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Printable Handouts
Navigable Slide Index
- Introduction
- Costing systems
- Job-order production and costing
- The manufacturing process
- Accounting for materials
- Job order cost sheet - direct materials recorded
- Accounting for direct labor
- Job order cost sheet – direct labor recorded
- Steps for allocating overhead costs
- Predetermined overhead rate
- Job order cost sheet - allocating overhead
- Job order cost sheet - completed
- Adjusting manufacturing overhead
- Overview
- Flow of costs
- Costing systems
This material is restricted to subscribers.
Topics Covered
- Job order cost sheet
- Accounting for materials
- Accounting for direct labor
- Adjusting manufacturing overhead
Talk Citation
Himme, A. (2024, November 29). Job order costing [Video file]. In The Business & Management Collection, Henry Stewart Talks. Retrieved December 14, 2024, from https://doi.org/10.69645/VOJS4409.Export Citation (RIS)
Publication History
Other Talks in the Series: Management Accounting
Transcript
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0:00
Hello everyone. I would like to welcome you to
this HS Talks Lecture Series on managerial accounting.
My name is Alexander Himme,
and I'm Assistant Professor for Managerial Accounting at
the Kuhne Logistics University in Hamburg, Germany.
In this module, we dig deeper into how product costs are tracked.
The first possibility to accumulate costs is a job order costing system.
We'll talk about the cost flows associated with job order
costing and how overhead costs are allocated to products and services.
0:35
There are two types of cost accounting systems;
job order costing and process costing.
Companies can be divided into
two major types depending on whether their products or services are unique.
Job order costing is used by businesses that
produce unique products or provide specialized services.
Here, costs are accumulated for each batch or job.
Examples of these types of companies that use job order costing are;
accounting firms, building contractors,
shipyards and customized furniture manufacturers.
In contrast, process costing is used by
businesses that manufacture large quantities of identical units.
Production is carried out through a series of steps or processes,
and costs are accumulated for each process.
Examples of the types of companies that use process costing are for example,
soft drink manufacturers like Coca-Cola,
whose processes may include mixing, bottling and packaging,
or car manufacturers whose processes may include assembling and painting.
Both accounting systems have in common,
that they are usually set up out of four steps.
In the first step, all production costs are accumulated.
That means that all incurred costs are collected and documented.
In the second step, they are easily plausible,
costs are assigned to costs objects.
For example, the unit of a product.
As you remember from Module 2,
this will be easy for all the so-called direct costs.
However, it's more difficult for the indirect costs like manufacturing overheads.
For these indirect costs,
we have to find ways how to allocate the costs of cost objects.
This is done in the third step,
the allocation of overheads.
Finally, you have to do some adjustments.
This is because you will allocate the indirect cost before they actually incur.
You do this based on a so-called predetermined overhead rate.
In the end, we may have allocated
too much or too less overhead costs to the cost objects.
Then we have to adjust this,
the fourth step of the cost accounting system.
Here, in Module 4,
we now concentrate how this costing process
exactly looks like in a job order costing system.
In Module 5, you'll then look at process costing
and the different approach that process costing takes.