CHAPTER 4 JOB COSTING. $2,700,000 = 1.80 or 185% $1,500,000

Transcription

1 CHAPTER 4 JOB ING 4-17 (20 min.) Actual costing, normal costing, accounting for manufacturing overhead. 1. Budgeted manufacturing overhead rate Budgeted manufacturing overhead costs Budgeted direct manufacturing labor costs $2,700, or 185% $1,500,000 Actual manufacturing overhead rate Actual manufacturing overhead costs Actual direct manufacturing labor costs $2,755, or 190% $1,450, Costs of Job 626 under actual and normal costing follow: Actual Costing Normal Costing Direct materials $ 40,000 $ 40,000 Direct manufacturing labor costs 30,000 30,000 Manufacturing overhead costs $30, ; $30, ,000 54,000 Total manufacturing costs of Job 626 $127,000 $124,

2 3. Total manufacturing overhead allocated under normal costing Actual manufacturing labor costs Budgeted overhead rate $1,450, $2,610,000 Underallocated manufacturing overhead Actual manufacturing overhead costs Manufacturing overhead allocated $2,755,000 $2,610,000 $145,000 There is no under- or overallocated overhead under actual costing because overhead is allocated under actual costing by multiplying actual manufacturing labor costs and the actual manufacturing overhead rate. This, of course equals the actual manufacturing overhead costs. All actual overhead costs are allocated to products. Hence, there is no under- or overallocatead overhead. 4-2

3 4-18 (20-30 min.) Job costing, normal and actual costing. 1. Budgeted indirectcost rate Actual indirectcost rate Budgeted indirect costs Budgeted direct labor-hours $50 per direct labor-hour $8,000, ,000 hours Actual indirect costs Actual direct labor-hours $6,888, ,000 hours $42 per direct labor-hour These rates differ because both the numerator and the denominator in the two calculations are different one based on budgeted numbers and the other based on actual numbers. 2a. Laguna Model Normal costing Direct costs Direct materials Direct labor Indirect costs Assembly support ($50 900; $50 1,010) Total costs 2b. Actual costing Direct costs Direct materials Direct labor Indirect costs Assembly support ($42 900; $42 1,010) Total costs $106,450 36, ,726 45,000 $187,726 $106,450 36, ,726 37,800 $180,526 Mission Model $127,604 41, ,014 50,500 $219,514 $127,604 41, ,014 42,420 $211, Normal costing enables Anderson to report a job cost as soon as the job is completed, assuming that both the direct materials and direct labor costs are known at the time of use. Once the 900 direct labor-hours are known for the Laguna Model (June 2007), Anderson can compute the $187,726 cost figure using normal costing. Anderson can use this information to manage the costs of the Laguna Model job as well as to bid on similar jobs later in the year. In contrast, Anderson has to wait until the December 2007 year-end to compute the $180,526 cost of the Laguna Model using actual costing. Although not required, the following overview diagram summarizes Anderson Construction s job-costing system. 4-3

4 INDIRECT POOL ALLOCATION BASE OBJECT: RESIDENTIAL HOME Assembly Support Direct Labor-Hours Indirect Costs Direct Costs DIRECT Direct S Direct Manufacturing Materials Labor 4-4

5 4-19 (10 min.) Budgeted manufacturing overhead rate, allocated manufacturing overhead. 1. Budgeted manufacturing overhead rate Budgeted manufacturing overhead Budgeted machine hours $4,000, ,000 machine-hours $20 per machine-hour 2. Manufacturing overhead allocated Actual machine-hours Budgeted manufacturing overhead rate 195,000 $20 $3,900, Since manufacturing overhead allocated is greater than the actual manufacturing overhead costs, Waheed overallocated manufacturing overhead: Manufacturing overhead allocated $3,900,000 Actual manufacturing overhead costs 3,860,000 Overallocated manufacturing overhead $ 40,

6 4-20 (20-30 min.) Job costing, accounting for manufacturing overhead, budgeted rates. 1. An overview of the product costing system is INDIRECT POOL Machining Department Manufacturing Overhead Assembly Department Manufacturing Overhead ALLOCATION BASE Machine-Hours Direct Manuf. Labor Cost OBJECT: PRODUCT Indirect Costs Direct Costs DIRECT Direct Materials Direct Manufacturing Labor Budgeted manufacturing overhead divided by allocation base: Machining overhead Assembly overhead: $1,800,000 50,000 $3,600,000 $2,000,000 $36 per machine-hour 180% of direct manuf. labor costs 2. Machining department, 2,000 hours $36 $72,000 Assembly department, 180% $15,000 27,000 Total manufacturing overhead allocated to Job 494 $99, Machining Assembly Actual manufacturing overhead $2,100,000 $ 3,700,000 Manufacturing overhead allocated, 55,000 $36 1,980, % $2,200,000 3,960,000 Underallocated (Overallocated) $ 120,000 $ (260,000) 4-6

7 4-23 (10 15 min.) Accounting for manufacturing overhead. 1. Budgeted manufacturing overhead rate $7,500, ,000 $30 per machine-hour 2. Work-in-Process Control 7,350,000 Manufacturing Overhead Allocated 7,350,000 (245,000 machine-hours $30 per machine-hour $7,350,000) 3. $7,350,000 $7,300,000 $50,000 overallocated, an insignificant amount of actual manufacturing overhead costs $50,000 $7,300, %. Manufacturing Overhead Allocated 7,350,000 Manufacturing Department Overhead Control 7,300,000 Cost of Goods Sold 50,

8 4-27 (15 min.) Job costing, unit cost, ending work in progress. 1. Direct manufacturing labor rate per hour $25 Manufacturing overhead cost allocated per manufacturing labor-hour $20 Job M1 Job M2 Direct manufacturing labor costs $275,000 $200,000 Direct manufacturing labor hours ($275,000 $25; $200,000 $25) 11,000 8,000 Manufacturing overhead cost allocated (11,000 $20; 8,000 $20) $220,000 $160,000 Job Costs May 2009 Job M1 Job M2 Direct materials $ 75,000 $ 50,000 Direct manufacturing labor 275, ,000 Manufacturing overhead allocated 220, ,000 Total costs $570,000 $410, Number of pipes produced for Job M1 1,500 Cost per pipe ($570,000 1,500) $ Finished Goods Control 570,000 Work-in-Process Control 570, Raymond Company began May 2009 with no work-in-process inventory. During May, it started and finished M1. It also started M2, which is still in work-in-process inventory at the end of May. M2 s manufacturing costs up to this point, $410,000, remain as a debit balance in the Work-in-Process Inventory account at the end of May

9 4-28 (20 30 min.) Job costing; actual, normal, and variation from normal costing. 1. Actual direct cost rate for professional labor $58 per professional labor-hour Actual indirect cost rate Budgeted direct cost rate for professional labor Budgeted indirect cost rate $744,000 15,500 hours $960,000 16,000 hours $720,000 16,000 hours $48 per professional labor-hour $60 per professional labor-hour $45 per professional labor-hour (a) Actual Costing Direct-Cost Rate $58 (Actual rate) Indirect-Cost Rate $48 (Actual rate) (b) Normal Costing $58 (Actual rate) $45 (Budgeted rate) (c) Variation of Normal Costing $60 (Budgeted rate) $45 (Budgeted rate) 2. (a) Actual Costing Direct Costs Indirect Costs Total Job Costs $ $ 6, ,760 $12,720 (b) Normal Costing $ $ 6, ,400 $12,360 (c) Variation of Normal Costing $ $ 7, ,400 $12,600 All three costing systems use the actual professional labor time of 120 hours. The budgeted 110 hours for the Pierre Enterprises audit job is not used in job costing. However, Chirac may have used the 110 hour number in bidding for the audit. The actual costing figure of $12,720 exceeds the normal costing figure of $12,360 because the actual indirect-cost rate ($48) exceeds the budgeted indirect-cost rate ($45). The normal costing figure of $12,360 is less than the variation of normal costing (based on budgeted rates for direct costs) figure of $12,600, because the actual direct-cost rate ($58) is less than the budgeted direct-cost rate ($60). 4-9

10 Although not required, the following overview diagram summarizes Chirac s job-costing system. INDIRECT POOL Audit Support ALLOCATION BASE Professional Labor-Hours OBJECT: JOB FOR AUDITING PIERRE & CO. Indirect Costs Direct Costs DIRECT Professional Labor 4-10

11 4-31 (20 30 min) Job costing, accounting for manufacturing overhead, budgeted rates. 1. An overview of the job-costing system is: INDIRECT POOL Machining Department Manufacturing Overhead Finishing Department Manufacturing Overhead ALLOCATION BASE Machine-Hours in Machining Dept. Direct Manufacturing Labor Costs in Finishing Dept. OBJECT: PRODUCT JOB Indirect Costs Direct Costs DIRECT Direct Materials Direct Manufacturing Labor 2. Budgeted manufacturing overhead divided by allocation base: a. Machining Department: $10,000, ,000 $50 per machine-hour b. Finishing Department: $8,000,000 $4,000, % of direct manufacturing labor costs 4-11

12 3. Machining Department overhead, $ hours $6,500 Finishing Department overhead, 200% of $1,250 2,500 Total manufacturing overhead allocated $9, Total costs of Job 431: Direct costs: Direct materials Machining Department $14,000 Finishing Department 3,000 Direct manufacturing labor Machining Department 600 Finishing Department 1,250 $18,850 Indirect costs: Machining Department overhead, $ $6,500 Finishing Department overhead, 200% of $1,250 2,500 9,000 Total costs $27,850 The per-unit product cost of Job 431 is $27, units $ per unit The point of this part is (a) to get the definitions straight and (b) to underscore that overhead is allocated by multiplying the actual amount of the allocation base by the budgeted rate. 5. Machining Finishing Manufacturing overhead incurred (actual) $11,200,000 $7,900,000 Manufacturing overhead allocated 220,000 hours $50 11,000, % of $4,100,000 8,200,000 Underallocated manufacturing overhead $ 200,000 Overallocated manufacturing overhead $ 300,000 Total overallocated overhead $300,000 $200,000 $100, A homogeneous cost pool is one where all costs have the same or a similar cause-andeffect or benefits-received relationship with the cost-allocation base. Solomon likely assumes that all its manufacturing overhead cost items are not homogeneous. Specifically, those in the Machining Department have a cause-and-effect relationship with machine-hours, while those in the Finishing Department have a cause-and-effect relationship with direct manufacturing labor costs. Solomon believes that the benefits of using two cost pools (more accurate product costs and better ability to manage costs) exceeds the costs of implementing a more complex system. 4-12