Part 4 - Job Order Costing Group 9: Lin Wang Bichloan Nguyen Hank Liu Keye Su Jeff Tsai
Slide 2Constructo is a maker of furniture for babies and kids. The organization utilizes work cost framework and utilizes a full ingestion bookkeeping strategy for cost collection. Case 4-1 COMPANY OVERVIEW
Slide 3Q1: Describe when it is fitting for an organization to utilize work taken a toll framework? Work cost framework is utilized as a part of circumstances where the association offers various items or administrations, for example, in furniture producing, business flying machine assembling, doctor's facilities, and law offices. In a vocation cost framework, expenses are followed and dispensed to employments.
Slide 4Flow of Documents in a Job-Order Costing System Materials demand shape Job cost sheet Sales arrange Production arrange Direct work time ticket Predetermined overhead rates
Slide 5A General Model of Cost Flows in Job-arrange Costing System Raw Materials Direct materials Cost of materials acquired Work in Process Indirect materials Direct materials Direct work Overhead connected Cost of merchandise fabricated Salaries and Wages Payable Direct work Indirect work Finished Goods Manufacturing Overhead Cost of products made Cost of products sold Actual overhead Applied overhead Cost of Goods Sold Underapplied overhead cost Overapplied overhead Cost of products sold
Slide 6Constructo's work in process stock on April 30, 2001
Slide 7The Company's done products stock, utilizing the FIFO technique on April 30, 2001
Slide 8Materials Inventory on April 30,2001 At the finish of April, the adjust in Constructo's Materials Inventory account, which incorporates both crude materials and obtained parts, was $668,000
Slide 9Additions to and orders from the stock amid the time of May
Slide 10Labor costs amid the time of May
Slide 11Jobs finished for May
Slide 12Unit deals for May
Slide 13OVERHEAD COST Constructo applies plant overhead on the premise of direct work hours. The organization's production line overhead spending plan for the financial year completion May 31, 2001 aggregate $4,500,000 The organization arrangements to exhaust 600,000 Direct Labor Hours (DLH) amid the period Predetermined overhead rate = $4,500,000/600,000 DHL = $7.5 per DLH
Slide 14The stream of expenses through the records introduced in T-account shape (1) Raw Materials Requisitions: Cribs: 51,000+104,000= 155,000 Playpens: 3,000+10,800= 13,800 Dressers: 124,000+87,000= 211,000 Strollers: 62,000+81,000= 143,000 Carriages: 65,000+187,000= 252,000 Bal. 668,000 Raw Materials increases 242,000 Purchased Parts augmentations 396,000 Bal. 531,200
Slide 15The stream of expenses through the records displayed in T-account frame (2) Work in Process Finished Goods: Cribs: 1,267,400 900,000+51,000+104,000+122,400+12,000*7.5 Playpens: 336,480 (420,000+3,000+10,800)*15,000/25,000+43,200+4,400*7.5 Strollers: 199,250 62,000+81,000+30,000+3,500*7.5 Carriages: 495,000 65,000+187,000+138,000+14,000*7.5 Bal. 1,570,000 Direct Materials: 774,800 (155,000+13,800+211,000+ 143,000+252,000) Direct work: 534,100 (621,100-29,400-57,600) Overhead Applied: 400,500 ((12,000+4,400+19,500+3,500 +14,000)*7.5) Bal. 981,270 (Answer to Q2)
Slide 16The stream of expenses through the records displayed in T-account shape (3) Finished Goods Bal. 3,755,400 Cribs: 1,267,400 Playpens: 336,480 Strollers: 199,250 Carriages: 495,000 Cost of Goods Sold: Cribs: 1,113,700 7,500*64+(17,500-7,500)*1,267,400/20,000 Playpens: 714,891 19,400*35+(21,000-19,400)*336,480/15,000 Strollers: 318,925 13,000*23+(14,000-13,000)*199,250/10,000 Dressers: 990,000 18,000*55 Carriages: 612,000 6,000*102 Bal. 2,304,014
Slide 17The stream of expenses through the records displayed in T-account shape (4) Cost of Goods Sold 3,749,516 (1,113,700+714,891 +318,925+990,000+612,000)
Slide 18The stream of expenses through the records exhibited in T-account frame (5) Manufacturing Overhead Actual Overhead Costs: Indirect materials: ? Aberrant work: 29,400 Supervision: 57,600 Utilities: ? Lease on production line hardware: ? Random production line costs: ? Deterioration on manufacturing plant gear: ? Connected Overhead Costs: 400,500 (12,000+4,400+19,500+3,500 +14,000)*7.5 ? (overapplied overhead) Bal. ? (underapplied overhead)
Slide 19Price per unit of completed products for May
Slide 20Q3: The dollar sum identified with the playpens in Constructo's done merchandise stock as of May 31,2001 Playpens in Finished Goods 714,891 Bal. 679,000 336,480 Bal. 300,589 Answer to Q3: The dollar sum identified with the playpens in Constructo's done products stock as of May 31,2001 was $300,589.
Slide 21Another technique for ascertaining the response to Q3 Beginning Inventory + Quantity Added = Quantity dispatched + Ending Inventory 19,400 + 15,000 = 21,000 + Ending Inventory Ending Inventory = 34,400 – 21,000 = 13,400 Dollar sum = 13,400 * 22.432 = $300,589
Slide 22Overapplied or underapplied overhead can be dealt with in two courses: Closed out to Cost of Goods Sold. Unadjusted Cost of products sold + Underapplied overhead Adjusted Cost of merchandise sold Unadjusted Cost of products sold - Overapplied overhead Adjusted Cost of products sold 2. Dispensed between Work in Process, Finished Goods, and Cost of Goods Sold in extent to the overhead connected amid the present time frame in the closure equalizations of these records.
Slide 23Q4: Explain the best possible bookkeeping treatment for overapplied or underapplied overhead adjusts when utilizing an occupation cost framework Since real generation expenses ought to be accounted for in the period they were acquired, add up to item costs at the bookkeeping time frame ought to be founded on real as opposed to connected overhead. Underapplied or Overapplied overhead can be discarded in 2 ways
Slide 24Closed out to Cost of Goods Sold : the more catalyst of the two strategies for discarding overhead errors: For Example: Suppose… Unadjusted Cost of Goods Sold = 3,749,516 Manufactory Overhead Applied = 4,500,000 Actual Manufactory Overhead = 4,674,000 Underapplied Overhead = 4,674,000 – 4,500,000 = 174,000 Then the balanced cost of merchandise sold = 3,749,516 +174,000 = 3,923,516
Slide 25Proration : the way toward distributing Underapplied or overapplied overhead to Work-In-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold records toward the finish of period . For Example: Assume that an organization's records has the accompanying connected overhead adjusts for the finish of period: Ending W-I-P Inventory $20,000 Ending Finished merchandise Inventory $30,000 Cost of Goods Sold $150,000 Total Manufactory Overhead applied $200,000 Actual Manufactory Overhead $205,000
Slide 26The allocation of the $5,000 underapplied production line overhead among the W-I-P Inventory, Finished Goods Inventory, and Cost of Goods Sold records is processed as takes after:
Slide 27The fitting changing passage is: Factory Overhead Applied 200,000 W-I-P Inventory 500 Finished Goods Inventory 750 Cost of Goods Sold 3,750 Factory Overhead 205,000
Slide 28Case 4-2 Power Services Industries Three plants in the U.S. East River Plant 1 2 3 4 5 6 7 8 9 Industrial maker of force creating hardware since 1907 PSI likewise delivers post-retail and unique gear parts East River Plant – one of three assembling firms, situated in Illinois Major items: coal-let go boilers
Slide 29Competitive Environment Pre-1980s time popularity for power low # of contenders low # of makers for OEM and new parts low fuel value Original-hardware showcase (OEM) made up 60% of East River's incomes Replacement orders made up around 40% of incomes Early 1990s consistent development for power, critical reduction in requests government directions – natural concerns more makers of new parts, raising business sector standard: a. speedier conveyance b. bring down costs c. higher quality fuel cost/loan fee increment
Slide 30East River Plant +
Slide 31Plant Management Problems hardware > 29 years approx. machine downtime bottlenecks plant use = 45-half gear format = superfluous manual process 40% worker hours material taking care of High Inventory $7 Million
Slide 32Potential Problem as-sold cost gauges & real contract cost As-sold cost in view of chronicled information which from mid seventies Cost of material has been changed the real contract cost more than gauge As-sold cost estimation didn't contain abandons and other material waste
Slide 33Current Cost System Contract Order Direct Costs Overhead Direct materials Direct work Product configuration building Machine set up Materials taking care of Headquarter bolster administrations General administrator administrations (finance, bookkeeping)
Slide 34Current Cost System cont. Work cost framework since 1950s Materials and work costs charged specifically to contracts Overhead costs connected with foreordained % of direct work costs execution – think about month to month proportion – Estimate Man to Actual Man Hours (E/An) If E/A beneath 100% = not great
Slide 35Labor-Based versus Movement Based Labor cost is not larger part of costs Not all expenses are driven by worker hours Example – increment in worker hours in welding one item does not equivalent increment in cost for testing (QA) ABC – yes! Why? Off base costing structure, complex assembling process
Slide 36Recommendations for Current Cost System refresh truly decided overhead/load rate Incorporate likelihood of machine downtime Use genuine c
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