horngren_ima16_stppt14

Report
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 1
Chapter 14
Job-Order Costing and
Process-Costing Systems
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 2
Chapter 14 Learning Objectives
1. Distinguish between job-order costing and process
costing.
2. Prepare summary journal entries for the typical
transactions of a job-order costing system.
3. Use an ABC system in a job-order environment.
4. Show how service organizations use job-order costing.
5. Explain the basic ideas underlying process costing and
how they differ from job-order costing.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 3
Chapter 14 Learning Objectives
6. Compute output in terms of equivalent units.
7. Compute costs and prepare journal entries for the
principal transactions in a process-costing system.
8. Demonstrate how the presence of beginning
inventories affects the computation of unit costs under
the weighted-average method.
9. Understand the concept of transferred-in costs in a
process-costing system with sequential processes.
10. Use backflush costing with a JIT production system.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 4
Learning
Objective 1
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.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 5
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.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 6
Job-Cost Record
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 7
Job-Order Costing System Example
Summary of Enriquez Machine Parts
Company Pertinent Transactions
December 31 inventories
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 8
Job-Costing System Example
Job-Order Costing, General Flow of Costs (in 000)
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 9
Learning
Objective 2
Summary journal entries for the
a job-order costing system
Trace direct materials and direct labor costs to WIP.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 10
Applying Factory Overhead Costs
Accountants trace actual direct materials
and direct labor costs to products, and apply
factory overhead costs to WIP via budgeted
(predetermined) overhead rates.
To charge actual overhead costs to
Factory Department Overhead:
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 11
Applying Factory Overhead Costs
To compute budgeted overhead rates, for each
department determine: 1) cost-allocation base,
2) budgeted overhead costs, and 3) budgeted
amount of each cost-allocation base.
Apply factory overhead costs to jobs:
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 12
Applying Factory Overhead Costs
Enriquez allocates overhead based on machine
hours in machining and direct-labor cost in
assembly, resulting in the following overhead
rates:
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 13
Applying Factory Overhead Costs
Applied overhead for 20X1 is $375,000
Summary journal entry:
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 14
Finished Goods, Sales, and Cost of Goods Sold
Transactions that recognize the completion of
production and the eventual sale of the goods.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 15
Finished Goods, Sales, and Cost of Goods Sold
Assuming the use of the immediate write-off method
to dispose of under- or overapplied overhead:
The preceding seven transactions recorded direct
materials, direct labor, and factory overhead costs
incurred during 20X1. Costs flowed through WIP to
either Direct-Materials Inventory, WIP Inventory,
Finished-Goods Inventory, or Cost of Goods Sold.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 16
Learning
Objective 3
Activity-Based Costing in a
Job-Costing Environment
ABC increases costing accuracy by focusing
On the cause-and-effect relations between:
Work
performed
(activities)
Consumption
of resources
(costs)
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 17
ABC in a Job-Order Environment Illustration
Dell focuses on the most critical (core)
processes across the value chain, the
design and production processes.
Dell then added the remaining phases of
the value chain, the functions (or core
processes) that add value to the
company’s products.
Dell assigns the costs of these functions
to an individual job under the current ABC
system.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 18
ABC in a Job-Order Environment Illustration
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 19
Learning
Objective 4
Product Costing in Service and
Nonprofit 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.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 20
Budgets and Control of Engagements
Accounting Firm Condensed Budget
The budgeted total cost of an engagement is the
direct-labor cost plus applied overhead (260% of
direct-labor cost plus any other direct costs).
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 21
Accuracy of Costs of Engagements
Suppose that this accounting firm’s policy
for price quotes is 200% of total
professional costs plus travel costs.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 22
Process Costing
The cost accounting system used
by a company depends upon the
nature of its products or services.
Process-costing systems apply costs to
homogeneous products that a company mass
produces in continuous fashion through a
series of production processes.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 23
Learning
Objective 5
Process Costing Compared
With Job Costing
The journal entries for process-costing
systems are similar to those
for the job-order system.
However,
Job-costing has one WIP account.
Process costing requires one WIP
account for each processing department.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 24
Process Costing Compared
With Job Costing
Process costing does not
distinguish among
individual units of product.
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 nonmanufacturing and
manufacturing
activities.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 25
Application of Process Costing
The Oakville Wooden Toys company buys wood
as a direct material for its forming department,
which processes only one type of toy,
marionettes.
It inserts all the wood into this department at
the beginning of the process. After forming, the
company transfers the marionettes to the
finishing department where workers hand
shape them and add strings, paint, and
clothing.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 26
Application of Process Costing
The forming department had no beginning
inventory and completely manufactured 25,000
identical units during April, leaving no ending
inventory. Its costs that month were as follows:
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 27
Application of Process Costing
Oakville Wooden Toys
Five key steps in the
Cost of Goods Sold calculation
Step 1: Summarize the flow of physical units.
Step 2: Calculate output in terms of equivalent units.
Step 3: Summarize the total costs to account for (apply
to WIP).
Step 4: Calculate equivalent unit costs .
Step 5: Apply costs to units completed and in ending
WIP.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 28
Application of Process Costing
How does a company measure output—
the results of the department’s work?
Step 2
State output not in terms of physical
units but in terms of a different unit
measure called an “equivalent unit.”
Equivalent units are the number of completed
(whole) units that the department could have
produced from the inputs applied.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 29
Learning
Objective 6
Physical Units and Equivalent Units
Determine equivalent units of partially
completed units by multiplying physical units by
the percent of completion to correctly equate
the completed units transferred out with the
partially completed units in ending inventory.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 30
Learning
Objective 7
Calculation of Product Costs
Step 3 summarizes the total costs to account for (that is,
the total costs incurred and applied to WIP—Forming).
Step 4 obtains unit costs by dividing the two categories
of total costs by the appropriate measures of equivalent
units. The unit cost of a completed unit = materials cost
plus conversion costs per equivalent unit.
Step 5 then uses unit costs to apply costs to products.
Finished units are complete in terms of both direct materials
and conversion costs. Multiply the full unit cost times the
number of completed units to determine unit cost.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 31
Calculation of Product Costs
Forming Department Production Cost Report
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 32
Journal Entries
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 33
Learning
Objective 8
Effects of Beginning Inventories:
Weighted-Average Method
The weighted-average (WA) process-costing
method determines total costs by adding
together the cost of:
(1) all work done in the current period and
(2) the work done in the preceding period on the
current period’s beginning inventory of work in
process.
(3) Then, you divide this total cost by the total
equivalent units of work done to date, whether
that work was done in the current or previous
period.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 34
Learning
Objective 9
Effects of Beginning Inventories:
Weighted-Average Method
Many companies that use process costing have
sequential production processes. Oakville
Wooden Toys transfers the items completed in
its forming department to the finishing
department. The finishing department would
label the costs of the items it receives from the
forming department as transferred-in costs.
Transferred-in costs —costs incurred in a
previous department for items that have been
received by a subsequent department.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 35
Effects of Beginning Inventories:
Weighted-Average Method
Forming Department Output in Equivalent Units,
Weighted-Average Method
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 36
Weighted-Average Method Example
Forming Department Production-Cost report,
Weighted-Average Method
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 37
Learning
Objective 8
Process Costing in a JIT System
Organizations using JIT production systems
usually have very small inventories,
or no inventories at all.
Backflush costing is an accounting
System that applies costs to products
only when the production is complete.
Backflush costing has only two categories of
costs: materials and conversion costs. Its
unique feature is an absence of a WIP account.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 38
Backflush Costing Example
Speaker Technology, Inc., recently
introduced backflush costing and JIT.
July Production for Model AX27 :
Standard material cost:
Standard conversion cost:
$14
$21
Actual production for the month: 400 units
Actual materials purchased:
$5,600
Actual conversion costs:
$8,400
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 39
Backflush Costing Example
Backflush costing is accomplished in three steps:
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 40
Backflush Costing Example
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 41
Backflush Costing Example
Charge any remaining balance in the account
at the end of an accounting period to Cost of
Goods Sold.
Write off the $200 balance in the conversion
costs account to Cost of Goods Sold at the end
of the month:
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 42
All rights reserved. No part of this publication
may be reproduced, stored in a retrieval system,
or transmitted, in any form or by any means,
electronic, mechanical, photocopying, recording,
or otherwise, without the prior written permission
of the publisher. Printed in the United States of
America.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
14 - 43

similar documents