MODULE 2 - ILLUSTRATION OF JOB ORDER COSTING

Ex. ABC Company had the following balances at December 31, 2016.

Material Inventory $70,000

Work in Process $80,000
Finished Goods Inventory $3,000

During 2017, company completed the following transactions:-

A. ACCUMULATE MANUFACTURING COST

1. Purchased material
On January 15, 2017 ABC purchased direct material of $350,000 and indirect material of
$17,000 on account.

DATE PARTICULAR DEBIT CREDIT

2. Accounting for labor

During 2017, ABC incurred labor cost of $197,000. It is determined that direct labor of
$169,000 and $28,000 for indirect labor.

DATE PARTICULAR DEBIT CREDIT

3. Accounting for manufacturing overhead.

During 2017 ABC incurred the following overhead costs: Factory Depreciation $10,000,
Factory utilities $7,000, Factory insurance $6,000 and Factory property taxes $ 5,000

DATE PARTICULAR DEBIT CREDIT

B. ASSIGNED MANUFACTURING COST
At December 31, 2017, it is determined that company used direct material of $355,000 and
indirect material of $17,000. ABC Co. use direct labor cost to CALCULATE PREDETERMINED
OVERHEAD RATE for manufacturing overhead cost. It is estimated in 2016 that total
overhead cost for 2017 will be $68,000 and estimated direct labor cost of $170,000.

DATE PARTICULAR DEBIT CREDIT

CALCULATE PREDETERMINED OVERHEAD RATE:

C. ASSIGNED COST TO FINISHED GOODS
At the end of 2017, ABC co incurred the following:-

Sales on account $1,200,000

Work In Process $2,300
Finished Goods $3,400