1. Use only with permission of Susan Crosson Chapter 3 Costing Systems: Job Order Costing Fall 2007 Crosson

2. Use only with permission of Susan Crosson Learning Objectives:  How much does it cost?  Types of Product Costing Systems  Cost Flows in a Job Order Costing System in T-accounts and Journal entries  Completing a Job Order Cost Card  Computing a Job Order’s Product Unit Cost

3. Use only with permission of Susan Crosson In Chapter 2 the question was: How much does it cost?  Unit cost of a product or service under Normal Costing: Costs of Goods Manufactured* Units produced *Actual DM, Actual DL, Applied OH

4. Use only with permission of Susan Crosson Question refined: How much does a job cost? _______ Cost of Job*_____ Number of Units Produced *DM+DL+OH

5. Use only with permission of Susan Crosson Types of Product Cost Systems Table 1  Job Order Costing  Process Costing Income Statement format the same

6. Use only with permission of Susan Crosson Financial Reporting of Costs  Manufacturing Income Statement Sales -Cost of Goods Sold (COGS) =Gross Margin -SAG =Net Income  Chapter 2 Exhibit 1 in text  Example: Chapter 2 E3 or E8.

7. Use only with permission of Susan Crosson What Do You Know? Chapter 3 E 7 Starke Company Sales -COGS =GM -SAG =NI +Beg. DM +DM purchased -End DM +DM used +DL +OH =Current Mfg Costs +Beg. WIP -End. WIP =COGM +Beg. FG =COGAS -End. FG COGS +$42,000 +A +$38,000 =$168,000 +$382,000 +B=80%(DL) =$? +$66,000 -$138,600 =$C +$29,000 =$? -D $808,000

8. Use only with permission of Susan Crosson What Do You Know? E 7 Starke Company Sales -COGS =GM -SAG =NI +Beg. DM +DM purchased -End DM =DM used +DL +OH =Current Mfg Costs +Beg. WIP -End. WIP =COGM +Beg. FG =COGAS -End. FG =COGS +$42,000 +A +$38,000 =$168,000 +$382,000 +B=80%(DL) =$? +$66,000 -$138,600 =$C +$29,000 =$? -D $808,000 A=164,000 B=305,600 $855,600 C=783,000 $812,000 D=4,000

9. Use only with permission of Susan Crosson Financial Reporting of Costs Where do Manufacturing Income Statements come from?

10. Use only with permission of Susan Crosson Inventory Accounts and Job Order Cost Flows  Exhibit 1  3 Inventory Accounts:  Materials  Work in Process  Finished Goods  Cookie Example

11. Use only with permission of Susan Crosson The Materials Account: the account that summarizes all material purchases Material Inventory Beginning Balance +DM Purchased +IDM Purchased DM used (to WIP) IDM used (to OH) Ending Balance

12. Use only with permission of Susan Crosson The Work in Process Account: the account that summarizes of all in process Job Order Cards WIP Inventory Beginning Balance +DM used +DL used +OH used Cost of Goods* Manufactured or Completed (COGM to FG) Ending Balance*JOBS Current Manufacturing Costs Info. for the I/S’s COGM comes from this account!

13. Use only with permission of Susan Crosson The Finished Goods Account: the account that summarizes all completed job order cards Finished Goods Inventory Beginning Balance(BB) +Cost of Goods* Manufactured (COGM from WIP) Cost of Goods* Sold (to COGS) Ending Balance*JOBS BB+COGM=COGAS

14. Use only with permission of Susan Crosson BB +DM Purchased +IDM Purchased DM used (to WIP) IDM used (to OH) EB BB +DM +DL +OH COGM EB BB +COGM COGS EB Material Inventory Work in Process Inventory Finished Goods Inventory Info. for the I/S’s COGM comes from this account! RECAP: Good follow up is SE 5, SE6, or P2. Look and listen to journal entries SE4.

15. Use only with permission of Susan Crosson What Do You Know? Now Do E 7 Starke Company using T-accounts Sales -COGS =GM -SAG =NI +Beg. DM +DM purchased -End DM =DM used +DL +OH =Current Mfg Costs +Beg. WIP -End. WIP =COGM +Beg. FG =COGAS -End. FG =COGS +$42,000 +A +$38,000 =$168,000 +$382,000 +B=80%(DL) =$? +$66,000 -$138,600 =$C +$29,000 =$? -D $808,000 A=164,000 B=305,600 $855,600 C=783,000 $812,000 D=4,000

16. Use only with permission of Susan Crosson BB 42,000 +DM Purchased A= DM used 168,000 EB BB 66,000 +DM 168,000 +DL 382,000 +OH 80%(DL) COGM = C EB 138,600 BB 29,000 +COGM = C COGS 808,000 EB = D Material Inventory Work in Process Inventory Finished Goods Inventory Info. for the I/S’s COGM comes from this account! E 7 in T accounts:

17. Use only with permission of Susan Crosson BB 42,000 +M Purchased A= 164,000 DM used 168,000 EB BB 66,000 +DM 168,000 +DL 382,000 +OH 80%(DL)=305,600 COGM C =783,000 EB 138,600 BB 29,000 +COGM C = 783,000 COGS 808,000 EB D = 4,000 Material Inventory Work in Process Inventory Finished Goods Inventory Info. for the I/S’s COGM comes from this account! E 7 in T accounts:

18. Use only with permission of Susan Crosson BB +DM Purchased +IDM Purchased DM used (to WIP) IDM used (to OH) EB BB +DM +DL +OH COGM EB BB +COGM COGS EB Material Inventory Work in Process Inventory Finished Goods Inventory Info. for the I/S’s COGM comes from this account! Try E 6 for June…

19. Use only with permission of Susan Crosson BB 33,939 +DM Purchased 57,100 DM used (to WIP) 59,025 EB 32,014 BB 89,605 +DM 59,025 +DL 48,760 + OH 58,512 COGM 154,701 EB 101,201 BB 79,764 + COGM 154,701 COGS 166,805 EB 67,660 Material Inventory Work in Process Inventory Finished Goods Inventory Info. for the I/S’s COGM comes from this account! E 6 for June…

20. Use only with permission of Susan Crosson BB 32,014 (from June) +DM Purchased 60,216 DM requested = 64,602 EB 27,628 BB 101,201 (from June) +DM 64,602 +DL 54,540 +OH = 65,448* COGM 231,861 EB = 53,930 BB 67,660 +COGM 231,861 COGS = 269,006 EB 30,515 Material Inventory Work in Process Inventory Finished Goods Inventory Info. for the I/S’s COGM comes from this account! E 6 for July… *120% of 54,540

21. Use only with permission of Susan Crosson BB +DM Purchased +IDM Purchased DM used (to WIP) IDM used (to OH) EB BB +DM +DL +OH COGM EB BB +COGM COGS EB Material Inventory Work in Process Inventory Finished Goods Inventory Info. for the I/S’s COGM comes from this account! Now Try P6… Know Journal entries and T-accounts!!! Hint: create a WIP account for each Job.

22. Use only with permission of Susan Crosson Where does Work in Process Information come from?

23. Use only with permission of Susan Crosson Job Cost Card Chapter 3 Job Order Cost Card Format Job Order Cost Card Job Order #: Batch Custom Customer : Specifications: Date of Order: Date of Completion: Costs Charged to Job Previous MonthCurrent MonthTotal Cost Totals Units Completed : Product Unit Cost: Profit Factor: Revenue Generated :

24. Use only with permission of Susan Crosson Job Cost Card Format  Figure 2-Product  Figure 3-Service  Review Problem  Good follow up exercises are SE8, SE10, E12, E15.  Look and listen to SE8.

25. Use only with permission of Susan Crosson SE 10 Job Cost Card Chapter 3 Job Order Cost Card Format Job Order Cost Card Job Order #: 2003-A7 Batch Custom Customer : Arthur Farnsworth Specifications: Annual Individual Tax Return Date of Order: 3/24/x8 Date of Completion: 4/8/x8 Costs Charged to Job Previous MonthCurrent MonthTotal Cost Client Interview Preparation of Return Delivery Profit Factor: 25% Revenue Generated : 10+50+20=60+24= 16+12+240+120 12 $ $ $ $ $ $$ Totals

26. Use only with permission of Susan Crosson SE 10 Job Cost Card Chapter 3 Job Order Cost Card Format Job Order Cost Card Job Order #: 2003-A7 Batch Custom Customer : Arthur Farnsworth Specifications: Annual Individual Tax Return Date of Order: 3/24/x8 Date of Completion: 4/8/x8 Costs Charged to Job Previous MonthCurrent MonthTotal Cost Client Interview Preparation of Return Delivery Profit Factor: 25% Revenue Generated : 10+50+2060+24 16+12+240+120 12 $164 $388 $12 $564 $705 Totals Profit= $141

27. Use only with permission of Susan Crosson Check figure: Contract Revenue $1,801.50 What Do You Know? : E 13

28. Use only with permission of Susan Crosson BB +DM Purchased +IDM Purchased DM used (to WIP) IDM used (to OH) EB BB +DM +DL +OH COGM EB BB +COGM COGS EB Material Inventory Work in Process Inventory Finished Goods Inventory Info. for the I/S’s COGM comes from this account! Try P5 Job P-12… Know Job Cards and T-accounts!!! Homework Hint: create a WIP account for each Job.

29. Use only with permission of Susan Crosson P5 Job Cost Card for P-12… Chapter 3 Job Order Cost Card Format Job Order Cost Card Job Order #: Batch Custom Customer : Specifications: Date of Order: Date of Completion: Costs Charged to Job Previous MonthCurrent MonthTotal Cost Totals Units Completed : Product Unit Cost: Profit Factor: Revenue Generated :

30. Use only with permission of Susan Crosson Homework: Problem 2

31. Use only with permission of Susan Crosson Build Your Own Business with LEGOS  Form groups of 4 students  Obtain a 2 sets of Legos (return at end of BYOB)  Assign each student member a team role:  Manager (instructions and picture of product)  Employee (product builder)  Accountant (must have job cost card)  Customer (quality control)  Each team will build 2 products with accountant recording costs on job card  In your group, how much does one unit cost?  Compare results with other teams, do all the cost cards agree? Why not?

32. Use only with permission of Susan Crosson Put all Legos, instructions, picture, etc. back in the bag. Return bags to front of class. Before you leave…..

33. Use only with permission of Susan Crosson Example of Job Order Costing  http://inst.sfcc.edu/~scrosson/w2002/6E /Chilly, Group E Website/index.html http://inst.sfcc.edu/~scrosson/w2002/6E /Chilly, Group E Website/index.html