ACCT4B
Ch. 3 Job Costing
Process Costing:
Used for companies that mass produce a product. The uniform production allows cost to be spread evenly.
IPhone X process = $92,562,500 TC / 250,000 units = $370.25 per unit
Job Costing:
Unique product or batch of units produced uniquely or in small batches.
Cost of all labor and materials will be recorded on a job cost sheet, shown below.
Key distinctions!
Uniqueness of product. Job costing is used for unique products, and process costing is used for standardized products.
.Size of job. Job costing is used for very small production runs, and process costing is used for large production runs
Record keeping. Much more record keeping is required for job costing, since time and materials must be charged to specific jobs. Process costing aggregates costs, and so requires less record keeping.
Customer billing. Job costing is more likely to be used for billings to customers, since it details the exact costs consumed by projects commissioned by customers.
Job Cost Sheet: Breakdown
A sheet like this encompasses all the cost associated with a products cost. Here are some important notes about allocating Manufacturing Overhead (MOH):
Predetermined MOH rate
= Total estimated manufacturing overhead costs / Total estimated amount of the allocation base
With this, you find the MOH allocated to a job by
= Predetermined MOH rate (above) x Actual amount of allocation base used by the job
Page 118 of your textbook covers a similar example.
Image Credit: https://www.accountingformanagement.org/job-cost-sheet/
As a result of UNDER - or OVER - ALLOCATION the corresponding journal entries must be made.
Under - Allocation*:
Dr. Cost of Goods Sold XXX
Cr. Manufacturing Overhead XXX
*An inverse relationship is represented with Over-Allocation. Instead debit MOH and credit CGS!!
IF YOU WANT TO TEST YOUR JOB/PROCESS COSTING SKILLS, HERE'S SOME PRACTICE QUESTIONS!!
Ch. 4 Activity-Based Costing
Why companies use ABC:
1) Improved accuracy
2) Detailed information on costs of activities & associated drivers helping mangers assess value added activities
Activity cost allocation rate = Total estimated activity cost pool / Total estimated activity allocation base
Allocation of activity's cost = Activity cost allocation rate X Actual amount of activity allocation base used by job
Check out this Khan Academy Video!
Ch. 5 Process Costing
Calculating Costs
This image illustrates how costs are calculated from the beginning of the manufacturing process all the way to the selling of a finished good.
Manufacturing Costs
In this video, Nico explains the process of calculating manufacturing costs to the sale of goods.
Job Order Costing vs Process Costing
If you want a more in-depth look at the difference between job order costing and process costing, watch this video which goes over the conceptual difference and expands on it with an example for each.
Cost Behavior & Cost-Volume-Profit Analysis
Want a better understanding on absorption costing and variable costing? Check out the website link below! https://www.coursesidekick.com/accounting/study-guides/sac-managacct/absorption-costing
Fixed vs. Variable Cost
Still not sure about cost types?
Try to solve these practice exercies by defining what type of cost each example falls under.
4B Types of costs.pdfCh. 11 Standard Costs and Variances
Variance
Practice variances problems with this worksheet!
ACCT 4B - Variances Practice Problem.xlsx