Chapter_3_Notes

advertisement
MBA 631
Chapter 3 Notes
1. General Product Cost terms:
a. Direct Materials (DM)
b. Direct Labor (DL)
c. Manufacturing Overhead (MOH) also referred to in text as Manufacturing
Support
d. Product Cost (also known as Manufacturing Costs) = DM + DL + MOH
e. Conversion costs (what it costs to convert raw materials into product) =
DL + MOH
2. Job order costing
a. Identifiable, unique jobs
b. Cost traced to job
3. Process costing system
a. Product result of various processes
i. Products are (homogeneous) identical:
ii. Examples
1. refinery
2. bakery
b. Cost traced to process: then per unit (per hr) cost determined and used for
product support cost (conversion costs) added to DM
4. Three inventories
a. Raw Materials Inventory (RM)
b. Work-in Process Inventory (WIP)
c. Finished Goods Inventory (FG)
5. Cost Flow:
Raw Materials (increased by purchases of RM decreased by issuing material to
WIP)
Work in Process (increased by RM issued which are termed DM, the DL is taken
from payroll records, and MOHapplied is taken from the MOH account. The MOH
account may not end with a zero balance and any remainder is either closed into WIP
or prorated between WIP, FG, and COGS. When goods are completed, the total DM,
DL, and MOH needed to complete these goods is added together. The total of the
mfg. costs for goods that have completed the production process
(DM+DL+MOHapplied) is the COGM – cost of goods manufactured COGM
decreases WIP for the product costs for goods transferred to the Finished Goods
inventory. Thus COGM increases FG inventory. When goods are sold the cost of
goods sold is transferred from FG inventory on the balance sheet to the income
statement using the COGS account – which is an expense account. So the COGS
decreases FG and increases the expense account).
MBA 631 Ch. 3 Notes
6. Job cost sheet
a. Used to estimate costs for job to set bid price and used to accumulate costs
as job processes through system
i. Lists: DM, DL, MOH
7. Cost drivers
How to apply costs other than DM + DL (that is the Manufacturing overhead
or support costs)
Cost driver rate = Cost of Support Activity/Level of Cost Driver
You use the estimates of expected costs and levels of usage to calculate the
rate. Then you take that rate and multiply it times the actual level of usage to
calculate the amount of the manufacturing overhead (support costs) to be
applied to the production.
Examples on next page
2
MBA 631 Ch. 3 Notes
Examples
3-24)
a. 60,000/4000 = $15 per DLH (direct labor hour)
b. Assembly = DLH
35,000/3000 = $11.67 per DLH
Cutting = Machine Hours (MH)
25,000/4000 = $6.25 per MH
Why a?
Ease of use
Why b?
Cost flow estimation better
In class example illustrative data
Job costing: JOB107
If single rates
$606.24
126.00
180.00
$912.24
DM: 48 board ft @ 12.63 per ft.
DL: 12 hours @ 10.50 /hr
MOH: $15 per DLH ($15 * 12)
Manufacturing Cost
Additional Data
8 machine hours for job107 in Cutting
4 DL hours for job107 in Assembly
If multi rates
$606.24
126.00
46.68
50.00
$828.92
DM: same as above
DL: same as above
MOH assembly: ($11.67 * 4DLH)
MOH cutting: ($6.25 * 8 MH)
Manufacturing Cost
Problem on next page..
3
MBA 631 Ch. 3 Notes
3-27
200,000/10 = 20,000 Baddy
$412,000 (DM $232000 + DL $120000 + MOH $60000)
+ 20,000 Baddy cost
432,000 Mfg costs
432,000/200,000 = $2.16 lb of Goody (cost per lb)
4
Download