Afds

Chapter 3 Lecture Notes

Systems Design: Job-Order Costing

Absorption Costing

- the product absorbs all manufacturing costs (DM, DL, MOH)

JOB-ORDER COSTING—An Overview

Job order costing is used in situations where many different products are produced each period.

Job Cost Sheet

Exhibit 3-2 page 87

A job cost sheet includes:

Materials (DM)

+Labor (DL)

+*Applied MOH (MOH)

Total Cost

Cost per unit

Computation of Unit Costs

-total job cost ÷ total units produced = average cost per unit (or cost per unit)

-basis for valuing COGS and EI

THE FLOW OF COSTS

The Purchase and Issue of Materials

|Raw Material | |WIP |

|+ |- | |DM | |

|Beginning bal. |Materials used in | | | |

|+ purchases |production (either to | | | |

| |WIP or MOH) | | | |

| | | | |

| | | |MOH |

| | | |IDM | |

|Ending bal. | | | |

Purchases increase Raw Material (RM)

DM(goes to WIP (RM decreases)

IDM(goes to MOH (RM decreases)

|WIP |

|DL | |

| |

|MOH |

|IDL | |

Labor Costs

--DL(goes to WIP

--IDL(goes to MOH

|MOH |

|+ |- |

|(actual costs) |(applied costs) |

|IDM...