hour ....... 100,000 $650,000 $3.00 Required: 1. Compute the predetermined overhead rate. 2. During the year, Job 400 was started and completed. The following information was available with respect to this job: $450 Direct materials requisitioned ..... Direct labor cost ... Machine-hours used ...... $210 40 Compute the total manufacturing cost assigned to Job 400. During the year, the company worked a total of 146,000 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,350,000. What is the amount of underap- plied or overapplied overhead for the year? If this amount were closed out entirely to Cost of Goods Sold would the journal entry increase or decrease net operating income?

Basic Job Costing Project

Reed Incorporated uses a job-order costing system and a predetermined overhead rate based on machine hours.

At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000 and machine hours would be 8,000.

The following information pertains to December of the current year:

	Job 10	Job 11	Job 12	Total
Work-in-process, Dec. 1	$16,000	$26,000	$38,000	$80,000

The following transactions took place during the month of December:

1. Purchased raw materials for $25,000 on credit;

2. Requisitioned and used direct materials for the three jobs:

a. $4,000 for Job 10

b. $4,800 for Job 11

c. $7,200 for Job 12

3. Used indirect materials worth $20,000

4. . Incurred direct labor costs as follows:

a. $ 2,400 for Job 10

b. $3,600 for Job 11

c. $4,000 for Job 12

5. Incurred $30,000 worth of indirect manufacturing labor costs.

6. Depreciation on manufacturing plant and equipment $21,000.

7. During the month of December, the company used the following direct labor hours and machine hours for the three jobs:

	Job 10	Job 11	Job 12	Total
Machine hours	400	700	900	2,000
Labor hours	120	180	200	500

Required:

1. Compute the predetermined overhead application rate.

2. Prepare the journal entries for the transactions that took place in December and apply manufacturing overhead to the jobs using the actual machine hours.

3. Determine the total cost associated with each job.

4. If jobs 10 and 12 were completed, prepared the journal entry to move jobs 10 and 12 to finished goods.

5. Delivered job 10 to customers that paid $40,000 cash; prepare the journal entries to sell job 10 and to recognize the associated cost of goods sold.

6. What is the cost assigned to ending work in process (control account)?

7. What is the cost assigned to ending finished goods (control account)?

8. How much was manufacturing overhead over/underapplied?

indigolion723

AirComp Corporation produces component parts for the aircraftindustry. In prior years, they maintained a job-costing systemconsisting of direct materials and direct labor cost andmanufacturing overhead. Manufacturing overhead was allocated toproduction jobs using a single-indirect cost allocation rate, whichwas $115 per direct labor hour.

For 20x1, the Company decided to change the method of allocatingmanufacturing overhead to production jobs from the single-indirectcost allocation approach to the activity-based costing (âABCâ)indirect cost allocation approach. For purposes of developing theABC allocation rates, AirCompâs cost accounting team prepared thefollowing analysis:

Activity	Cost Driver	Allocation Rate
Material handling	Parts handled	$0.40
Lathe work	No. of lathe turns	$0.20
Milling	Machine hours	$20.00
Grinding	No. of parts ground	$0.80
Testing	No. of units tested	$15.00

For 20x1, AirCompâs cost accountant team prepared the followinganalysis of the direct costs and indirect cost activities for Job100 and Job 200, the only production jobs in process for theperiod:

	Job 100	Job 200
Direct materials cost	$9,700	$59,900
Direct labor cost	$750	$11,250
No. of direct manufacturing labor hours	25	375
No. of parts ground	500	2,000
No. of lathe turns	20,000	60,000
Machine hours	150	1,050
No. of units produced during period (all are tested)	10	200

Required

1.For each job, determine total per unit cost using direct laborhours to allocate manufacturing overhead to each job.

2.For each job, determine total per unit cost using anactivity-based costing approach to allocate manufacturing overheadcost to job.

3.Compare the per unit cost figures for each job computed instep a. and step b., above. Why do the new ABC approach differ fromthe single-indirect cost allocation systems differ in the amount ofthe per unit indirect cost allocated to each job (i.e. what was theimplications of the cost allocation method change on the amount ofper unit cost allocated to each job and what factors caused theobserved changes).

4.How might AirComp Corporation use the information from ABCallocation approach to better manage its business, i.e. what arethe advantages of using an activity-based costing approach?

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