Recording Non-manufacturing Costs in a Job Order
Costing System:
In addition to manufacturing costs, companies also incur
marketing and selling costs. These costs should be treated as period
expenses and charged directly to the
income statement
and therefore should not go into the the manufacturing overhead account.
Example:
To illustrate the correct
treatment of non-manufacturing costs, assume that a company incurred $30,000
in selling and administrative salary costs during a months, the following
entry records these salaries.
|
Salaries expense |
30,000 |
Dr. |
| |
Salaries
and wages payable |
|
30,000 |
Cr. |
Depreciation on factory
equipment is debited to manufacturing overhead account but depreciation on
office equipment is considered a period expense and is not included in
manufacturing overhead. Assume that depreciation of office equipment during
the month was $7,000. The entry is as follows:
|
Depreciation expense |
7,000 |
Dr. |
| |
Accumulated depreciation |
|
7,000 |
Cr. |
Finally assume that advertising
was $42,000 and that other selling and administrative expenses during the
month was $8,000. The following journal entry records these items:
|
Advertising expenses |
42,000 |
Dr. |
|
Other selling and administrative expense |
8,000 |
Dr. |
| |
Accounts payable |
|
50,000 |
Cr. |
Since the amounts in entries
above all go directly into expense accounts, they will have no effect on the
costing of the company's production for the month. The same will be true of
any other selling and administrative expenses incurred during the month
including sales commission, depreciation on sales equipment, rent on office
facilities, insurance on office facilities, and related costs.
|
