Slides calculate cost of goods sold

Job Order CostingDirect Materials + Direct Labor + Applied Overhead... Job Order Cost FlowDM DL OH DM Goods Mfd Goods Sold Work in Process... Job Order Cost Flow 13,000 Total cost of dir

Calculate Cost of Goods Sold and Ending Overhead

Balance

Principles of Cost Analysis and Management

Terminal Learning Objective

regulations/course handouts, and awareness of Operational Environment

(OE)/Contemporary Operational Environment (COE) variables and actors

If Unit Cost is misstated, how might that affect these

Job Order Costing

Job Order Costing

Direct Materials + Direct Labor + Applied Overhead

Job Order Costing

Overhead Rate * Direct Labor $

Job Order Costing

Lends itself readily to service applications:

Purchases Materials Used

Job Order Cost Flow

DM

DL OH

DM

Goods Mfd

Goods Sold Work in Process

Check on Learning

Total of Job Tickets for unfinished jobs

Total of Job Tickets for jobs completed during the period

Total of Job Tickets for unfinished jobs

Total of Job Tickets for jobs completed during the period

Total of Job Tickets for unfinished jobs

Total of Job Tickets for jobs completed during the period

Job Order Cost Flow

13,000

Total cost of direct materials used equals cost of materials for Job A plus

cost of materials for Job B

Total cost of direct materials used equals cost of materials for Job A plus

cost of materials for Job B

Job Order Cost Flow

13,000

Total cost of Work in Process equals cost of materials, labor and overhead for Job

A plus cost of materials, labor and overhead for Job B

Total cost of Work in Process equals cost of materials, labor and overhead for Job

A plus cost of materials, labor and overhead for Job B

Job Order Cost Flow

Goods Sold Work in Process =

5100

If Job B is completed and transferred to Finished Goods, Cost of Goods Manufactured equals

cost of Job B Work in Process consists of Job A, which is still unfinished.

If Job B is completed and transferred to Finished Goods, Cost of Goods Manufactured equals

cost of Job B Work in Process consists of Job A, which is still unfinished.

Check on Learning

Demonstration Problem

the period the following jobs are started:

Alpha Bravo Charlie

Demonstration Problem

the period the following jobs are started:

Alpha Bravo Charlie

Demonstration Problem

the period the following jobs are started:

Alpha Bravo Charlie

Demonstration Problem

Alpha Bravo Charlie

Check on Learning

application?

Perpetual Overhead Application

Estimated Overhead $

Estimated Direct Labor $

Perpetual Overhead Example

contracts using a job order cost system

and Direct Labor on contracts will be $95,000

Estimated Direct Labor: $95,000

Perpetual Overhead Example

contracts using a job order cost system

and Direct Labor on contracts will be $95,000

Estimated Direct Labor: $95,000

Check on Learning

Perpetual Overhead Example (cont’d)

Perpetual Overhead Example (cont’d)

Perpetual Overhead Example (cont’d)

Perpetual Overhead Example (cont’d)

Check on Learning

Over-applied vs Under-applied

estimated, overhead may be over- or under-applied

Over-applied vs Under-applied

over-applied

OH incurred 8500

OH applied 8820 - 320 (+) (-)

Over-applied vs Under-applied

administering contracts is too high

administering contracts is too low.

Is this a Serious Problem?

will affect decisions

significant

Under- or Over-costing

Under- or Over-costing

• If contract administration costs are significantly under-costed (think underpriced), the demand for contract administration resources will increase and they will be over-

consumed

Under- or Over-costing

• If contract administration costs are significantly under-costed (think underpriced), the demand for contract administration resources will increase and they will be over-

consumed

• If contract administration costs are significantly over-costed, it may make outsourcing appear attractive

Demonstration Problem – Part 2

the period the following jobs are started:

Alpha Bravo Charlie

Demonstration Problem – Part 2

Demonstration Problem – Part 2

Use the inventory template to:

Demonstration Problem – Part 2

Raw Materials

Alpha

Finished Goods

Charlie

Beg 1500

Purchases ?

-End 2500

? DMU DL

OH DM . . Beg COGM

-End COGS  Work in Process Bravo . WIP - Summary Beg

-0-DL OH DMU

-End

COGM

Demonstration Problem – Part 2

COGS 

Work in Process

Bravo 6400 3200

4200

WIP - Summary Beg -0-

DL 14100

OH 7050

DMU 12800

End

COGM

Total of materials for the three jobs equals

Direct Materials Used

Total of materials for the three jobs equals

Direct Materials Used

Demonstration Problem – Part 2

COGS 

Work in Process

Bravo 6400 3200

4200

WIP - Summary Beg -0-

DL 14100

OH 7050

DMU 12800

End

COGM

Ending is 1000 more than Beginning; Inputs

must be 1000 more than Outputs

Ending is 1000 more than Beginning; Inputs

must be 1000 more than Outputs

Demonstration Problem – Part 2

COGS 

Work in Process

Bravo 6400

3200

4200

WIP - Summary Beg -0-

DL 14100

OH 7050

DMU 12800

End

Demonstration Problem – Part 2

COGS 

Work in Process

Bravo 6400 3200

4200

WIP - Summary Beg -0-

DL 14100

OH 7050

DMU 12800

End

COGM

Total of Overhead applied to for the three jobs

equals Overhead Applied

Total of Overhead applied to for the three jobs

equals Overhead Applied

Demonstration Problem – Part 2

Raw Materials

Alpha

Finished Goods

Charlie

Beg 1500

Purchases 13800

-End 2500

12800 DMU DL 4500

OH 2250

DM 5000

11750

3200 =14100

1600 = 7050

3600 =12800

Beg COGM 25550

-End 25550 COGS  Work in Process Bravo 6400 3200 4200

13800

WIP - Summary Beg

-0-DL 14100

OH 7050

DMU 12800

-End

25550 COGM

Alpha and Bravo are completed COGM equals total of Alpha and Bravo

Alpha and Bravo are completed COGM equals total of Alpha and Bravo

Demonstration Problem – Part 2

Raw Materials

Alpha

Finished Goods

Charlie

Beg 1500

Purchases 13800

-End 2500

12800 DMU DL 4500

OH 2250

DM 5000

11750

3200 =14100

1600 = 7050

3600 =12800

Beg

-0-COGM 25550

-End

-0-25550 COGS  Work in Process Bravo 6400 3200 4200

13800

WIP - Summary Beg

-0-DL 14100

OH 7050

DMU 12800

-End

25550 COGM

All jobs are sold when completed COGS equals total of Alpha and Bravo

All jobs are sold when completed COGS equals total of Alpha and Bravo

Demonstration Problem – Part 2

Raw Materials

Alpha

Finished Goods

Charlie

Beg 1500

Purchases 13800

-End 2500

12800 DMU DL 4500

OH 2250

DM 5000

11750

3200 =14100

1600 = 7050

3600 =12800

8400

Beg

-0-COGM 25550

-End

-0-25550 COGS  Work in Process Bravo 6400 3200 4200 13800

WIP - Summary Beg

-0-DL 14100

OH 7050

DMU 12800

-End 8400

25550 COGM

Ending Balance in WIP is equal to the cost of Charlie

Ending Balance in WIP is equal to the cost of Charlie

Demonstration Problem – Part 2

Statement of Activities Revenue:

Practical Exercise

Job Order Costing Spreadsheet

Enter estimated overhead and estimated direct labor to

calculate pre-determined overhead rate

Enter estimated overhead and estimated direct labor to

calculate pre-determined overhead rate

Job Order Costing Spreadsheet

Itemize actual overhead incurred

Over or under-applied overhead is calculated automatically

Over or under-applied overhead is calculated automatically

Practical Exercise