Presentation is loading. Please wait.

Presentation is loading. Please wait.

Previous Lecturer Ratio analysis Working capital is the excess of current assets over current liabilities Current ratio measures the short-term debt- paying.

Published byJoanna Cole Modified over 9 years ago

Similar presentations

Presentation on theme: "Previous Lecturer Ratio analysis Working capital is the excess of current assets over current liabilities Current ratio measures the short-term debt- paying."— Presentation transcript:

1 Previous Lecturer Ratio analysis Working capital is the excess of current assets over current liabilities Current ratio measures the short-term debt- paying ability of the company Quick ratio is like the current ratio but excludes current assets such as inventories that may be difficult to quickly convert into cash 1

2 Previous Lecturer Debt ratio is a measure of creditor’s long-term risk Uses and Limitations of Financial Ratios Measures of Profitability Return on Assets ratio is generally considered the best overall measure of a company’s profitability This measure indicates how well the company employed the owners’ investments to earn income 2

3 Sources of Financial Information Accounts Receivable Turnover Number of Days’ Sales in Receivables Inventory turnover Number of Days’ Sales in Inventory Ratio of Fixed Assets to Long-Term Liabilities Ratio of Liabilities to Stockholders’ Equity Number of Times Interest Charges Earned 3 Previous Lecturer

4 Ratio of Net Sales to Assets Rate Earned on Total Assets Rate Earned on Stockholders’ Equity Rate Earned on Common Stockholders’ Equity Earnings Per Share on Common Stock Price-Earnings Ratio Dividend Yield on Common Stock 4

5 Accounting Systems For Measuring Costs Chapter 17 5

6 Planning and control functions. Providing products or services to customers. Assessing the efficiency and effectiveness of operations. Determining unit manufacturing costs. Cost accounting systems provide information supporting decisions making the business successful. Cost Accounting Systems 6

7 Disclose inventories and cost of goods sold. Track resources consumed by products and services. Manage activities that consume resources. Evaluate and reward employee performance. Cost accounting systems are the procedures and techniques used by management. Cost Accounting Systems 7

8 Process Costing Job Order Costing  Used for production of large, unique, high-cost items.  Built to order rather than mass produced.  Many costs can be directly traced to each job. Basic Cost Accounting Procedures 8

9 Typical job order cost applications:  Special-order printing  Building construction Also used in service industry  Hospitals  Law firms Basic Cost Accounting Procedures Process Costing Job Order Costing 9

10  Used for production of small, identical, low-cost items.  Mass produced in automated continuous production process.  Costs cannot be directly traced to each unit of product. Basic Cost Accounting Procedures Process Costing Job Order Costing 10

11 Typical process cost applications:  Petrochemical refinery  Paint manufacturer  Paper mill Basic Cost Accounting Procedures Process Costing Job Order Costing 11

12 THE JOB Direct materials Direct labor Traced directly to each job Manufacturing overhead (OH) Applied to each job using a predetermined rate (POHR) Job Order Costing 12

13 Job Order Costing The primary document for tracking the costs associated with a given job is the job cost sheet. Let’s investigate 13

14 The Job Cost Sheet 14

15 The Job Cost Sheet 15

16 The Job Cost Sheet Accumulate direct labor costs by means of a work record, such as a time ticket, for each employee. 16

17 The Job Cost Sheet Apply manufacturing overhead to jobs using a predetermined overhead rate (POHR) based on direct labor hours (DLH). 17

18 Let’s summarize the document flow we have been discussing in a job order costing system. Job Order Costing Document Flow Summary 18

19 Materials Ledger Cards Materials Requisition Direct materials The materials requisition indicates the cost of direct material to charge to jobs and the cost of indirect material to charge to overhead. Indirect materials Job Cost Sheets Manufacturing Overhead Account Job Order Costing Document Flow Summary 19

20 Employee time tickets indicate the cost of direct labor to charge to jobs and the cost of indirect labor to charge to overhead. Job Cost Sheets Manufacturing Overhead Account Job Cost Sheets Direct Labor Indirect Labor Employee Time Ticket Job Order Costing Document Flow Summary 20

21 Employee Time Ticket Materials Requisition Other Actual OH Charges Indirect Material Indirect Labor Overhead Applied with POHR Manufacturing Overhead Account Job Cost Sheets Job Order Costing Document Flow Summary 21

22 Let’s examine the cost flows in a job order costing system. We will use T-accounts and start with materials. Flow of Costs in Job Costing 22

23 Material Purchases Direct Material Mfg. Overhead Indirect Material Work in Process (Job Cost Sheet) Indirect Material Materials Inventory Flow of Costs in Job Costing 23

24 Next let’s add labor costs and applied manufacturing overhead to the job order cost flows. Are you with me? Flow of Costs in Job Costing 24

25 Direct Labor Mfg. Overhead Work in Process (Job Cost Sheet) Indirect Material Direct Material Overhead Applied to Work in Process Indirect Labor Direct Labor Overhead Applied Indirect Labor the difference is closed to cost of goods sold. When Actual Applied factory factory overhead overhead = / Labor Flow of Costs in Job Costing 25

26 Closing Under- or Overapplied Manufacturing Overhead 26

27 Now let’s complete the goods and sell them. Still with me? Flow of Costs in Job Costing 27

28 Cost of Goods Mfd. Finished Goods Cost of Goods Sold Cost of Goods Mfd. Cost of Goods Sold Work in Process (Job Cost Sheet) Direct Material Direct Labor Overhead Applied Flow of Costs in Job Costing 28

29  Used for production of small, identical, low-cost items.  Mass produced in automated continuous production process.  Costs cannot be directly traced to each unit of product.  Used for production of small, identical, low-cost items.  Mass produced in automated continuous production process.  Costs cannot be directly traced to each unit of product. Process Costing 29

30 Comparing Job and Process Costing Job Costing Custom orders Heterogeneous products Low production volume High product flexibility Low to medium standardization Process Costing Repetitive production Homogeneous products High production volume Low product flexibility High standardization 30

31 Direct Materials Finished Goods Cost per unit for each job Direct Labor Factory Overhead Jobs The Work in Process account consists of individual jobs in job costing. Job and Process Costing 31

32 Direct Materials Finished Goods Direct Labor Factory Overhead Processes The Work in Process account consists of specific processes in process costing. Cost per unit processed Job and Process Costing 32

33 Same objective: to determine the cost of products Same inventory accounts: raw materials, work in process, and finished goods Same overhead assignment method: predetermined rate times actual activity Job and Process Costing Similarities 33

34 Work in Process Assembly Labor Materials Indirect Finished Goods Factory Overhead Direct Delivered to Customers Applied Overhead Work in Process Packaging Work in Process Accounts — The Key to Process Costing 34

35 Computing Unit Cost Costs are accumulated for a period of time by process or department. Unit cost is computed by dividing the accumulated costs by the number of units produced in the period. 35

36 Unit cost is computed by dividing the accumulated costs by the number of units produced in the period. If partially complete units remain in process, we must use equivalent units as the divisor to obtain unit costs. Computing Unit Cost Costs are accumulated for a period of time by process or department. 36

37 Computing and Using Equivalent Units of Production Equivalent units is a concept expressing a number of partially completed units as a smaller number of fully completed units. Two one-half full pitchers are equivalent to one full pitcher. + = 1 37

38 Question For the current period, PencilCo started 15,000 units and completed 10,000 units, leaving 5,000 units in process 30 percent complete. How many equivalent units of production did PencilCo have for the period? a.10,000 b.11,500 c. 1,500 d. 15,000 For the current period, PencilCo started 15,000 units and completed 10,000 units, leaving 5,000 units in process 30 percent complete. How many equivalent units of production did PencilCo have for the period? a.10,000 b.11,500 c. 1,500 d. 15,000 38

39 For the current period, PencilCo started 15,000 units and completed 10,000 units, leaving 5,000 units in process 30 percent complete. How many equivalent units of production did PencilCo have for the period? a.10,000 b.11,500 c. 1,500 d. 15,000 For the current period, PencilCo started 15,000 units and completed 10,000 units, leaving 5,000 units in process 30 percent complete. How many equivalent units of production did PencilCo have for the period? a.10,000 b.11,500 c. 1,500 d. 15,000 10,000 units + (5,000 units ×.30) = 11,500 equivalent units Question 39

40 Cost per equivalent unit = Product costs for the period Equivalent units for the period Cost Per Equivalent Unit 40

41 Now assume that PencilCo incurred $27,600 in production costs. What was PencilCo’s cost per unit for the period? a.$1.84 b.$2.40 c.$2.76 d.$2.90 Now assume that PencilCo incurred $27,600 in production costs. What was PencilCo’s cost per unit for the period? a.$1.84 b.$2.40 c.$2.76 d.$2.90 Question 41

42 Now assume that PencilCo incurred $27,600 in production costs. What was PencilCo’s cost per unit for the period? a.$1.84 b.$2.40 c.$2.76 d.$2.90 Now assume that PencilCo incurred $27,600 in production costs. What was PencilCo’s cost per unit for the period? a.$1.84 b.$2.40 c.$2.76 d.$2.90 $27,600 ÷ 11,500 equivalent units = $2.40 per equivalent unit Question 42

43 Equivalent units may be different for material and labor and overhead at different stages of a process. At completion of Stage 1 of the process, material is 40% complete, but labor and overhead are only 25% complete. Stage 1 40% of Material 25% of Labor and Overhead Equivalent Units 43

44 Stage 2 25% of Labor and Overhead 60% of Material Stage 1 40% of Material 25% of Labor and Overhead + + = = 100% 50% Equivalent Units 44

45 Stage 3 50% of Labor and Overhead The process is now complete. Stage 2 25% of Labor and Overhead 60% of Material Stage 1 40% of Material 25% of Labor and Overhead Equivalent Units 45

46 End of Todays Session 46

Download ppt "Previous Lecturer Ratio analysis Working capital is the excess of current assets over current liabilities Current ratio measures the short-term debt- paying."

Similar presentations

Basics of Job-Order Costing

Basics of Job-Order Costing
REVIEW of Chapter 14 We begin this chapter by describing a cost accounting system. We then explain the procedures used to determine costs using a job.

REVIEW of Chapter 14 We begin this chapter by describing a cost accounting system. We then explain the procedures used to determine costs using a job.
Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fourth Edition Wild, Shaw, and Chiappetta Fourth Edition McGraw-Hill/Irwin Copyright © 2011.

Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fourth Edition Wild, Shaw, and Chiappetta Fourth Edition McGraw-Hill/Irwin Copyright © 2011.
Process Costing and Analysis

Process Costing and Analysis
Managerial Accounting Wild and Shaw Third Edition Wild and Shaw Third Edition McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All.

Managerial Accounting Wild and Shaw Third Edition Wild and Shaw Third Edition McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All.
Financial and Managerial Accounting John J. Wild Third Edition John J. Wild Third Edition McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies,

Financial and Managerial Accounting John J. Wild Third Edition John J. Wild Third Edition McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies,
Lecture 14. Chapter Overview Types of Costing Systems Used to Determine Product Costs – Job-Order Costing – Process Costing Sequence of Events in a Job-Order.

Lecture 14. Chapter Overview Types of Costing Systems Used to Determine Product Costs – Job-Order Costing – Process Costing Sequence of Events in a Job-Order.
Systems Design: Job-Order costing Chapter 3. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Types of Costing Systems Used to Determine Product.

Systems Design: Job-Order costing Chapter 3. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Types of Costing Systems Used to Determine Product.
Systems Design: Process Costing Chapter 4. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Job-order Costing Process Costing F Many units of.

Systems Design: Process Costing Chapter 4. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Job-order Costing Process Costing F Many units of.
Systems Design: Job-Order Costing 11/09/04

Systems Design: Job-Order Costing 11/09/04
Systems Design: Process Costing

Systems Design: Process Costing
Systems Design: Job-Order costing Chapter 3. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Types of Costing Systems Used to Determine Product.

Systems Design: Job-Order costing Chapter 3. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Types of Costing Systems Used to Determine Product.
Contrôle Interne Avancé-HEC Lausanne-2007/2008 CHAPTER 17 Process Costing.

Contrôle Interne Avancé-HEC Lausanne-2007/2008 CHAPTER 17 Process Costing.
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Product Costing and Cost Accumulation in a Batch Production.

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Product Costing and Cost Accumulation in a Batch Production.
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 4 Process Costing and Hybrid Product- Costing Systems.

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 4 Process Costing and Hybrid Product- Costing Systems.
Costing Systems EMBA 5403 Fall 2010. Mugan2/37 Available costing systems  Absorption costing Actual Costing Normal Costing Standard Costing  Variable.

Costing Systems EMBA 5403 Fall Mugan2/37 Available costing systems  Absorption costing Actual Costing Normal Costing Standard Costing  Variable.
Job Order Costing and Analysis

Job Order Costing and Analysis
Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fifth Edition Wild, Shaw, and Chiappetta Fifth Edition Copyright © 2013 by The McGraw-Hill.

Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fifth Edition Wild, Shaw, and Chiappetta Fifth Edition Copyright © 2013 by The McGraw-Hill.
Chapter 2 Systems Design: Job-Order Costing. © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Process and Job-Order Costing Process Costing.

Chapter 2 Systems Design: Job-Order Costing. © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Process and Job-Order Costing Process Costing.
REVIEW of Chapter 14. Completed products for sale. Materials waiting to be processed. Can be direct or indirect. Partially complete products. Material.

REVIEW of Chapter 14. Completed products for sale. Materials waiting to be processed. Can be direct or indirect. Partially complete products. Material.

Similar presentations

Ads by Google