Week 2 Notes
Week 2 Notes ACCT 226 - 001
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This 3 page Class Notes was uploaded by Madeline Lacman on Tuesday September 6, 2016. The Class Notes belongs to ACCT 226 - 001 at University of South Carolina taught by Debbie Huguley Brumbaugh (P) in Fall 2016. Since its upload, it has received 47 views. For similar materials see Introduction to Managerial Accounting in Accounting at University of South Carolina.
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Date Created: 09/06/16
Chapter 3 Job Order Costing Used by companies where many different products or services are produced each period All the product costs Product cost included direct materials, direct labor, and overhead Absorption Costing o Used to determine product costs Examples of companies that would use job order costing: o Boeing (aircraft manufacturing) Manufacturing Overhead, o Bechtel international (large scale construction) including indirect materials o Walt Disney studios (movie production) and indirect labor, are o Law firms; accounting firms; services allocated to all jobs rather than directly traced to each MOH- Computing Predetermined Overhead Rates The predetermined overhead rate (POHR) used to apply overhead to jobs is determined before the period begins POHR= Estimated totalmanufacturingoverheadcost forthecoming period Estimated totalunits∈theallocationbase for thecoming period Ideally, the allocation base is a cost driver that causes overhead Why use an Allocation base? An allocation base is used to assign manufacturing overhead to individual jobs o Indirect, so it is difficult (impossible) to trace OH to jobs o Many types of costs included in OH Some variable Some fixed Fixed MOH affects average cost per unit Common bases used o Direct labor hours o Direct labor dollars o Machine hours POHR Estimate total MOH costs for next period [VMOH+FMOH = TMOH or Y = a+b(X)] Given in terms of $ per direct labor-hour Total Manufacturing Costs = DM+DL+MOH POHR x actual direct labor hours = MOH applied to all jobs during the period Chapter 3 cont On the Job Order Cost Sheet, the three major cost categories that are captured for each Direct materials, direct labor, applied overhead Key Terms Raw Materials: include any material that go into the final product Work in Process: consists of units of production that are only partially complete and will require further work before they are ready for sale to customers Finished goods: consist of completed units of product that have not been sold to customers Cost of goods manufactured: include the manufacturing costs associated with the goods that were finished during the period Flow of Costs: A conceptual Overview Income Cost Balance s Sheet Statement Expenses Inventories Material Purchases Raw Materials Direct Labor Work in Process Manufacturing Cost of Overhead Goods Sold Finished Goods Period Costs Selling and Selling and Administrative Administrative Chapter 3 cont Note: Actual vs. Applied MOH Year-End Adjustment If actual and applied MOH are not equal, a year-end adjustment is required 2 methods of adjusting Over or Under applied MOH o Close out to Cost of Goods Sold o Allocate between WIP, Finished Goods, & COGS Review WIP: Partially completed units o Captures costs of Direct Material for a job o Direct labor for a job o Applied MOH for the job o Based on POHR and the actual units of the activity driver used for the job MOH o Debits= actual OH costs o Credits= applied OH costs Finished Goods: completed units A proper journal entry to record the application of manufacturing overhead to a job or order being processed includes a: Credit to Manufacturing Overhead
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