ACCT 2102 1st Edition Lecture 7 Outline of Last Lecture I Schedule for Calculating the COGS II Example Outline of Current Lecture III Job Costing IV MOH V Calculating POHR Current Lecture Job Costing Chapter 3 Part 1 III Job Costing Common Product Costing System IV Job Costing Environment unique custom ordered products or relatively small batches of different products Each unique product or batch is considered a separate job costs accumulated by the job Example Custom home builder Process Costing Environment homogeneous products costs are accumulated by department Example Hostess snack cakes How Companies Handle MOH By their very nature indirect manufacturing can NOT be traced to specific cost object Yet GAAP requires that MOH be treated as an inventoriable product cost for financial reporting purposes Why 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 Before the year begins most manufacturers calculate a predetermined MOH rate POHR that will be used throughout the year to allocate MOH to each job V During the year manufacturers allocate MOH to each cost object At the end of the year manufacturers must deal with any overallocated OR underallocated overhead Calculating POHR before the year begins How is the POHR computed Total estimated MOH costs Total estimated amount of allocation base What are the most common allocation bases DL hours because most jobs are labor intensive jobs DM because machines are largely used What allocation base should be used Based on what we see happening Machines DM A lot of people used DL Why do companies use a predetermined MOH rate rather than the actual rate In order to get actual rates the company would have to wait until the end of the year to set its MOH rate Managers are willing to sacrifice some accuracy to get timely information on how much each job costs to produce
View Full Document
Unlocking...