CHAPTER 9
Cost
accounting
systems
CONTENTS
9.1 Job order costing and factory overhead
9.2
Job order costing
9.3 Process costing
9.4 Calculating unit costs with process costing
9.5 Cost of production reports for two departments
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Cost Accounting Systems: Job Order and Process Costing, Exams of Cost Accounting
Examples of cost accounting systems, specifically job order costing and process costing. It includes calculations for total cost, overhead application, and cost of production reports for multiple departments. The examples are based on a company that manufactures playground equipment and another that produces Goody Bars.
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CHAPTER 9
Cost
accounting
systems
CONTENTS
9.1 Job order costing and factory overhead
9.2 Job order costing
9.3 Process costing
9.4 Calculating unit costs with process costing
9.5 Cost of production reports for two departments
McGoo Pty Ltd uses a job order costing system to control production costs in its two departments. Accounting records for Job 433 show the following data:
The company applies overhead to production on the basis of direct labour cost in Department A and on the basis of machine hours in Department B. At the beginning of the year, the company estimated the following production performance:
Required: A. Calculate the overhead rate for each department. B. Calculate the total cost of Job 433. C. If actual machine hours used in Department B were 16 640 and the actual factory overhead was $507 200, was the overhead overapplied or underapplied? By what amount?
McGOO PTY LTD A. Departmental overhead rates: Department A: $1 497 600 ÷ $1 248 000 = $1.20 per DL$ Department B: $488 400 ÷ $16 280 = $30 per Mach hr
B. Total cost Job 433
Total cost of Job 433 = $384 180
C. Department B: Actual factory overhead: $507 200 Applied overhead 16 640 ($30) 499 200 Factory overhead underapplied $ 8 000
Department A Department B
Direct labour hours Direct labour cost Raw materials cost Machine hours
Department A Department B
Direct labour hours Direct labour cost Machine hours Factory overhead
Department A — Job 433 Department B — Job 433 DL 19 200 RM 7 200 FOH (1) 23 040 49 440
DB 49 440
______
DA 49 440
DM 319 380
RM 10 320
FOH (2) 5 040
FG 384 180
______
ADDITIONAL PROBLEMS
Problem 9.1 Job order costing and factory overhead
Solution
MASTHEAD LTD
A. General journal entries
January 2002 1 Work in process 11 732 Factory overhead 1 330 Raw materials 13 062
2 Factory wages and salaries 10 400 Wages payable 10 400 Wages payable 10 400 Cash at bank 10 400
3 Work in process 9 280 Factory overhead 1 120 Factory wages and salaries 10 400
4 Work in process 11 600 Factory overhead applied 11 600 ($10 (9 280 ÷ 8))
5 Factory overhead 10 200 Accounts payable (various) 10 200
6 Finished goods 30 642 Work in process 30 642 Job 43: $ 840 + 1 990 + 2 600 + 3 250 = $8 680 Job 44: $ 910 + 3 200 + 3 400 + 4 250 = 11 760 Job 45: $4 442 + 2 560 + 3 200 = 10 202 30 642
7 Cost of goods sold 18 882 Finished goods 18 882 Accounts receivable 26 435 Sales revenue 26 435 (1.4 × 18 882 = $26 435 rounded)
B. Schedule of costs:
Job
Beginning balance
Raw materials Direct labour
Factory overhead Total 43 44 45 46
______
Solution
C.
MASTHEAD LTD
Job Cost Sheet (Summary)
Job 45
D.
E.
Labour Materials Overhead Total $4 442 $2 560 $3 200 $10 202
Work in process B/B (1) (3) (4)
Balance
C/F
_______
Finished goods (6)
Balance
______
C/F
OLDMAN LTD
Predetermined factory overhead application rate. Budgeted overhead ÷ budgeted direct labour cost $420,000 ÷ 260,000 = 161.538462% direct labour cost.
- 30 June A. General journal entries
- 1 Work in process - blending
- Work in process - bottling
- Raw materials
- Work in process - bottling
- 2 Work in process -blending
- Work in process - bottling
- Factory overhead
- Factory wages and salaries
- 3 Factory overhead - Cash at bank - Accumulated depreciation
- 4 Work in process - bottling - Work in process - blending
- 5 Finished goods - Work in process - bottling
- 6 Cost of goods sold
- Accounts receivable
- Finished goods
- Sales revenue
- Accounts receivable
- 7 Raw materials - Accounts payable
- 8 Work in process - blending
- Work in process - bottling
- Factory overhead applied
- Work in process - bottling
- Actual overhead $107 B.
- Blending department $ Applied overhead:
- Bottling department
- Overapplied overhead $
- 1 Work in process - blending
C.
Ending inventory balances: Work in process - blending $87 308 Work in process- bottling 82 596 Raw materials 18 750 Finished goods 42 500
Work in Process — Blending Work in Process — Bottling B/B 50 000 (1) 56 250 (2) 52 500 (8) 84 808 243 558 Bal 87 308
C/F 87 308
B/B 37 500
Bal 82 596
C/F 82 596
Raw Materials Finished Goods B/B 31 250 (7) 87 500 118 750 Bal 18 750
C/F 18 750
B/B 23 750
Bal 42 500
C/F 42 500
A.
FANTASTIC FIGURINES PTY LTD
Missing unit production data: Finishing - Units started = units transferred out from Shaping Department Shaping - Units started 52 000 Beginning WIP 10 000 Units to be accounted for 62 000 Ending WIP 12 000 Transferred out 50 000 Finishing - Units started 50 000 Beginning WIP 4 000 Units to be accounted for 54 000 Ending WIP 10 000 Transferred out 44 000 Packaging - Units started 44 000 Beginning WIP 3 000 Units to be accounted for 47 000 Ending WIP 7 000 Transferred out 40 000
B. FANTASTIC FIGURINES PTY LTD Shaping Department Cost of Production Report for the month ending 30 June, 2002 Physical flow schedule: Work in process, 1 June 10 000 units (0.50) Units started 52 000 units Units finished 50 000 units Work in process, 30 June 12 000 units (0.60)
Costs to be accounted for:
Costs accounted for: Units completed (50 000 × $10.926573) $546 329 Work in process, 30 June: Raw materials, 12 000 × $8.00 $96 000 Conversion cost, 2 520 × $0.203933 21 071 117 071 $663 400
+Equivalent units of production (weighted average) Materials Conv.Cost Units completed 50 000 50 000 Equivalent units in ending inventory 12 000 * 7 200 ** 62 000 57 200
- (1.0) 12 000 ** (0.60) 12 000
Cost element Beginning Current Total Equivalent units+
Unit cost
Raw materials $106 400 $389 600 $496 000 62 000 $8. Conversion costs 13 800 153 600 167 400 57 200 2. $120 200 $543 200 $663 400 $10.
Solution
FANTASTIC FIGURINES PTY LTD
Finishing Department Cost of Production Report for the month ending 30 June, 2002 Physical flow schedule: Work in process, 1 June 4 000 units (0.60) Units started 50 000 units Units finished 44 000 units Work in process, 30 June 10 000 units (0.80)
Costs to be accounted for:
Costs accounted for: Units completed (44 000 × $12.324041) $542 258 Work in process, 30 June: Conversion cost, 8 000 × $1.384615 11 077 Previous dept. costs, 10 000 × $10.939426 109 394 120 471 $662 729
+Equivalent units of production (weighted average) Materials Conv. Prev Dept Cost Units completed 44 000 44 000 44 000 Equivalent units in ending inventory 0 8 000 ** 10 000 44 000 52 000 54 000 ** (0.80) 10 000
Cost element Beginning Current Total Equivalent units+
Unit cost
Raw materials $0 $0 $0 44 000 $0. Conversion costs 2 680 69 320 72 000 52 000 1. Transferred in 44 400 546 329 590 729 54 000 $47 080 $615 649 $662 729 $12.
( Note: The breakdown of beginning inventories in cost components has been omitted from this question. These are — Cooking, Transferred in $2 282, conversion costs $468; Packaging, Transferred in $5 280, materials $1 760, and conversion costs $1 760. Units transferred out of the Packaging dept. should be 257 500. The solution below incorpor- ates these figures.)
GOODIE GOODIE BREAKFASTS LTD Cooking Department Cost of Production Report for the month ending 31 July Physical flow schedule: Work in process, 1 July 5 000 units (0.50) Units started 250 000 units Units finished 255 000 units Work in process, 31 July 0 units
Costs to be accounted for:
Costs accounted for: Units completed (255 000 × $0.600000) $153 000
+Equivalent units of production (weighted average) Materials Conv. Cost Units completed 255 000 255 000 255 000 255 000
Cost element Beginning Current Total Equivalent units+
Unit cost
Transferred in $468 $125 000 $125 468 255 000 $0. Conversion costs 2 282 25 250 27 532 255 200 0. $2 750 $150 250 $153 000 $0.
Solution
GOODIE GOODIE BREAKFASTS LTD
Packaging Department Cost of Production Report for the month ending 31 July Physical flow schedule: Work in process, 1 July 10 000 units (0.40) Units started 255 000 units Units finished 257 500 units Work in process, 31 July 7 500 units (0.70 )
Costs to be accounted for:
Costs accounted for: Units completed (257 500 × $1.000031) $257 508 Work in process, 30 June: Raw materials, 7 500x $0. 199094 $1 493 Conversion cost, 2 520 × $0.203654 1 069 Previous dept. costs, 4 200 × $0.597283 4 480 7 042 $264 550
+Equivalent units of production (weighted average) Materials Conv. Prev Dept Cost Units completed 257 500 257 500 257 500 Equivalent units in ending inventory 7 500 * 5 250 ** 7 500 265 000 252 750 265 000
- (1.0) 7 500 ** (0.70) 7 500
Cost element Beginning Current Total Equivalent units+
Unit cost
Raw materials $1 760 $51 000 $52 760 265 000 $0. Conversion costs 1 760 51 750 53 510 262 750 0. Transferred in 5 280 153 000 158 280 265 000 0. $8 800 $255 750 $264 550 $1.