ACCT 2020 1st Edition Lecture 7 Outline of Last Lecture I Job order Costing II Compute a Predetermined Overhead Rate III Materials cost IV Computing Job costs V Compute Under applied or Over applied Overhead Cost Outline of Current Lecture I Computing Costs of Goods sold DIRECT METHOD II Computing Costs of Goods sold INDIRECT METHOD III Multiple Pre Determined Overhead rate Current Lecture I Computing Costs of Goods sold DIRECT METHOD Really concerned with how much overhead to allocate One way to do this would be through the direct method Only tricky to remember is ADJUST for whether overhead was under or over applied Exercise 5 o Uxmaiz Corporation had only one job in process during May Had no finished goods inventory on May 1 the job was started in April and finished in May 1 First get a cost per Unit 190 unit 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 2 Second multiply that by a cost of unit sold 7600 unadjusted COGS 3 Third adjust for over or under applied overhead 7300 1 Begin BAL 5 000 applied DM 8 000 applied DL 2 000 applied overhead 4 000 so total job cost is 19 000 100 units completed So 19 000 100 average unit product cost is 190 units 2 190 per unit and 40 units sold 190 x 40 units 7600 unadjusted COGS 3 The overhead applied by 400 so what is the adjusted COGS 7600 400 7300 II Computing Costs of Goods sold INDIRECT METHOD Beginning work in process 30 000 no beginning finished goods total manufacturing costs charged to jobs in April was 200 000 DM 50 000 DL 60 000 OH applied 90 000 the ending of work in process was 72 000 Manufacturing overhead was under applied by 5 000 Took 1000 units to COGS of 158 000 750 sold end of finished goods at 250 Create 2 T Accounts o The Work in process T account increases for the amount manufacturing costs and decreases with the completion of these goods costs of good manufactured o The Finished goods T account increases with the completion of costs of goods manufactured and decreases with cost of goods sold o WIP 30 000 30 000 20 000 x 72 000 200 000 COGS 158 000 72 000 o Finished Goods 158 000 0 158 000 x 39 500 158 000 1000units x 158 000 39 500 158 unit COGS 118 500 250 units x 158 39 500 o SO we take the unadjusted COGS 118 500 add the under applied OH 5 000 so your cost of goods sold is 118 500 5 000 COGS 123 500 Steps 1 Set up WIP and FG T accounts and enter given info 2 Solve for COGM DR to FG 3 Solve for COGS Let s use the Indirect Method on Exercise 5 o WIP 5 000 DM 8 000 DL 2 000 OH 4 000 5 000 8 000 2 000 4 000 x 0 COGS 19 000 0 o Finished Goods Begin Bal 0 19 000 100units 190 unit 0 19 000 x 11 400 x 19 000 11 400 COGS 7 600 100 40 60 60 x 190 EOY 11 400 o SO we take the unadjusted COGS 7 600 subtract the over applied OH 300 so your cost of goods sold is 7 600 300 COGS 7 300 III Multiple Pre Determined Overhead rate Might need to use multiple predetermined rates to more accurately predict overhead costs Remember you have overhead allocated from multiple departments POHR Total Estimated Manufacturing Overhead Total Estimated Allocation Base Example 4 9 o Milling Fixed OH 390 000 variable 2 machine hour x 60 000 mhr 120 000 Total Estimated OH 390 000 120 000 510 000 POHR 510 000 8 50 mhr 60 000 mhr o Assembly Fixed OH 500 000 variable 3 75 Direct labor x 80 000 DL 300 000 Total Estimated OH 500 000 300 000 800 000 POHR 800 000 10 DL 80 000 DL o Now apply to Job 407 DM for milling assembly are 800 370 Total DM 1170 DL for milling assembly are 45 160 Total DM 205 OH for milling assembly are 90 x 8 50 20 x 10 Total OH 865 TOTAL JOB COST OF 2 340