WSU ACCTG 231 - Job-Order Costing: An Overview (2 pages)

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ACCTG 231 Lecture 5 Ch 2 Job Order Costing Outline of Current Lecture I Job Order Costing An Overview II Job Order Costing An Example III Why Use an Allocation Base IV Manufacturing Overhead Application V The Need for a POHR VI Computing Predetermined Overhead Rates VII Key Definitions VIII Job Order Costing The Flow of Costs Current Lecture I II III IV Job Order Costing An Overview Job order costing systems are used when o Many different products are produced each period o Products are manufactured to order o The unique nature of each order requires tracing or allocating costs to each job and maintaining cost records for each job Examples of companies that would use job order costing include o Boeing aircraft manufacturing o Bechtel International large scale construction o Walt Disney Studios movie production Job Order Costing An Example Change direct material and direct labor costs to each job as work is performed Manufacturing Overhead including indirect materials and indirect labor are allocated to all jobs rather than directly traced to each job Why Use an Allocation Base An allocation base such as direct labor hours direct labor dollars or machinehours is used to assign manufacturing overhead to individual jobs We use an allocation base because o It is impossible or difficult to trace overhead costs to particular jobs o Manufacturing overhead consists of many different items ranging from the grease used in machines to the production manager s salary o Many types of manufacturing overhead costs are fixed even though output fluctuates during the period Manufacturing Overhead Application These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute V VI VII VIII The predetermined overhead rate POHR used to apply overhead to jobs is determined before the period begins POHR Estimated total manufacturing overhead cost for the coming period Estimated total units in the