ACCT Ch. 3

Process Costing

Job Costing

Scheduling Production

begins with management's decision to produce a batch of units

Stock Inventory

Products sold on a regular basis

Production Schedule

indicates the quantity and types of inventory scheduled to be manufactured during the period,

Bill of materials

lists all raw materials needed to manufacture job

Raw materials record

shows detailed information about each item in stock

Purchase order

The purchasing department issues to suppliers to order any parts not in stock

Receiving report

incoming raw materials are counted and recorded on receiving report

Invoice

Bill from supplier

- Match PO, receiving report, and invoice amounts prior to paying the supplier

Allocating manufacturing overhead

Indirect manufacturing costs that must be allocated to jobs

Allocating

Splitting up, dividing total MOH costs among the jobs produced during the year

Underallocated

actual MOH > allocated MOH

Overallocated

actual MOH < allocated MOH

If MOH allocated < actual MOH incurred, then...

MOH has been underallocated, so jobs have been undercosted

If MOH allocated > actual MOH incurred, then...

MOH has been overallocated, so jobs have been overcosted

If jobs have been undercosted due to under allocation of MOH, Then Cost of Goods sold is too low, so

Increase Cost of Goods Sold for the amount of the underallocation

If jobs have been overcosted due to over allocation of MOH, then Cost of Goods Sold is too high, so

Decrease Cost of Goods Sold for the amount of the overallocation