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UNT ACCT 2020 - Job Cost Calculation
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I. Job-order CostingII. Compute a Predetermined Overhead RateIII. Materials costIV. Computing Job-costsV. Compute Under-applied or Over-applied Overhead CostACCT 2020 1st Edition Lecture 6Outline of Last Lecture I. Rules/Guidelines Exam ReviewII. Margin of SafetyIII. Cost structure and Profit StabilityIV. Structuring Sales CommissionsV. Compute Break-even point (sales mix)Outline of Current LectureI. Job-order CostingII. Compute a Predetermined Overhead RateIII. Materials costIV. Computing Job-costsV. Compute Under-applied or Over-applied Overhead CostCurrent LectureI. Job-order Costing- Used when many different products are produced during a single period. If you produce more than one product you need to allocate overhead onto different products. If products are manufactured to order, Requires the allocation of overhead. Many companies need this type of allocation.o Say you’re a manufacturer of bicycles and a retailer wants to buy 150 bikes. That’s the job… What is the total cost of this job? 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.- WE have direct material and direct labor, which are easily allocated. Manufacturing overhead, which includes direct labor and materials, but how do we allocate this? Companies need to keep track of the cost of each job so they know how much they make money on the job, should they continue, are they making money, is it beneficial? o One example of this could be to fallout a job cost sheet, in which the total is divided by the unit to get that per unit cost. A materials requisition form that helps define a total cost of materials needed for this job, employee time tickets are then directly traced to the job, the final cost is manufacturing overhead that is tricky to be included in the cost of the product. The part related to the production is always related to OVERHEAD. II. Compute a Predetermined Overhead Rate- Whatever we think is driving overhead can be used as an allocation base. The idea here is, if we believe the overhead goes up with amount of hours worked, than direct labor dollars will be the allocation base. - The predetermined overhead rate = Estimated total manufacturing overheadEstimated total units of allocation baseo This is all based on ESTIMATION. There needs to be a predetermined overhead rate because if we waited till the actual, then we would have to wait 12 months to recognize overhead. This means we would lack the information to charge customers and pay employees properly. o First find the allocation base, and then estimate the manufacturing overhead, and finally you are able to do the division. ALWAYS REMEMBER, EVERYTHING IS BASED ON ESTIMATES.o = Fixed estimated Overhead + (variable overhead x allocation base)Allocation base- Average cost per unit can be found by diving the totally job cost by the units produced.- Job has $200 direct materials; 10 hours of labor at $15/hr. estimated total overhead was 760,000 for the year with 20,000 direct labor hours. What would the job cost be?o $760,000/20,000= $38, $38(10)+($15) 10+200 = $730 job costIII. Materials cost- Raw materials are any materials that go into the final product. When raw materials are purchased, you debut raw materials and credit cash or account payable. Once you start using raw materials in production, these materials are now a work in process, which consists of units of production that are only partially complete and need further work tobe sellable. There is no expense involved, just a transfer between inventory accounts. Once completed they can be considered finished goods which are completed goods that are ready to be sold. Cost of good manufactured includes the costs associated wit them goods that were finished during this period. All of these changes are on the balance sheet, not on the income statement until expenses are incurred. IV. Computing Job-costs- 3 types of manufacturing cost, Direct Labor, Direct Materials, and Overhead. o Example: OH=$18/hr, DL=$12/hr, $200 TDM, $120 TDL. Direct labor cost is $120/$12= 10 direct labor hours. Now we know we have 10 DLH, so OH cost is $18x10= $180. So 180+120+200= $500. V. Compute Under-applied or Over-applied Overhead Cost- If you overhead are under-applied, then the overhead is less than your actual. And vice versa for over-applied overhead which is greater than the actual overhead costs.o If actual overhead was 95,000 and applied overhead was 90,000, then the under-applied overhead is 5,000. - Once you know if the Overhead is over or under-applied, you must record on the balance sheet. If we do not record it, then the cost of goods sold will be affected. So we will need to change the cost of good


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UNT ACCT 2020 - Job Cost Calculation

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