Lecture 3_PPT_Job Costing
1. Introduction to Job Costing
Costing Systems: Understanding methods to measure cost associated with a product/service, crucial for decision-making.
2. Learning Objectives
4.1: Describe costing systems concepts.
4.2: Differences in job costing vs. process costing.
4.3: Outline the seven-step approach for job costing.
4.4: Understand actual vs. normal costing.
4.5: Track cost flow in job costing systems.
4.6: Dispose of under-/over-allocated MOH costs using alternative methods.
3. Basic Costing Terminology
Cost Objects: Anything being measured for cost.
Direct Costs: Easily traceable to a cost object.
Indirect Costs: Not easily traceable to a specific cost object, grouped in pools.
4. Cost Terminology Expansion
Cost Pool: Grouping of indirect costs.
Cost-allocation Base: Method to link indirect costs to cost objects.
Building Blocks: Key concepts that form the basis for costing systems.
5. Cost Assignment Review
Direct Costs (Cost A): Affect cost objects directly.
Indirect Costs (Cost B): Collected in cost pools, allocated to cost objects (Cost C).
6. Two Costing Systems
6.1 Job Costing
Deals with distinct products/services, each job uses varying resources.
6.2 Process Costing
Mass production of identical units, costs are averaged over units produced.
7. Costing Systems in Different Sectors
Examples across service (audit), merchandising (Home Depot), and manufacturing (Boeing) sectors illustrating various applications of costing.
8. Costing Approaches
8.1 Actual Costing
Uses actual rates for overhead applied based on actual quantity of cost allocation base.
8.2 Normal Costing
Uses budgeted rates for overhead, applied based on actual quantity.
9. Indirect Cost Rate Calculation
Actual Rate: Actual overhead costs divided by actual quantity of allocation base.
Budgeted Rate: Budgeted overhead costs divided by budgeted quantity of allocation base.
10. Summary of Costing Approaches
Both costing methods trace direct costs the same way but differ in indirect cost handling.
11. Seven-Step Approach to Job Costing
11.1 Step 1-4
Identify the job, direct costs, allocation bases, and indirect costs.
11.2 Step 5-7
Compute rates per unit for allocation, calculate allocated indirect costs, and total job costs.
12. Example Job Costing Process
Demonstrates steps in calculating total job costs using direct materials/labor and overhead allocation.
13. Cost Flow Process in Job Costing
13.1 Income Statement
Outlines revenues, direct materials, labor, manufacturing overhead, cost of goods sold.
13.2 Balance Sheet
Consideration of inventories and marketing expense allocations.
14. Journal Entries in Job Costing
14.1 Overview of Journal Entries
Captures every transaction in the production process.
14.2 Detailed Journal Entries
Specific actions taken (e.g., purchasing materials, recognizing labor costs, applying overhead).
15. Accounting for Overhead
15.1 Imbalances and Adjustments
Explains actual overhead versus allocated overhead and approaches to reconcile differences.
15.2 Methods of Adjustment
Adjusted allocation rate, proration, and write-off approaches to deal with imbalances in overhead accounts.
16. Job Costing in the Service Sector
Applications of job costing methodologies outside manufacturing, e.g., accounting services, auto repairs.
17. Conclusion
Summary of essential job costing principles and applications to reinforce learning.
18. Homework and Continuing Studies
Assignment and review of concepts covered.