1、Chapter 2 Job-Order Costing and Modern Manufacturing Practices,Presentation Outline,Job-Order vs. Process Costing Cost Classifications in Manufacturing Companies Costs Flows in Manufacturing Companies Job-Order Costing System Allocating Manufacturing Overhead to Jobs Modern Manufacturing Practices,I
2、. Job-Order vs. Process Costing,Job-Order Costing Process Costing,A. Job-Order Costing,A job-order costing system is a product costing system used by entities that make (perform) relatively small quantities or distinct batches of identifiable, unique products (services).,B. Process Costing,A process
3、 costing system is a product costing system used by entities that produce large quantities of homogeneous goods.,II. Cost Classifications in Manufacturing Companies,A. Manufacturing Costs B. Nonmanufacturing Costs,Manufacturing Costs (Also called Product Costs),Direct Materials Materials that can ph
4、ysically and conveniently traced to a product.,Direct Labor Labor that can physically and conveniently traced to a product.,Manufacturing Overhead All manufacturing costs other than direct materials and direct labor.,Prime Costs,ConversionCosts,B. Nonmanufacturing Costs (Also Called Period Costs),Ma
5、rketing or Selling Costs All costs necessary to secure orders and get the finished product or service into the hands of the customer,Administrative Costs All costs of general administration of the company as a whole.,III. Cost Flows in Manufacturing Companies,Three Inventory Accounts The Schedule of
6、 Cost of Goods Manufactured The Cost of Goods Sold Calculation Overview of Product Cost Flows Overview of Period Cost Flows,A. Three Inventory Accounts,Raw materials inventory cost of materials on hand that are used to produce a companys products. Work in process inventory cost of goods that are onl
7、y partially completed. Finished goods inventory cost of all items that are complete and ready to sell. (Sell Illustration 2-4 on page 37),B. The Schedule of Cost of Goods Manufactured,Direct materials,Direct labor,Manufacturing Overhead,Beginning Work in Process Inventory,Total Work in Process Inven
8、tory,Ending Work in Process Inventory,Cost of Goods Manufactured,+,+,+,+,=,=,-,Beginning raw materials inventory,+ Purchases of raw materials,= Raw materials available for use,- Ending raw materials inventory,= Raw materials used in production,Plus: current manufacturing costs:,C. The Cost of Goods
9、Sold Calculation,Merchandising CompanyBeginning merchandise inventory+ Purchases-= Goods available for sale- Ending merchandise inventory-= Cost of Goods Sold,Manufacturing CompanyBeginning finished goods inventory+ Cost of goods manufactured-= Goods available for sale- Ending finished goods invento
10、ry-= Cost of Goods Sold,(See Illustration 2-6 on page 40),D. Overview of Product Cost Flows,Balance Sheet,Income Statement,Raw Materials Inventory,Work in Process Inventory,Finished Goods Inventory,Manufacturing Overhead,Indirect Materials,Direct Materials,Labor,Indirect Labor,Direct Labor,Cost of G
11、oods Sold,Raw Material Purchases,Cost of Goods Manufactured,E. Overview of Period Cost Flows,Balance Sheet,Income Statement,Prepaid Expenses,Selling Expenses,General & Administrative Expenses,Selling Expenses,General & Administrative Expenses,Prepaid expenses does not include inventory.,IV. Job-Orde
12、r-Costing System,Materials Requisition Form Materials Requisition Journal Entry Employee Time Ticket Labor Journal Entry Manufacturing Overhead Entry to Apply Manufacturing Overhead Finished Goods and Cost of Goods Sold,A. Materials Requisition Form,A materials requisition form is used to request th
13、e release of materials from a companys storage area. It shows the type, quantity, and cost of material, as well as the number of the job using the material. See Illustrations 2-11 and 2-10 on page 44.,B. Materials Requisition Journal Entry,Work-in-Process Inventory xxx (Direct materials),Manufacturi
14、ng Overhead xxx (Indirect materials),Raw Materials Inventory xxx,C. Employee Time Ticket,Time tickets keep track of employee time spent on jobs. (See Illustration 2-12 on page 97). If many workers are on a certain job, daily labor summaries may be posted to jobs instead of individual time tickets. (
15、See Illustrations 2-13 on page 46 and 2-10 on page 44).,D. Labor Journal Entry,Work-in-Process Inventory xxx (Direct labor),Manufacturing Overhead xxx (Indirect labor),Salaries & Wages Payable xxx,E. Manufacturing Overhead,Actual manufacturing overhead costs are recorded as debits in a manufacturing
16、 overhead account. Overhead is usually applied to job cost sheets using one or more predetermined overhead rates. Overhead is applied to jobs by multiplying the predetermined overhead rate by the actual measure of the activity base (cost driver) associated with each job. (See 2 step process on pages
17、 47-48),F. Entry to Apply Manufacturing Overhead,Overhead is applied at the end of the period or at the completion of production, whichever is earlier. The journal entry to apply overhead is as follows:,Work-in-Process Inventory xxxManufacturing Overhead xxx,G. Finished Goods and Cost of Goods Sold,
18、When jobs are complete, Finished Goods is increased and Work in Process is reduced:Finished Goods Inventory xxxWork in Process Inventory xxxWhen completed goods are sold, Cost of Goods Sold is increased and Finished Goods is reduced:Cost of Goods Sold xxxFinished Goods Inventory xxx,V. Allocating Ma
19、nufacturing Overhead to Jobs,Computing a Predetermined Overhead Rate Allocation of Manufacturing Overhead Why Estimate an Overhead Rate? Overapplied and Underapplied Overhead,A. Computing a Predetermined Overhead Rate,Estimated Total Overhead Cost Estimated Level of Allocation Base = Predetermined O
20、verhead Rate,$320,000 40,000 direct labor hours = $8 per direct labor hour,B. Allocation (or Application) of Manufacturing Overhead,Predetermined Overhead Ratex Actual Level of Allocation Base-Overhead Applied to Product,Manufacturing Overhead (MOH),Actual MOH,Applied MOH,Work in Process Inventory,D
21、M,DL,AppliedMOH,$8 x 27 hours = 216,C. Why Estimate an Overhead Rate?,Overhead rates are estimated because product costs need to be known for pricing purposes before production is completed. Using annual estimates smoothes out fluctuations in overhead costs so customers are treated more consistently
22、 in pricing products.,D. Overapplied and Underapplied Overhead,Any balance in manufacturing overhead should technically be adjusted through work in process, finished goods, and cost of goods sold since the overhead flows through these accounts. If the balance is immaterial, it is often adjusted thro
23、ugh cost of goods sold only. (See Journal Entry Examples on Page 54),Manufacturing Overhead (MOH),Actual MOH,Applied MOH,Underapplied,Overapplied,VI. Modern Manufacturing Practices,Just-In-Time Production Computer-Controlled Manufacturing Total Quality Management,Just-In-Time (JIT) Production,Suppli
24、ers deliver materials just before they are needed in the production process. Production lines are synchronized to remove waiting time between lines.,B. Computer-Controlled Manufacturing,Decreasing labor costs are causing many companies to reconsider their overhead allocation bases. In a highly mecha
25、nized companies where direct labor is a small part of total manufacturing costs, using labor as an allocation base is generally not appropriate. When equipment is substituted for labor, fixed costs generally increase, and variable costs decrease.,C. Total Quality Management,Although there is no righ
26、t way to implement total quality management (TQM), the following are usually stressed: Listening to customer needs Making products right the first time Reducing defective products Encouraging continuous improvement by workers,Summary,Job-Order vs. Process Costing Manufacturing (DM, DL, MOH) and Nonmanufacturing (S&A) Costs Cost flows in a Manufacturing Company Manufacturing Overhead JIT, Computer-Controlled Manufacturing, Total Quality Management,
