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Introduction to Managerial
Accounting and Job Order
Cost Systems
Accounting, 21st Edition
Warren Reeve Fess
Shareholders
Shareholders Management
Management
Creditors
Creditors
Government
Government
General
General Public
Public
Management
Management
Financial Financial
Statements
Accounting
External Users and
Users:
Management
Characteristics: Objective
Objective
Prepared
Preparedaccording
according
to
toGAAP
GAAP
Prepared
Preparedperiodically
periodically
Business
Businessentity
entity
Managerial Management
Reports
Accounting
Users: Management
Characteristics: Objective
Objectiveand
andsubjective
subjective
Prepared
Preparedaccording
accordingto
to
management
managementneeds
needs
Prepared
Preparedperiodically
periodically
or
oras
asneeded
needed
Business
Businessentity
entityor
orsegment
segment
Partial Organization Chart – Callaway Golf Company
Chief
ChiefExecutive
Executive
Officer
Officer
Vice-President
Vice-President
Vice-President— Vice-President— New Chief Financial
Global Sales Manufacturing NewProduct
Product Officer
Development
Development
Plant Manager--
Manager——Pro Manager—Shaft
Carlsbad, CA Controller
Tour Relations Development
Plant
Manufacturing
Manufacturing Cost
Cost
Terms
Terms
COST
Payroll
Check
EXPENSE ASSET
EXPENSE
The cost of materials
Direct
Direct that are an integral
Materials
Materials part of the product.
INK INK
Job 73
Job 69
Job 70
a. Materials 10 500 00
Accounts Payable 10 500 00
Materials purchased during
December.
Flow
Flow of
of Manufacturing
Manufacturing Costs
Costs
Receiving
Receiving
Report
Report Invoice
Invoice
No.
No.196
196
Rec. Mat.
Report Req.
Unit
No. Quantity Amount No. Quantity Amount Date Quantity
Amount Price Dec. 1 1,200 $ 6,000 $5.00
672 400 $ 2,000 4 800 4,000 5.00
196 1,500 $10,500 8 800 4,000 5.00
1,500 10,500 7.00
First-in,
First-in, first-out
first-out
Direct
Direct Materials
Materials
Rec. Mat.
Report Req.
Unit
No. Quantity Amount No. Quantity Amount Date Quantity
Amount Price Dec. 1 1,200 $ 6,000 $5.00
672 400 $ 2,000 4 800 4,000 5.00
196 1,500 $10,500 8 800 4,000 5.00
1,500 10,500 7.00
704 1,800 11,000 12 500 3,500 7.00
to Materials Requisition
Direct
Direct Materials
Materials from Materials Ledger Account
MATERIALS REQUISITIONS
REQUISITION NO. 704
JOB NO. 72
Quantity Unit
Description Issued Price Amount
to Job Cost
Sheet
Direct
Direct Materials
Materials from Materials Requisition
Job 72
4,000 units of Algebra
TIME TICKET
No. 6311
Employee Name S. Andrews
Date Dec. 26, 2006
Work Description Printing
December Job Job No. 72
72 (500 hours) Start Finish Hours Hourly
Time Time Worked Rate Cost
for a total cost 9:00 12:00 3 $15.00 $45.00
of $7,500 1:00 6:00 5 15.00 75.00
Job 72
4,000 units of Algebra
A
A firm
firm can’t
can’t wait
wait until
until the
the end
end of
of the
the
fiscal
fiscal year
year to
to price
price aa product,
product, so
so
overhead
overhead must
must bebe estimated
estimated (or
(or
applied)
applied) using
using this
this formula.
formula.
Estimated total
Predetermined
factory overhead costs
Estimated activity = factory overhead
rate
base
Factory
Factory Overhead
Overhead
An
An activity
activity base
base isis chosen
chosen for
for the
the
denominator
denominator of of the
the formula
formula that
that isis
relevant
relevant to
to overhead
overhead and and can
can bebe
realistically
realistically measured.
measured. There There are
are several
several
possibilities
possibilities for
for Goodwell
Goodwell Printers.
Printers.
Activity
Activity base
base possibilities
possibilities
1. Direct labor hours
2. Direct labor dollars
3. Machine hours
4. Direct materials
Factory
Factory Overhead
Overhead
Goodwell
Goodwell Printers
Printers estimates
estimates
factory
factory overhead
overhead costs
costs to
to be
be
$50,000
$50,000 and
and chooses
chooses direct
direct
labor
labor hours
hours as
as its
its activity
activity base.
base.
Factory
Factory Overhead
Overhead
Management
Management estimated
estimated that
that 10,000
10,000 direct
direct
labor
labor hours
hours would
would be
be used
used during
during the
the fiscal
fiscal
period.
period. This
This allowed
allowed for
for aa predetermined
predetermined
factory
factory overhead
overhead rate
rate to
to be
be calculated.
calculated.
No. 6311
Employee Name B. Andrews
Date Dec. 26, 2006
Work Description Printing
December Job No. 72
Job 72 (500 Start Finish Hours Hourly
Time Time Worked Rate Cost
hours) for a 9:00 12:00 3 $15.00 $45.00
total cost of 1:00 6:00 5 15.00 75.00
$7,500
Job 72
4,000 units of Algebra
Factory
Factory Overhead
Overhead Overapplied
requires
requires closing
closing at
at the
the (overestimated)
Underapplied
end
end of
of the
the fiscal
fiscal period.
period. (underestimated)
Disposal
Disposal of
of Factory
Factory Overhead
Overhead Balance
Balance
ACCOUNT Factory Overhead ACCOUNT
NO.
Post. Balance
Date Item Ref. Debit Credit Debit
Credit
Dec. 1 Balance 200
31 FO cost incurred 4,600 4,400
31 FO cost applied 4,250 150
Sold
Sold 2,000
2,000 American
American History
History
textbooks
textbooks on
on account,
account, $28,000.
$28,000.
Sale
Sale of
of Product
Product
FINISHED GOODS LEDGER
ITEM: American History
Manufactured Shipped Balance
Job Ship
Order Order
Unit
No. Quantity Amount No. Quantity Amount Date Quantity
Amount Price Dec. 1 2,000 $ 20,000 $10.00
643 2,000 $20,000 9 --- --- ---
Sold
Sold 2,000
2,000 American
American History
History
textbooks
textbooks on
on account,
account, $28,000.
$28,000.
Sale
Sale of
of Product
Product
Entry to remove books from inventory.
h. Cost of Goods Sold 20 000 00
The receiving report and the invoice are
Finished Goods 20 000 00
used to record the receipt of the
Cost of 2,000 American
merchandise and to control the payment.
History textbooks sold.
Entry to record sale on account.
i. Accounts Receivable 28 000 00
The receiving report and the invoice are
Sales 28 000 00
used to record the receipt of the
Revenue received from
merchandise and to control the payment.
textbooks sold.
Transfer
Transfer to
to Finished
Finished Goods
Goods
SELLING EXPENSES
Advertising expenses
Sales salaries expenses
Commission expenses
Examples
Examples of
of Period
Period Costs
Costs
ADMINISTRATIVE EXPENSES
Office salaries expenses
Office supplies expenses
Depreciation expense—
office buildings and
office equipment
Goodwell Printers
Income Statement
For the Month Ended December 31, 2006
Sales $28,000
Cost of goods sold 20,150
Gross profit $ 7,850
Selling and admin. expenses:
Sales salaries expense $2,000
Office salaries expense 1,500
Total selling and admin.
expenses 3,500
Income from operations $ 4,350
Overview of Job Order Costing
Costs & Expenses
Product Costs Balance Sheet
Materials
Materials Materials
Materials
Purchases
Purchases Inventory
Inventory
Direct
Direct Work
Workinin Cost of goods
Labor
Labor Process
Process manufactured
Inventory
Inventory
Factory
Factory
Overhead
Overhead
Finished
Finished
Goods
Goods
Inventory
Inventory
Overview of Job Order Costing
Costs & Expenses
Product Costs Balance Sheet
Materials
Materials Materials
Materials
Purchases
Purchases Inventory
Inventory
Period
Periodcosts
costsflow
flow
Direct
Direct
directly
directlyto
tothe
the
Work
Workinin
Labor
Labor income
incomestatement
statement
Process
Process
Inventory
Inventory
Factory
Factory
Overhead
Overhead Income Statement
Finished
Finished
Goods Cost
Costofof
Goods
Period Costs Inventory Goods
GoodsSold
Sold
Inventory
Selling
Sellingand Selling
and Sellingand
and
Administrative
Administrative Administrative
Administrative
Flow of Manufacturing Costs
Materials Work in Process Finished Goods
Materials DM DM
Purchased
Total
Wages
Total IM
Wages
Total DL IM
Wages
Total DL IM
Wages
IL IL
Total DL IM
Wages
IL IL
OFOH
FOHA
Cost of Goods Sold
Wages Payable Factory Overhead
Total DL IM FOHA
Wages
IL IL Based on
predetermined
OFOH
overhead rate
FOHA
Cost of Goods Sold
Wages Payable Factory Overhead
Total DL IM FOHA
Wages
IL IL
OFOH
FOHA
Cost of Goods Sold
Wages Payable Factory Overhead SOLD
Total DL IM FOHA
Wages
IL IL
OFOH
Supplies Overhead
Purchased xxx Used xxx xxx Applied xxx
xxx
Other
costs xxx
Chapter 18
The
The End
End