CHAPTER arg SYSTEMS DESIGN: JOB-ORDER COSTING AND PROCESS COSTING LEARNING OBJECTIVES After studying thie chapter, you should be able to... 2 Explain the relationship between cost accounting pesgive 208 fi manutaccina compan: aan Describe and distinguish bet Reta ieee iar oi sec eu coat an Sperauon costing eyatsr 2 oe Apply the job order costing | ayat Sturing company and a Sorvice cntorpise Apply the process cost ec eee 9 system in eee aorta BAe SrecseT Sans SL Sheesine benween soe aay Describe applical i oa Hemtion of o| eration cost dj ng syste: SpCHAPTER 9 SYSTEMS DESIGN: JOB-ORDER COSTING AND PROCESS COSTING Introduction to Cost Acc. and Management Accounting Accounting systems serve people both inside and outside an organization. The ng. which 1s pr eee nese “Bnancotat for decision We ely costs mre uued [or manaseriar accounting purposes Ghen cams are uss Us Suteiders, puch as shacholdara or oredivors: to svaiaase SOT eae ee Basueeiont and sake investment Govistone above ame Sredaination we eae Solas ure Used For fiance! aeccuntins purposes! Flow of Costs in « Merchandising Company Morchaifaising compunice such, ne computer stores, department stored. crass Merchiifgining, companige suena" Goma ins” thay Sait te eueerneen Product comty are the purchase Ptisg. gu ‘nudism tne, staizinont ‘of finametgl Position ander Merchandise 3 asia Tortcn finger | Misoinnt ere’ pee cei thy mratated Sy connis, 2atate and cheraed,suninse sais mnccMant ‘soiling snd garminincraeiee oo Soriano Seen AO ahs Pariod am the neoma me SOCMRE ASENS Fakes tna MroraanctinionB46 Chapter o Blgere 9.1. Flow of Costs in a Merchandi ing Company Costs ‘Statement of Financial Position Income Statement Flow of Costs in a Manufacturing Company “Che most complex cost classification systems are found in manufacturing Grianizations, Where a special starcment must be propared to determine the cose SP aisas said.” Migure S.2 shows the basic flow of costs in a manufacturing Sh.itpany while Figures 9.3 iilitaten the flow Of manufacturing costs through manufacturing accounts igere 9.2. Plow of Costs im a Manutmcen: i esac rnninds onan345 Chaprer ©. nuit gurses mptertaty, discos tapes cont ors, regret any lNeaace Soca jaced Hufmcturinig overhead t= placed) Be eco Nan Charges. ase OF Incirest abag Jopf eC ates oon piention | of oeer Saami ret manufacturing: overhead costs are Muneint position. in the illustration, hese Direct labor expires with time and cannot the Motory to the storeroom, the the products are sold, theit tora! com Tansterred from the Finished Manufacturing Cost Accounting Systems= Manufacturing companies use clther job order, ro ontimates of what unit Sill sie nvseems bela Job order gr = protons dont mescunting alan nee aaa Ber lets scr crcene. Srintncisder cron treated differenti under oving average ha: jally completed units om Rana at both. dhe beginning! ancl Gnd’ Oe dhe the! Soce2 GF the beginning Month's production costs. Es rs cn Gal 1G Salculate the cont OF goods wanstarred ie to compute Sains @i ute cane of sempiating Sogietine Sind pagretaaatae Bell comp lavect Genie tin ee a ea Shea Wo EIS uiake The Soar Gi partially’ Compioted Wiseke in peceeas we method be slightly easier and yijustrative Problem 9.4. Process ©. esters Pests: Job-Order Costin, kunt Process Costin — 367 Ss eigen Waltauart Home Paint Company er inter pale aeraee Peecccrinecead tae Serta tsp iE 92 company’s paints. is m Parra oa packed for shippims Raw materials were ures: ee eee ere inn ice encameate wcare In) OS eee Po.OO TRACE posting ontries to the T-accounts, find the ending balance tn cach dloparmants work in Process #ecount Propite a production report for the Processi following additional, information is avallabl ene during April: pee seen cy om proerpnng Ae mugerints 100%. comple Sibi oe prec sRaeaaes ; opuiabk anal ovacheahaupcdubtlan ayrinn Aor nny enlace ec cde ieee Ee ie eae368 Chapter 0 Pegi eess ce vetnactasee corneas Cost data: Rei wa atts ce eee earn on 60.000te Systems Design: Job-Order Costh TeCompute the cauivatene us 2. Compute the eauivaicnes nd Process Costing 374 nits for October, assuming that the company od Of accounting: for unite and Comte Tn eee Soluion: Camin Company 30:000 units x 5098000077 k sen 13.000 eet eee 431.000 aa=o88 Tequivatent units of production Sue000 = 39.900372_Chapter 9Systems Desig Job-Ordar Costin: Systems Choice: ent Process Costing Job Costing versus Process Costime in job costing. costs a: 373 collected Tor cach unit produced. In process costing, ise are accumulated in a department for an accounting period (ror example, front), then spread evenly or averaged, over all units produced that mone Process Costing assumes cach unit produced tm relatively uniform Process costing has less detailed Shoosings between job Secordkeeping costs mre lower Under process Costing. Soca noe provide as much itor Sreach ol ipa nation as job costing: because 1 Samus job costing =ystem= cach system. ratty tind that Phuc. "Managers and accountants must decide Addntional benefits (ror example. costo cach un Swnien, Secorakecping costs. fom, the additional oy ‘nvallatle in a job cost rocordkecping costs. If recordkeeping cost Guta that process system= do. plus more Operation Costing Concépt and ApplicationSystems Desigys: Joh-Order Costin: Systems Choice: 373 nd Process Costing Job Costing versus Process Costing collected Yor each un lated in a department for an Spread eventy, font. then Produced. In process costing, cchunting period (for example, © Process costing assumes cach unit produce lod ts relatively thar month es between ots recordkeeping: hence. if @ company was Fee etineecnina: Conta wre lower Under process coetina, OF coursa; process acne etree ote ee ican taternation as Jeb cocina tecaues reaorda of aaaes esate sei ae suing pescene|cocciia:: meri SS ee aaa ee pesesencneey SS and. account: Bddntional benefits (ror oxs costar each u recordkeeping costs. SVSich is avaliable. in a jot Sosting nator, eo dusrify: aciaiaionat rocordkecping costs IF recorakenpina costs, wars cain! unter Jota nnd process eTS TS Se Seta that process systems do, plus more Operation Costing Concépt ana Applicadon374 Chaprer o i ee ants gpecifiontiy allocate, direct maccrials <2 the echo See” Socks Sanne” Cee et alas Naeger and’ overhead are Soisteea it Who waree anne? stnaet process Sonting.” They appl qonversian SEETNS upfield ute yatta rSagh Uae Spermtion by eine single wcemge Unit convertion cont forihe operation: Operation costing: best moots the reads oF Serene products have variations Of single design and An operation costing system represents a hybrid method. having some of the Coating, accountants allocate direct materials specifically to the batches. This is The job order costing. “They apply direct labor and overhead to all physical units fessing throush the Spcracion ty Using « single average wnt conversion cost for Syacte the Nosas SE EAC Gamarnctuver whore products have variauions ofSystems Destan: Jab-Order Co sting and Process Costing 375 REVIEW QUESTIONS AND PROBLEMS Questions 1. When would job-order cost 4 be Used In preference to process costing? What is the purpose of the job cost sheet in a job-order costing system? 3. Explain why some production costs must through an allocation process. Name several costs be Classified as direct or ms indirect costa? 4. why do do firm= use predetermined over manufacturing overhdad costs be assigned to products much Goats. Would such rates rather than sctual Hebe Ss nals vr encies ite ene What factors should be considered Somputing the predeterm oh Ce eee Se err tared ey (Sb. 14 leis cb orien ccerats lem eae eee SORS a2 Notated ina process costing: system? 10. Whatis = quantity sched: by aren't mutual overhead coms traced to jobs just as direct SC RMIPGMER TabSe So cte are traced 16 Jobe? cortate 12716 a company fully alloces Guarantee that a profit ie Larned for the period? * border and process costing, nee pgduces thousands Of medallions made of bronze. Inc), PEgdMecSyaiions mre identical except for the materials MUGM Badung system would you advise the ae ie aed ss,aero. es oF costs that vary ssregtly with ference bermeen normal cost of goods Sold and adjusted 22 (Process Costing amd Job Order Costing? Which would be more appropriate in cach of the following: situations — Job