Accounting Discussion
Part 1 Write Discusion Post (150 words)
Now
that we have a better understanding of job costing, let’s take an
example from our childhood entrepreneurial endeavors (running a lemonade
stand or neighborhood lawn mowing services, making crafts to sell at a
local crafts fair, babysitting, etc.). Imagine these products and
services as businesses, in which you are the manager with several
teenagers as your employees.
In
your initial post, define the “jobs” in job costing. Explain how you
would measure direct materials cost, direct labor cost, and compute
predetermined overhead rates.
What
are your actual manufacturing overhead costs, and why aren’t they
traced to jobs, just as direct materials and direct labor are traced to
jobs?
Give reasons why overhead might be under-applied or over-applied in a given year.
What factors should be considered in selecting a base to be used in computing the predetermined overhead rate? Why?
When
you read the posts submitted by your peers, provide feedback explaining
what you would have done differently. Ask for clarification regarding
their definitions or decisions that seem unclear to you. Identify areas
where you concur with their thinking.
Part 2 Respond to two peers (75 words)
Peer 1 David
Job
Costing: Job costing is when you are able to break down the cost of
items, services and profits directly tied to individual jobs. For
instance, if you own a lawn mowing company as a kid, you may have it
broken down into groups who mow lawns, those who clean up the lawns, and
those who manicure lawns. This allows you to track profitability and
cost of each individual job. This also shows the best or more
profitable areas to invest in or cut ties with if they are loosing
money.
Overhead:
Overhead is not traced to jobs because it is a collective expense. If
you did this by individual jobs, you may have an area loosing money and
therefore unable to pay the overhead to house it's services. The
overhead is an overall expense whereas different jobs could have
different expense. Take for instance the lawn mowing job above. Let's
say you lease space to house all of your equipment in your dad's garage
or shed. The equipment must all go in this one space and is a company
expense. Different machines such as the mower and weed eaters use
different fuels, different maintenance parts, and may even require
different "manpower" to operate. This should all be directly tied to the
individual jobs
over
head might be under applied or overapplied in a given year due to
projected sales or production and then not meeting or exceeding that
production goals. There needs to be a baseline number for the amount of
overhead and this may not be enough or to much to cover the actual
overhead. These factors can lead to a defecit or surplus for the
business depending on the way sales go.
Peer 2 Anna
According
to the textbook, job-order costing is used in situations where many
different products, each with individual and unique features, are
produced each period. In my area lawn care is a growing service that
you see widely among young job seekers, especially in the summer
months. However, the lawn care business is not just for the young
adults. My spouse took on a summer job for additional cash which
consisted mainly of weed eating and mowing some areas on the grounds of
Fort Leavenworth which included parking lots, barracks and some of the
prison grounds in Leavenworth, KS a few summers ago.
The
direct materials needed; one Bushwhacker mower, four weed eaters, four
gas cans at five gallons each, and three bundles of string for the weed
eaters. The material cost varied, even though the Bushwhacker mower was
already supplied the cost of each item provided needs to be factored
in. The mower cost was $300, four weed eaters $800, three bundles of
string $20/bundle. Gas is $2.19/gallon, for all four gas cans the cost
to fill up twenty gallons of gas is $43.80. There were three employees
and given an hourly rate of $25/hr. The job took place on Saturday and
Sunday ranging between 6 to 8 hours per day.
All
materials were housed at the boss’s house where the mower and weed
eaters were stored at no cost. The manufacturing overhead did not apply
since there was not additional charges to house any of the equipment
and materials. Since this is a seasonal work, mostly done in late
spring and ends in late summer the under-applied and over-applied in a
given year varies. Out of the 12 months, the work is only done applied
for 4 of those months. This also fluctuates given environmental
factors, such as late snow in the spring and the rain fall too. The
factors needed when computing the PDOR will be the increase the activity
in the spring and summer months and the decrease in the fall and winter
months since the activity is lower. 
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