Professional Documents
Culture Documents
Eighth Edition
Chapter 2
Job Order Costing
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Chapter Outline
Learning Objectives
LO 1 Describe cost systems and the flow of costs in a job
order system.
LO 2 Use a job cost sheet to assign costs to work in process.
LO 3 Demonstrate how to determine and use the
predetermined overhead rate.
LO 4 Record manufacturing and service jobs completed and
sold.
LO 5 Distinguish between under-and overapplied
manufacturing overhead.
LEARNING OBJECTIVE 1
Describe cost systems and the flow of costs in a job order
system.
Cost Accounting
• Involves measuring, recording, and reporting product
costs
• Accounts are fully integrated into the general ledger
• Perpetual inventory system provides immediate, up-to -
date information on cost of a product
• Two basic types: (1) a process order cost system and
(2) a job order cost system
LO 1 Copyright ©2018 John Wiley & Sons, Inc. 3
Process Cost System (1 of 2)
• Used when a large volume of similar products are
manufactured - (cereal, refining of petroleum,
production of ice cream)
• Costs are accumulated for a time period – (week or
month)
• Costs are assigned to departments or processes for a
specified period of time
Manufacturing Costs
Raw Materials Manufacturing
Inventory Factory Labor Overhead
Purchased raw materials (1) +$42,000
Balance $42,000
Manufacturing Costs
Raw Materials Manufacturing
Inventory Factory Labor Overhead
Purchased raw materials (1) +$42,000
Incurred factory labor (2) +$32,000
Balance $42,000 $32,000
Manufacturing Costs
Raw Materials Inventory Factory Labor Manufacturing Overhead
a. +$4,200
b.
c.
c.
c.
Manufacturing Costs
Raw Materials Inventory Factory Labor Manufacturing Overhead
a. +$4,200
b. +$18,000
c.
c.
c.
Manufacturing Costs
Raw Materials Inventory Factory Labor Manufacturing Overhead
a. +$4,200
b. +$18,000
c. +$2,200
c. 1,800
c. 3,500
LEARNING OBJECTIVE 2
Manufacturing Costs
Raw Materials Manufacturing Work In Process
Inventory Factory Labor Overhead Inventory
Balance $42,000 $32,000 $13,800
Direct materials − 24,000 + $24,000
(4)
Indirect − 6,000 + 6,000
materials (4)
Balance $12,000 $32,000 $19,800 $24,000
Manufacturing Costs
Manufacturing Costs
Raw Materials Factory Labor Manufacturing Work In Process
Inventory Overhead Inventory
Direct materials − $9,600 + $9,600
Direct labor −$6,000 + 6,000
LEARNING OBJECTIVE 3
Demonstrate how to determine and use the
predetermined overhead rate.
This means that for every dollar of direct labor, Wallace will
assign 80 cents of manufacturing overhead to a job.
Manufacturing Costs
Raw Materials Factory Labor Manufacturing Work In Process
Inventory Overhead Inventory
Balance $12,000 $0 $23,800 $52,000
Assigned -22,400 +22,400
overhead (6)
Balance $12,000 $0 $ 1,400 $74,400
LEARNING OBJECTIVE 4
Record manufacturing and service jobs completed and
sold.
Manufacturing Costs
Raw Work In Finished
Materials Factory Manufacturing Process Goods Cost of
Inventory Labor Overhead Inventory Inventory Goods Sold
Balance $12,000 $0 $1,400 $74,400
Job 101 (7) −39,000 +$39,000
Balance $12,000 $0 $ 1,400 $39,000 $39,000
Manufacturing Costs
Raw Work In Finished
Materials Factory Manufacturing Process Goods Cost of
Inventory Labor Overhead Inventory Inventory Goods Sold
Balance $12,000 $0 $1,400 $35,400 $39,000
Sale Job −39,000 +$39,000
101 (8)
Balance $12,000 $0 $ 1,400 $35,400 $0 $39,000
(3) +2,600
(3) +3,000
(3) +1,400
(4) -24,000 +$24,000
(4) -6,000 +6,000
Assignment
4. Raw materials are used
5. Factory labor is used
6. Overhead is applied
7. Completed goods are recognized
8. Cost of goods sold is recognized
LEARNING OBJECTIVE 5
Distinguish between under-and overapplied
manufacturing overhead.
Manufacturing
Overhead Cost of Goods Sold
Unadjusted balance $1,400 $39,000
Adjustment −1,400 1,400
Adjusted balance $ 0 $40,400