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ACCOUNTING FOR ACTUAL AND NORMAL JOB COSTING (continued)

LECTURE EXAMPLES - TOPIC A

代写留学生论文1. Assume a firm has total payroll of $64,000, and only one withholding, income tax of 30%.

2.   The total payroll of $64,000 was comprised of direct labour $49,000 and indirect labour $15,000.   Assume the only on-cost is 9% superannuation.  A detailed calculation of payroll on-costs follows:

Type of labour Amount On-costs
9% superannuation Total labour + on-costs
Direct $49,000 $4,410 $53,410
Indirect $15,000 $1,350 $16,350
Total $64,000 $5,760 $69,760

3. Assume the total cost of a job (all direct labour) was $500 if in normal time, and $750 if in overtime.

LECTURE EXAMPLES – TOPICS B and C

Data for a period follows:

 Product A Product B
Machine hrs/unit 2 2
DL hrs/unit 4 4
Annual units produced 1,000 10,000
Total machine hrs 2,000 20,000
Total DL hrs 4,000 40,000
No. purchase orders 80 160
No. set ups 40 60

Overhead costs of the production activities are as follows:
Volume related  $110 000  (use machine hours)
Purchasing related  $120 000
Set-up related  $210 000
    $440 000

Show how overhead is allocated to the two products assuming:

(a) The firm uses a plant-wide rate based on DL hours.
(b) The firm uses activity based costing.  The firm has grouped its overhead costs into three cost pools as listed above.

 
LECTURE 4 – ACCOUNTING FOR ACTUAL AND NORMAL JOB COSTING (continued)

TEXT READING:

Ch.5  to middle of p.152; middle of p.156–middle of p.157.
Ch.9  p.313–middle of p.315
Ch.10 bottom p.340-middle of p.342

A. ADDITIONAL PAYROLL ISSUES

Make sure you take the time to review the last section of lecture 3 which explained that there are a number of alternative treatments of payroll.  For example, sometimes, as in last week’s example, an entry is made to “incur” payroll, and then a further entry made to “distribute” payroll to WIP and OH.  Other firms will record the “incurrence and distribution” in one entry.

Another difference from your previous studies is that you will see that the term “wages” is used rather than “wages expense”.  This is because in management accounting, under absorption costing, manufacturing wages is an inventoriable cost (an asset), and will not become an expense until the goods to which the wages relate are sold.

 In last week’s lecture we made the following entry for payroll:
 
 Wages DR 64,000
 Wages Payable CR 64,000
 
There are limitations with the entry above.  It ignores a number of payroll-related issues that always must be considered by firms.  The incurrence of wages and salaries brings the related issues of:

• withholdings, and
• payroll on-costs.

1. WITHHOLDINGS
 
 Withholdings are items that are retained from employee’s wage or salary, and forwarded to a third party on the employee’s behalf.  They include items such as:
 
• Income tax
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