MGM222H5 Lecture Notes - Lecture 3: Cost Accounting, Pro Rata, Finished Good
MGM222-LEC-2018-01-22
Overview:
1) Distinguish between job order and process costing
2) POHR (Predetermined OverHead Rate - estimate) =
- Estimate total manufactured goods OH (for the period) / estimate total units (in the
allocation base)
3) JE’s (journal entries)= Cost flow
4) Applied OH:
a. UNDER from actual cost
b. OVER from actual cost
Cost accounting systems
- Two types:
o Job-order cost system
o Process cost system
▪ Not for service companies
Job-order cost System:
- Each job or batch has its own distinguishing characteristics
- Calculate the cost per job
- Maybe for a specific order or inventory
- Measures costs for each job completed not for set time periods
o Custom-home builder
o Architects
o Caterer for a wedding reception
o Builder of commercial fishing vessels
Process cost system
- All homogeneous products
o Cereal
o Automobiles
o Compact discs
o Paint
- Used when a large volume of similar products
- Accumulated for a specific time period
- Assigned to departments or processes for a set period of time
Job-order cost flows
- Raw materials:
find more resources at oneclass.com
find more resources at oneclass.com
o Include both direct and indirect materials
▪ Indirect
• Not worth it or not possible
- Labor
o Include both indirect and direct labors
- Remember:
o Raw materials
▪ Debit Purchases
▪ Credit Materials used
o Manufacturing overhead account:
▪ Dr actual cost
▪ Cr overhead applied – estimate
Two major steps in flows of costs:
1) Accumulate the manufacturing costs incurred
a. Raw materials
b. Factory labor
c. Manufacturing overhead
2) Assign the accumulated costs to the work done
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Overview: distinguish between job order and process costing, pohr (predetermined overhead rate - estimate) = Estimate total manufactured goods oh (for the period) / estimate total units (in the allocation base: je"s (journal entries)= cost flow, applied oh, under from actual cost, over from actual cost. Two types: job-order cost system, process cost system, not for service companies. Each job or batch has its own distinguishing characteristics. Maybe for a specific order or inventory. Measures costs for each job completed not for set time periods: custom-home builder, architects, caterer for a wedding reception, builder of commercial fishing vessels. All homogeneous products: cereal, automobiles, compact discs, paint. Used when a large volume of similar products. Assigned to departments or processes for a set period of time. Raw materials: include both direct and indirect materials. Indirect: not worth it or not possible. Labor: include both indirect and direct labors.
