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.