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ACCT 2603 - Chapter 3

by: Daniel Notetaker

ACCT 2603 - Chapter 3 ACCT 2603

Daniel Notetaker
GPA 3.9

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About this Document

These notes are include information that will be on our first exam.
Managerial Accounting
Kathleen E Mumaw
Class Notes
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This 9 page Class Notes was uploaded by Daniel Notetaker on Saturday September 10, 2016. The Class Notes belongs to ACCT 2603 at Youngstown State University taught by Kathleen E Mumaw in Fall 2016. Since its upload, it has received 3 views. For similar materials see Managerial Accounting in Accounting at Youngstown State University.


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Date Created: 09/10/16
Chapter 3 - Job Costing Process Costing Mass production Similar items Total costs are averaged over all units Examples Paint manufacturers Oil refineries Cereal manufacturers Job Costing Unique, custom products or small batches Total costs are accumulated by job Examples Hospitals Custom home builders Advertising agencies Flow of Inventory Through a Manufacturing System Exhibit 3-3: Production Schedule for the Month of December Exhibit 3-4: Bill of Materials Purchasing Process Exhibit 3-7: Job Cost Record Exhibit 3-9: Materials Requisition Direct Labor Costs Are Traced to Individual Jobs Ex 3-13: Direct Labor and Materials Posted to Job Cost Record Calculating Predetermined Manufacturing Overhead Rate Predetermined MOH rate = Total estimated mfg overhead costs / Total estimated amount of allocation base Allocating Manufacturing Overhead (MOH) to Individual Jobs MOH allocated to a job = Predetermined MOH rate x Actual amount of allocation base used by the job Allocating MOH to Individual Job (Example) Exhibit 3-14: Completing the Job Cost Record Cost Flow Actual MOH does not always equal allocated MOH Underallocated (undercosted) Not enough allocated to jobs Too little expense Overallocated (overcosted) Too much allocated to jobs Too much expense Underallocated or Overallocated Manufacturing Overhead Why/How? Estimated manufacturing overhead costs were higher or lower than actual Used more or less of the estimated allocation base than projected Two Solutions Adjust cost of goods sold Prorate among Cost of Goods Sold, Work in Process Inventory, Finished Goods Inventory Reasons Why Management Needs Product Cost 1. Reasons Why Management Needs Product Cost 2. Assess and compare profitability of models 3. Pricing decisions 4. Discounts on high-volume sales 5. Bids for custom orders 6. Financial statement preparation How Do Manufacturers Treat Nonmanufacturing Costs? GAAP: Only inventoriable product costs added to the cost of assets (inventory) Internal decision making: Management wants to know the total cost of the product across the value chain Review for Test - 1, 5, 6, 7, 8, 13, 18, 24


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