ACTG 2020 Chapter Notes - Chapter 5: Income Statement, Finished Good, Expense

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crimsonyak879

2 May 2017

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Job-order costing: used when many different products, jobs, or services are produced each period. I. e. a jeans factory making various types of jeans and styles each month: consists of multiple batches or jobs (i. e. an order of 1000 of a certain type of jeans) Job cost sheet: form prepared for each job that records materials, labour, and overhead costs charged to job, helps charge costs to a job, also helps with accounting records (serve as subsidiary ledger) I. e. when materials from materials requisition form are received, recorded on job cost sheet. Measuring direct labour cost: labour charges that are easily traceable to a particular job. I. e. applying /dlh to a job using 100 dlhs (100 x 8 = applied) The need for a predetermined rate: helps managers know accounting system"s valuation of completed job before end of actg period.

Related Questions

Identify each statement as true or false. If false, indicate howto correct the statement.

1. Process cost systems are used to apply costs to similarproducts that are mass-produced in a continuous fashion.
2. A process cost system is used when each finished unit isindistinguishable from another.
3. Companies that produce soft drinks, motion pictures, andcomputers chips would all use process cost accounting.
4. In a process cost system, costs are tracked by individualjobs.
5. Job order costing and process costing track differentmanufacturing costs elements.
6. Both job order costing and process costing account for directmaterials, direct labor, and manufacturing overhead.
7. Costs flow through the accounts in the same basic way for bothjob order costing and process costing.
8. In a process cost system, only one work in process account isused.
9. In a process cost system, costs are summarized in a job costsheet.
10. In a process cost system, the unit cost is total manufacturingcosts for the period divided by the units produced during theperiod.

byzantiumpanda529

AirComp Corporation produces component parts for the aircraftindustry. In prior years, they maintained a job-costing systemconsisting of direct materials and direct labor cost andmanufacturing overhead. Manufacturing overhead was allocated toproduction jobs using a single-indirect cost allocation rate, whichwas $115 per direct labor hour.

For 20x1, the Company decided to change the method of allocatingmanufacturing overhead to production jobs from the single-indirectcost allocation approach to the activity-based costing (âABCâ)indirect cost allocation approach. For purposes of developing theABC allocation rates, AirCompâs cost accounting team prepared thefollowing analysis:

Activity	Cost Driver	Allocation Rate
Material handling	Parts handled	$0.40
Lathe work	No. of lathe turns	$0.20
Milling	Machine hours	$20.00
Grinding	No. of parts ground	$0.80
Testing	No. of units tested	$15.00

For 20x1, AirCompâs cost accountant team prepared the followinganalysis of the direct costs and indirect cost activities for Job100 and Job 200, the only production jobs in process for theperiod:

	Job 100	Job 200
Direct materials cost	$9,700	$59,900
Direct labor cost	$750	$11,250
No. of direct manufacturing labor hours	25	375
No. of parts ground	500	2,000
No. of lathe turns	20,000	60,000
Machine hours	150	1,050
No. of units produced during period (all are tested)	10	200

Required

1.For each job, determine total per unit cost using direct laborhours to allocate manufacturing overhead to each job.

2.For each job, determine total per unit cost using anactivity-based costing approach to allocate manufacturing overheadcost to job.

3.Compare the per unit cost figures for each job computed instep a. and step b., above. Why do the new ABC approach differ fromthe single-indirect cost allocation systems differ in the amount ofthe per unit indirect cost allocated to each job (i.e. what was theimplications of the cost allocation method change on the amount ofper unit cost allocated to each job and what factors caused theobserved changes).

4.How might AirComp Corporation use the information from ABCallocation approach to better manage its business, i.e. what arethe advantages of using an activity-based costing approach?

oliveleopard246

Listed below are seven technical accounting terms introduced oremphasized in this chapter.

Job Order costing

Overhead application rate

Overapplied overhead

Activity-based costing

Cost driver

Cost of finished goods manufactured

Job cost sheet

Each of the following statements may (or may not) describe thsestechinial terms. For each statment, indicate the term described, oramswer "None" if the statement does not correctly describe any ofthe terms.

a. An activity base that can b etraced directly to unitsproduced and can be used as a denominator in computing an overheadapplication rate.

b. The total of all direct lavor, direct materials andmanufacturing overhead transferred from work in process to finishedgoods.

c. A means of assigning indirect product costs to work inprocess during the period.

d. A debit balance remaining in the Manufacturing Overheadaccount at teh end of the period.

e. The type of cost accounting system likely to be used by aconstruction company.

f. The type of cost accounting method likely to be used foroverhead costs.

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ACTG 2020 Chapter Notes - Chapter 5: Income Statement, Finished Good, Expense

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