Chapter 2:Job order Costing

1. Cost Accounting System:

Lostact measuring, recording, reporting products
-

a service costs

CAS the
perpeptual inventory system
-

use of
-

1. Process cost
system:
-

Manufactures a
large volume of similar products (continuous productions
Process costing accumulates product-related costs for period of time
-

to specific departments/processes for time period

-
Assign cost a

2. Job order cost

system:
Assign costs to each job/batch goods
-

of

Each
job batch has its distinguishing characteristics
-

own

Objective:compute the cost

per job
-

11. Job order costflow:

Manufacturing costs WIP inventory Finished goods inventory COGS

RM Assigned completed sold

> >
Labor to > Products Products Products

MoH

1.
Accumulating RM costs:

e.g:Wallace purchases 2000 batteries ($5/unit) a 800 electronic modules

($40 unit). The entry to record this purchase:

Jan 4
RM inventory $42,000

AP $42,000

(2000 x$5 +800 $40)

x

2. Factorylabor cost

e.g:Wallace incurs $32,000 factory labor costs.

to
$27,000 relates wages payable
$5,000 relates payroll
to taxes payable

Jan 31 Factorylabor $32,000

Factorywages payable $27,000

Payroll taxes payable 5,000

 3. MOHcosts

Jan 31 MOH $13,800

Utilities payable $4,800

Prepaid insurance 2,000

Ar (for repairs) 2600

Acc depre 3,000

Property taxes payable 1,480

DO IT1:

Date ACC titles Dr Cr

a. Raw materials inventory $4,200

AP $4,200
b. Factory labor 18,000

Factory wages payable 15,000

Payroll taxes payable 3,000

2. MOH 7,500

Factory utilities payable 2,200

Prepaid factory insurance 1,000

Depre on factory building 3,500

III.
Assigning Manufacturing costs
-

Results in following entries:

1. Debits made WIP
to

2. Credits made to RM inventory

Factory labor

MOH

Job Costsheet

To reportthe costs changable a set job

-

to

To determine thattotal unitcosts of the completed job

-

WIP inventory must be accompanied by corresponding

Each entry
·

to a

posting to or more Job Cost sheets

 1. RM costs:

Are assigned when materials

storeroom issues the materials in

respond requests
to

DM

indirect materials

Requests for issuing RM made

-

are

by Production DeptPersonnel on a

prenumbered Materials Requisition Slip

Company FIFO, LIF0, Arco in costing the requisition to the
-

use
may
individual job cost sheets

e.g:
Jan 31 WIP inventory $24,000
MOH 6,000
RM inventory $30,000
2.
Factory labor costs:

Are assigned jobs the basis of Time Tickets prepared when

-

to on

the work is performed

e.g.
Jan 31 WIP inventory $28,000
MOH 4,000

Factorylabor $32,000
IV. Predetermined Overhead Rates

Companies assign MOH WIP to spt jobs estimate basis thru the
·

to & on an

use of a predetermined overhead rate

Base the rits:estimate

annual overhead costs (C estimate
of activity
-

on

expressed in terms of a common

activity base

Est. Annual overhead costs

Predetermined Overhead
=

Rate

Est. Annual Operating activity

WIP
1

Predetermined
Actual Activity is assigned to

base used overhead rate L

Jobs
v

Job1 JobC
 E
st. Annual overhead costs
Predetermined
=

st.
E
Directlabor cost overhead rate

Material Requisition Slip doo

A the of from
authorizing insurance RM
-

the storeroom to production

Overapplied overhead Overhead applied wip
to the overhead incurred
Underapplied overhead -

OH applied (OH incurred

Assignments
E2.5

MOH $300,000 $2.4 machine he

a. rate = =

per
125,000

b. $322,000 -

($2.4 130,000
x machine hr)

$10,000
=

overapplied
c.
Adjusting entries

Manufacturing overhead $10,000

COGS $10,000
E2.6

=°π°π°*?°?
?
*? Manufacturing

4,700
1,360
1,700
7,760
(7,760/2,500) 3,104
 2. (10 3,5):

Est. Overhead costs $290,000

=

Est. Machine usage 125,000 his

=

Incurred:Overhead costs 295,000

=

Machine usage 130,000

=

a. Service overhead rate 290,000

=
$2.321 machine hr
=

125,000

b. 295,000 -(2.32 x 130,000) $6,600

=

over applied
W W

incurred service Incurred machine

overhead costs overhead rate hours

E2. 1:

Fringe benefits:phy caplong

NO. Acc titles Dr Cr

a Factory labor $90,000

Factory wages payable 576,000

Factory fringe benefits payable 6,000

Factory payroll taxes payable 8,000
b Wip inventory (90,000 x85%)
MOH 190,000 x15%) 76,508
Factory labor 13,500
To assign factory labor to 90,000
productions

~ Related Direct
to labor
->
Record WIP
to

Related to Indirect Yabor,

->
Record MOH
to
 E2 -

5:

a. MOH rate =
300,000 $2.4 machine
=
hr

125,000

b. 322,000 -
(2.4 130,000)
x

= $10,000 over applied

C. Ikerd Company
Adjusting entries

Dr Cr

MOH $10,000
COGS $10,000

E2 -

6:

4,708
1,360
1,700
7,760
3.184

a.

1. Source documents for:

Direct materials -
from the Material requisition slip
Directlabor -

from time cards of the employees

MOH -

from the Predetermined overhead rate

 MOH 1,700
2. Predetermined overhead rate: - 100
x 125%
=

DL costs 1,360

3. Total costof completed job $7,760

=

Unit cost 7,760

=
= $3.2
2,500

b. Journal entries

Finished goods inventory $7,760

wip inventory $7,760