Job

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Job-Costing and Process-Costing Systems

Cost Systems : 

Job order costing Process costing Cost Systems There are two basic systems used by manufacturers to assign costs to their products:

Process Costing Example : 

Chopping Mixing and Canning Process Costing Example MTR produces a garlic flavored tomato sauce. Production of the sauce requires two major processes:

Process Costing Example : 

$20,000 ÷ 100,000 = $0.20/pint Process Costing Example Assume that Laura incurred $20,000 in the Mixing and Canning process to mix 100,000 pints of tomato sauce. What is the Mixing and Canning cost per pint?

Job Costing : 

Job Costing It is used by a manufacturer who produces products as individual units or in distinct batches or jobs.

Job Costing Example : 

Job Costing Example David, Bryan, and Co. is a small furniture manufacturing business in Texas. They received an order for 10 chairs from a customer in Kansas City.

Job Costing Example : 

$500 ÷ 10 = $50/chair Job Costing Example Total cost for the job was $500. How much was the cost per chair?

Job Costing : 

Job Costing Job cost record is a document used to accumulate the costs of a job.

Job Cost Record Example : 

Job Number: J9738 Date Promised: 9/11/06 Customer: Miami Motors Date Started: 8/03/06 Job Description: 300 automobile engine valves Engineering Design Number: JJJ-100 Job Cost Record Example

Job Cost Record Example : 

Material Requisition Number Description Quantity Rate Amount 47624 Bar steel 720 units $11.50 $ 8,280 stock 3” A35161 Subassemblies 290 units $38.00 11,020 Total direct materials cost: $19,300 Job Cost Record Example

Job Cost Record Example : 

Dates Number Hours Rate Amount 8/2,3,4,5 M16 24 $28 $ 672 8/2,3,4,5 M18, M19, M20 64 $26 1,664 8/6,7,8,9,10 A25, A26, A27 120 $18 2,160 8/6,7,8,9,10 A32, A34, A35 61 $17 1,037 Total direct labor cost : 269 $5,533 Job Cost Record Example

Job Cost Record Example : 

Manufacturing Overhead Amount 118 machine hours @ $40 per hour $ 4,720 269 direct labor hours @ 36 per hour 9,684 Total overhead cost: $14,404 Job Cost Record Example

Job Cost Record Example : 

Total cost $39,237 Number of units produced 300 Cost per unit $130.79 Job Cost Record Example

Job-Order Costing and Process Costing : 

Job-Order Costing and Process Costing Job-order costing allocates costs to products that are identified by individual units or batches. Process costing averages costs over large numbers of nearly identical products.

Job-Order Costing Basic Records : 

Job-Order Costing Basic Records Job-cost records contain all costs for a particular product, service, or batch of products. Materials requisitions are records of materials used in particular jobs. Labor time cards record the time a particular direct laborer spends on each job.

Job-Cost Record : 

Date Started: 1/7/20X7 Job Number: 963 Date Completed: 1/14/20X7 Units completed: 12 Cost Date Ref. Quantity Amount Summary Direct Materials: 6” Bars 1/7 N41 24 120.00 Casings 1/9 K56 12 340.00 460.00 Direct Labor: Drill 1/8 7Z4 7.0 105.00 1/9 7Z5 5.5 82.50 Grind 1/13 9Z2 4.0 80.00 267.50 Overhead: Applied 1/14 9.0 mach. hrs. 180.00 180.00 Total cost 907.50 Unit cost 75.625 Job-Cost Record

Job-Costing System Example : 

Job-Costing System Example Beginning Direct Materials inventory Rs.110,000 Enriquez Machine Parts Company

Job-Costing System Example : 

Beginning inventory Rs.0 Direct labor and applied overhead Rs.765,000 Job-Costing System Example

Job-Costing System Example : 

Beginning Finished Foods inventory Rs.12,000 Cost of Goods Available for Sale Rs.2,512,000 Job-Costing System Example

Product Costing in Service Organizations : 

Product Costing in Service Organizations Service and nonprofit organizations call their “product” a program or a class of service. In service industries, each customer order is a different job.

Process Costing : 

Process Costing Process costing is more efficient for companies that produce large quantities of homogenous product in a continuous process. The cost accounting system used by a company depends upon the nature of its products or services.

Process Costing Compared With Job Costing : 

Process Costing Compared With Job Costing Job-costing has one WIP account. Process costing requires one WIP account for each process. The journal entries for process-costing systems are similar to those for the job-order system. However

Process Costing Compared With Job Costing : 

Process Costing Compared With Job Costing It accumulates costs for a period and divides them by quantities produced during the period to get broad, average unit costs. Process costing can be applied to non- manufacturing and manufacturing activities. Process-costing does not distinguish among individual units of product.

Calculation of Product Costs : 

Calculation of Product Costs What is the cost of a completed unit? Rs.2.8+2.0 = 4.8

Production Cost Report : 

Production Cost Report

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Job Order Cost System Comparing Job Order Costing and Process Costing Direct materials Factory overhead Direct labor Work in Process Account to Finished Goods

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Process Cost System Direct materials Work in Process Account Work in Process Account DEPT. A DEPT. B Factory Overhead Direct Labor Factory Overhead Direct Labor to Finished Goods Comparing Job Order Costing and Process Costing

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determine a product cost by measuring the amount of direct materials and direct labor used and allocating overhead costs. allocate overhead using a predetermined overhead rate (or activity-based costing). maintain perpetual inventory records with subsidiary ledgers for Materials, Work in Process, and Finished Goods. Both systems: Comparing Job Order Costing and Process Costing

Physical Flows for a Process Manufacturer : 

Physical Flows for a Process Manufacturer Scrap Metal Materials Melting Department Casting Department

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Molten metal transferred from Melting Casting Department Melting Department Physical Flows for a Process Manufacturer

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Materials WIP – Melting Factory OH – Melting DM Purchases of direct and indirect materials Direct materials used in production DM Finished Goods Cost of Goods Sold Factory OH – Casting WIP – Casting Cost Flows for a Process Manufacturer

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Materials WIP – Melting DM DL DM Direct labor used in production DL Purchases of direct and indirect materials Finished Goods Cost of Goods Sold Factory OH – Casting Actual costs incurred WIP – Casting Factory OH – Melting Cost Flows for a Process Manufacturer

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Materials WIP – Melting Finished Goods WIP – Casting Cost of Goods Sold DM DL DM Indirect materials used in production IM Purchases of direct and indirect materials IM Factory OH – Casting Factory OH – Melting Cost Flows for a Process Manufacturer

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Materials WIP – Melting Finished Goods WIP – Casting Cost of Goods Sold DM DL DM Factory overhead applied FOA Purchases of direct and indirect materials IM Factory OH – Casting Actual costs incurred FOA Factory OH – Melting Cost Flows for a Process Manufacturer

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Materials WIP – Melting Finished Goods WIP – Casting Cost of Goods Sold DM DL DM Cost transferred out/transferred in TO/TI Purchases of direct and indirect materials IM Factory OH – Casting Actual costs incurred FOA FOA TO Factory OH – Melting Cost Flows for a Process Manufacturer

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Materials WIP – Melting Finished Goods WIP – Casting Cost of Goods Sold DM DL DM Purchases of direct and indirect materials IM Factory OH – Casting Actual costs incurred FOA FOA TO TI DL Factory overhead applied FOA Direct labor used in production DL FOA Factory OH – Melting Cost Flows for a Process Manufacturer

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Materials WIP – Melting Finished Goods WIP – Casting Cost of Goods Sold DM DL DM Purchases of direct and indirect materials IM Factory OH – Casting Actual costs incurred FOA FOA TO TI DL FOA FOA Cost transferred out/transferred in TO/TI TO Factory OH – Melting Cost Flows for a Process Manufacturer

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Cost Flows for a Process Manufacturer Materials WIP – Melting Finished Goods WIP – Casting Cost of Goods Sold DM DL DM Purchases of direct and indirect materials IM Factory OH – Casting Actual costs incurred FOA FOA TO TI DL FOA FOA Cost of goods sold COGS TO TI COGS Factory OH – Melting

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Upholstery Dept. Assembly Dept. Just-in-Time Processing (JIT) Cutting Dept. Wood Traditional Production Line Drilling Dept. Sanding Dept. Staining Dept. Varnishing Dept.

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Just-in-Time Processing (JIT) Just-in-Time Production Line Wood Cutting drilling and sanding Staining and varnishing Upholstery and assembly

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The End

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The End