Please enable JavaScript.
Coggle requires JavaScript to display documents.
PRODUCT COSTING - Coggle Diagram
PRODUCT COSTING
JOB
JOB ORDER COSTING
Each BATCH
= Separate
JOB
MANUFACTURING, TRADE, SERVICES
UNIQUE, CUSTOM-ORDERED
, relatively
SMALL BATCHES
of different products
SINGLE unit for
DISTINCT CUSTOMER SPECIFICATIONS
Costs
ACCUMULATED Individually
Treated as
UNIQUE COST OBJECT/ LOT/BATCH
DM, DL & OH as each job consumes
VARYING AMOUNTS
of resources &
UNIQUE RAW MATERIALS
3 STAGES OF PRODUCTION
1 UNDER CONTRACT, NOT STARTED YET
2 IN PROCESS
3 COMPLETED
EXAMPLES
Construction, Printing, Special Equipment, Manufacturing, Shipbuilding, Medical Services, Custom Furniture, Advertising Agencies, Accounting/Legal firms etc...
LESS AVERAGING of COSTS
ACCOUNTING PROCEDURE
COSTS ACCUMULATED
by Job & averaged over units in Job
JOB ORDER COST SHEETS form BASIS
1 WIP INVENTORY account for all jobs IN PROCESS
JOB ORDER COST RECORD
Source Document
ALL FINANCIAL
info about a job
INCOMPLETE comprises
WIP
inventory ledger & reconciles with
WIP
Control Account
DM gathered from Materials Requisition Form
Direct Labour info on
EMPLOYEE TIME SHEETS OR LABOUR TICKETS
What
JOBS
were worked on &
AMOUNT of time
AUTOMATED PAYROLL
OVERHEAD
applied using
PREDETERMINED O/H RATE
source document
MATERIALS REQUISITION FORM
TYPES & QUANTITIES OF MATERIALS
to be put into
PRODUCTION
RELEASE
of materials from Warehouse to
WIP
Inventory
VERIFY FLOW
of materials to
DEPT & JOB
Prenumbered & multisets
7 STEPS
1 Define
COST OBJECT
2 Determine
DIRECT COSTS
(tracing)
3 Choose
ALLOCATION BASE
4 Determine
INDIRECT COSTS
5 Calculate OH ALLOCATION Rate
OHCOSTS/OH ALLOCATION BASE
6
ALLOCATE OH COSTS to the JOB
7 Compute
TOTAL COSTS (DM + DL + MOH)
Process of
ASSIGNING COSTS to the products
& services provided by the company
ACCURATE
info
Costing System
SUITS NEEDS
Pursue BUSINESS STRATEGIES, PRICING PLANS, EXTERNAL REPORTING REQUIREMENTS
Non-financial info customer satisfaction, defective units
GOAL: Find cost of manufacturing 1 unit of output, serve 1 customer/client
2 TYPES
PROCESS COSTING
LARGE numbers/
MASSES
of
IDENTICAL
units
Because identical, in theory, should
COST
the
SAME
AVERAGES COSTS
across ALL UNITS PRODUCED from PROCESS CENTRE
EXAMPLES
Chemical Industry, Bottling Companies, Plastics, Food Products, Paper Products, Cement Manufacturing, Brick Production, Oil Refining, Banking, Postal System etc..
HOMOGENOUS
products
Produced on
CONTINUOUS BASIS
Products receive
SUBSTANTIALLY IDENTICAL
amounts of material, labour & o/head
INPUT
COST OF PRODUCTION REPORTS
form
BASIS OF ACCOUNTING
SEPARATE WIP
Inventory account for
EACH DEPT/PROCESS
HYBRID
BLEND
of both
eg school uniforms with crests
ALLOCATING of Indirect MOH
3 METHODS OF MEASUREMENT
STANDARD
COST SYSTEM
PREDETERMINED DM & DL & MOH
NORMAL
COST SYSTEM
Uses ACTUAL DL & DM &
PREDETERMINED/BUDGETED OH
CALCULATED at BEGINNING
of period
SPREAD out
over longer periods to cancel
seasonal fluctuations
ACTUAL
COST SYSTEM
TRACES ACTUAL DL & DM & OH
NOT USED
commonly due to
TIMELINESS
Rates at
YEAR END
PREDETERMINED MOH
BUDGETED ANNUAL INDIRECT COSTS/BUDGETED ANNUAL QTY of choice of ALLOCATION BASE
STEPS
1 Estimates
TOTAL MOH
for year
2 Selects
ALLOCATION BASE
& Estimates TOTAL amount used in
YEAR
CRITERIA
CAUSE & EFFECT(driving cost) eg DL, DM
BENEFITS received
Ability to BEAR
Fairness & EQUITY
3
DIVIDE
STEP 1 by STEP 2
4
ALLOCATE SOME
MOH based on Q of base.
5
COMPARE PREDETERMINED
with ACTUAL
MOH < Actual
MOH UNDERALLOCATED
MOH> ACTUAL
OVERALLOCATED
ADJUST
ADJUSTED ALLOCATION RATE
Constantly update accounts
PRORATION RATE
Apportioning out across accounts
WRITE OFF TO COGS
Immaterial amounts, Most COMMON
TRACING
DM & DL
Source documents
Materials requisition & Labour Time Sheets
SERVICE DEPT
PART of product COST
DIRECT METHOD
STEP METHOD
REPEATED ITERATION SIMULTANEOUS EQUATION