Chapter 3: Job Order Costing Flashcards
When do you use process costing
homogenous products/services
-> when you have many identical products and services
How are process costing costs calculated
Divviding total process costs by units produced in that period to GET AN AVERAGE COST
When do you use job order costing
Distinct, identifiable products and services
-> EX: A custom made yacht
-> EX: an antique store
How is job order costing don
Costs are totaled by job or batch and the units costs are calculated by dividing total job cost by units produced in that job
AS MANY COSTS TO PRODUCT AS POSSIBLE ARE TRACED TO EACH JOB
Why do we do this? why do we determine unit costs
Financial Statement
Planning/Contorlling functions
Decision Making
Actual Costing
Actual DM, Actual DL, Actual MOH
What are we doing with normal costing?
DM- Actual Costs
DL- Actual Costs
MOH- Applied costs
what are different ways to do job order costing
actual, normal, and standard
What is applied MOH
It is the charge out rate, or THE PREDETERMINED MOH RATE
-> This is the estimated MOH rate
Estimated total MOH costs of period/ Estimated Total Unit in Base
What is the base? activity or allocation base (cost driver) WHICH WOULD IDEALLY RESULT IN MOH COSTS TO CHANGE IN PROPORTION TO THE BASE CHOSE
It is relatively easy to cost DL-Applied costs and DM-Applied costs
the challenge rises in calculating manufacturing overhead
Example of BASE
DLH: direct labour hours
MH: machine hours
DL $:Direct Labour Dollars
Whatever company feels will cause thee costs to increase or decrease
Predetermined MOH rate * Actual amount of base
Why do we use the applied MOH vs actual MOH
- timeliness
- avoids sasonabl fluctuations (utilies change in different period)
- simplifies the accounting process (this is far easier!!! who wants to change this period over period)
What is the Manufacturing overhead account?
It is a remporary account (at the end of the period it has a zero balance), it is used to calculate Applied MOH for WIP account
MOH, you DR. Actual | Cr. Applied
CR. Applied is (Predetermined MOH rate x Actual amount of cost driver)
How to account for applied MOH
dr. WIP
cr. Manufactured overhead
predetermined moh rate
Estimated total MOH costs of period/ Estimated total unit in base
at the end of the acct period where are the job costs held
EITHER WORK IN PROCESS INVENTORY for incomplete goods
OR FINISHED GOODSS for complete and not yet sold
JOB ORDER COST FLOW:
MANUFACTURING COSTS ARE ASSIGNED TO WORK IN PROCESS INVENTORY AS COSTS ARE INCURRED
completed jobs -> FG inventory
sold > COGS
OKAY AYUSHI LOCK IN LISTEN TO ME RN!!!!! WHAT ARE THE TWO MAJOR STEPS IN FLOWS OF COSTS
- ACCUMUALTE ALL MANUFACTURING COSTS AS INCURRED (RM,FL,MOH)
- ASSIGN COSTS TO EACH SPECIFIC JOB OR UNIT
Job order costing does NOT USE DM, DL,MOH
it uses RM, FL, APPLIED MOH
FL (consists of direct and inidirect labour costs)
RM Inventory
A/P
FL
??
MOH
???
WIP inventory
MOH
RM inv
—-> for direct & indirect materials
WIP inventory
MOH
FL
—-> for direct & indirect labour
learing out rm inv and FL
basically, you can close out RM inv to MOH (indirect materials), AND to WIP (direct labour)
FL to MOH (indirect labour), AND to WIP (direct labour)
MOH to WIP
proration method
basically you adjust entries to Work in Process Inventory, Finished Goods
Inventory and Cost of Goods not just cogs!!!! so like do reqular U/O but adjust to these accs depending on amt sold
