Bài giảng Kế toán, kiểm toán - Chapter 3: Product costing and cost accumulation in a batch production environment

Product Costing and Cost Accumulation in a Batch Production EnvironmentChapter 3Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Product and Service CostingFinancial AccountingProduct costs are used to value inventory and to compute cost ofgoods sold. Managerial Accounting and Cost ManagementProduct costs are used for planning, control, directing, and management decision making.Our focus changes from financial statement costs to operations3-2Flow of Costs in Manufacturing Firm3-3 Used for production of large, unique, high-cost items. Built to order rather than mass produced. Many costs can be directly traced to each job. TWO TYPES: Job-shop operations Products manufactured in very low volumes or one at a time. Batch-production operations Multiple products in batches of relatively small quantity.ProcessCostingJob-OrderCostingTypes of Product-Costing Systems3-4 Typical job-order cost applications: Special-order printing Building construction Also used in the service industry Hospitals Law firmsProcessCostingJob-OrderCostingTypes of Product-Costing Systems3-5ProcessCostingJob-OrderCosting Used for production of small, identical, low cost items. Mass produced in automated continuous production process. Costs cannot be directly traced to each unit of product. Typical process cost applications: Petrochemical refinery Paint manufacturer Paper millTypes of Product-Costing Systems3-6 Overhead is applied to jobs using a predetermined overhead rate (POHR) based on estimates made at the beginning of the accounting period.POHR =Budgeted manufacturing overhead costBudgeted amount of cost driver (or activity base)Overhead applied = POHR × Actual activity Based on estimates, and determined before the period beginsActual amount of the allocation base, such as direct labor hours, incurred during the periodManufacturing Overhead Costs3-7 Overhead is applied to jobs using a predetermined overhead rate (POHR) based on estimates made at the beginning of the accounting period.POHR =Budgeted manufacturing overhead costBudgeted amount of cost driver (or activity base)Overhead applied = POHR × Actual activity Recall the Aluminum Boat example where:Overhead applied = $30 per DLH × 600 DLH = $18,000Manufacturing Overhead Costs3-8Let’s examine the cost flows in a job-order costing system. We will use T-accounts and start with materials.Job-Order System Cost Flows3-9Raw MaterialsMaterialPurchasesDirect MaterialDirect MaterialMfg. OverheadIndirect MaterialIndirect MaterialWork in Process(Job-Cost Record)Job-Order System Cost Flows3-10Next let’s add labor costs and applied manufacturing overhead to the job-order cost flows. Are you with me?Job-Order System Cost Flows3-11Direct LaborMfg. OverheadIndirect MaterialDirect MaterialIndirectLaborDirect LaborIndirectLaborWages PayableWork in Process(Job-Cost Record)Job-Order System Cost Flows3-12Direct LaborMfg. OverheadIndirect MaterialDirect MaterialOverheadApplied to Work inProcessIf actual and applied manufacturing overhead are not equal, a year-end adjustment is required. We will look at the procedure to accomplish this later.IndirectLaborDirect LaborOverhead AppliedIndirectLaborWages PayableWork in Process(Job-Cost Record)Job-Order System Cost Flows3-13Now let’s complete the goods and sell them. Still with me? Job-Order System Cost Flows3-14Cost ofGoodsMfd. Finished GoodsCost ofGoodsSold Cost ofGoodsMfd. Cost of Goods SoldCost ofGoodsSold Direct MaterialDirect LaborOverhead AppliedWork in Process(Job-Cost Record)Job-Order System Cost Flows3-15Let’s return to AFB Company and see what we will do if actual and applied overhead are not equal. Job-Order System Cost Flows3-16Actual Overhead costs for the year: $5,050,000Actual direct labor hours worked for the year: 170,000Applied Overhead = POHR × Actual Direct Labor HoursApplied Overhead = $30.00 per DLH × 170,000 DLH = $5,100,000Applied overhead exceeds actual overhead by $50,000This difference is called overapplied overhead. Overhead Application Example3-17Work inProcessFinishedGoods Cost of Goods Sold$50,000may be allocatedto these accounts.$50,000 may beclosed directly to cost of goods sold.Cost of Goods SoldAFB Company’s MethodOROverapplied and Underapplied Manufacturing Overhead3-18Actualoverhead costs$5,050,000$50,000 overappliedUnadjusted Balance$50,000$50,000AdjustedBalanceOverhead Appliedto jobs $5,100,000 AFB’sMfg. Overheadfor the year AFB’s Costof Goods Soldfor the yearOverapplied and Underapplied Manufacturing Overhead3-19Overapplied and Underapplied Manufacturing Overhead - Summary3-20Schedule of Cost of Goods Manufactured3-21Schedule of Cost of Goods Sold3-22Actual direct materialand direct labor combined withactual overhead.Actual direct materialand direct labor combined withpredetermined overhead. Using a predetermined rate makes itpossible to estimate total job costs sooner. Actual overhead for the period is notknown until the end of the period.Actual and Normal Costing3-23Cost poolsStage One:Costs assignedto poolsIndirectLaborIndirectMaterialsOtherOverheadDepartment1Department2Department3Two-Stage Cost Allocation3-24Departmental Overhead RatesDepartment1Department2Department3 Products Cost poolsDirect Labor HoursMachineHoursRawMaterialsCostStage One:Costs assignedto poolsStage Two:Costs appliedto productsDepartmental Allocation BasesIndirectMaterialsOtherOverheadIndirectLabor3-25ContractsMissionsProgramsCasesTHE JOBJob-Order Costing in Nonmanufacturing Organizations3-26Changing Technology in Manufacturing OperationsComputerized data interchange has eliminated much of the paperwork associated with job-ordercost systems.Scanning devices have simplified data entry to record material and labor use. 3-27