Chapter 19 PPT

Chapter 19
JOB ORDER COST

ACCOUNTING
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Copyright © 2015 by McGraw-Hill Education (Asia). All rights reserved

19 - 2
C1
COST ACCOUNTING SYSTEMS
Process Job
Costing Costing
Chapter 20
 Used for production of large, unique, or

high-cost items.
 Built to order rather than mass produced.
 Many costs can be directly traced to each job.
19 - 3
C1
JOB ORDER PRODUCTION
Process Job
Costing Costing
Chapter 20
Typical job order cost applications:

 Special-order printing
 Building construction
Also used in service industry
 Hospitals
 Law firms
19 - 4
C1
EVENTS IN JOB ORDER COSTING
Receive order Schedule

from production of
customer. the job.
Predict cost Negotiate a sales price

to complete and decide whether to
job. pursue the job.
19 - 5
C1 JOB ORDER PRODUCTION

ACTIVITIES
Direct
Materials
Indirect
Factory Allocate Goods in Finished

Overhead Process Goods
Indirect
Cost of
Direct
Labor Goods
Sold
19 - 6
C2
JOB ORDER COST DOCUMENTS
The primary
document for
tracking the costs
associated with a
given job is the job
cost sheet.
sheet
Let’s investigate
19 - 7
C2
JOB COST SHEET
Road Warriors Job Cost Sheet
Customer Carroll Connor Job No. B15
Address 1542 High Point Dr. Portland, Oregon
Job Description Level I Alarm System on Ford Expedition
Date promised 3/15/11 Date started 3/3/11 Date completed
Direct Materials Direct Labor Factory Overhead
Date Req. Cost Date Ticket Cost Date Rate Cost
Total Total Total

Remarks Cost Summary
Direct Materials
Direct Labor
Factory Overhead
Total Cost
19 - 8
C2
JOB COST SHEET
A materials requisition
Direct Materials is used
Direct Labor to authorize the
Factory Overhead
Date Req. Cost Date Ticket
use ofCostmaterials
Date Rate
on aCost
job.
Total Total Total
Let’s see one
Direct Materials
Direct Labor
Factory Overhead
Total Cost
19 - 9
P1
MATERIALS REQUISITION
Road Warriors Materials Requisition No. R-4705
Job No. B15 Date 3-7-11

Material Stock No. M-347
Material Description Alarm system wiring
Quantity Requested 1 Requested By C. Luther
Quantity Provided 1 Date Provided 3-7-11

Filled By M. Received By
C. Luther
Remarks Bateman
19 - 10
P1
Cost of material is Proper
charged to Job B15. authorization


C. Luther
Remarks Bateman
19 - 11
P1
Type and quantity of material Pre-printed, sequentially
charged to Job B15. numbered form


C. Luther
Remarks Bateman
19 - 12
P1

The materials
Quantity Provided 1requisition form
Date also serves
Provided as
3-7-11
theBy
Filled M.document forReceived
source recording
By
C.material
Luther
usage in the accounting records.
Remarks Bateman
19 - 13
P1
MATERIALS LEDGER CARD
Road Warriors Materials Ledger Card
Item Alarm sys. wiring Stock No. M-347 Location Bin137

Maximum Qty. 5 units Minimum Qty. 1 unit Reorder Qty. 2 units
Received Issued Balance

Rec. Unit Total Req. Unit Total Unit Total
Date Rep. Units Cost Cost No. Units Cost Cost Units Cost Cost
1 $225 $225
3/4/11 C7117 2 $225 $450 3 $225 $675
3/7/11 R4705 1 $225 $225 2 $225 $450
19 - 14
P1
JOB COST SHEET
3/7/11 R-4705 $ 225
Total Total Total

Direct Materials $ 225
Direct Labor
Factory Overhead
Total Cost
19 - 15
P2
JOB COST SHEET
Accumulate
Job Description Level I Alarm System on Ford Expedition direct labor
Date promised 3/15/11 Date started 3/3/11 costs by
Date completed
Direct Materials Direct Labor means
Factory Overheadofa
3/7/11 R-4705 $ 225
work record,
such as a time
ticket, for each
Total Total Total
employee.
Direct Labor
Factory Overhead
Let’s see one
Total Cost
19 - 16
P2
LABOR TIME TICKET
Road Warriors Time Ticket No. L-3479
Job No. B15 Date 3/8/11

Employee Name T. Zeller Employee Number 3969
TIME AND RATE INFORMATION:
Start Time 9:00 Finish Time 12:00

Elapsed Time 3.0 Hourly Rate $20.00 Total Cost $60.00
Approved By C. Luther
Remarks
19 - 17
P2
JOB COST SHEET
3/7/11 R-4705 $ 225 3/8/11 L-3479 $ 60
Total Total $ 60 Total

Direct Labor 60
Factory Overhead
Total Cost
19 - 18
P3
JOB COST SHEET
3/7/11 R-4705 $ 225 3/8/11 L-3479 $ 60
Total Total $ 60
Allocate manufacturing overhead
Remarks
to jobs using
Cost Summary
a predetermined overhead rate
Direct Labor 60
Factory Overhead Let’s do$ it-
Total Cost $ 285
19 - 19
P3
JOB COST SHEET
3/7/11 R-4705 $ 225 3/8/11 L-3479 $ 60 3/08/11 160% $ 96
Total Total $ 60 Total $ 96

Direct Labor 60
Factory Overhead $ 96
Total Cost $ 381
19 - 20
P3 PREDETERMINED OVERHEAD
RATE
Road Warriors uses a predetermined
overhead rate (POHR) based on direct
labor cost to apply overhead to jobs.
Estimated total manufacturing
overhead cost for the coming period
POHR =
Estimated total direct labor costs
for the coming period
$200,000
POHR = = 160% of direct labor $
$125,000
19 - 21
JOB ORDER COST FLOWS AND

REPORTS
Let’s summarize
the document
flow we have
been discussing
in a job-order
costing system.
19 - 22
Material Cost Flows and Documents

P1
The materials Direct JobCost

Cost
materials Job
requisition Job Cost
Sheets
Job Cost
Sheets
indicates the cost Sheets
Sheets
of direct Materials
Materials
Ledger Cards
materials Materials
Ledger Cards
Materials
Ledger Cards
to charge to Requisition
jobs
and the cost of Factory
indirect materials Overhead
Indirect Account
to charge to materials
overhead.
19 - 23
Labor Cost Flows and Documents

P2
Employee time Direct JobCost

Cost
Labor Job
tickets indicate Job
Job Cost
Sheets
Cost
Sheets
Sheets
the cost of Sheets
direct labor Employee Time
Employee Time
Ticket
Employee
to charge to Employee Time
Ticket
Time
Ticket
jobs Ticket
and the cost
Factory
of indirect labor Overhead
to charge to Indirect Account
overhead. Labor
19 - 24
Summary of Cost Flows
Let’s examine the

cost flows in a job
order system.
We will use
T-accounts and
start with
materials.
19 - 25

P1
Dr Cr Dr Cr
Raw Materials Goods in Process
Material Direct Direct
Purchases Material Material
Indirect
Material
Dr Cr
Factory Overhead
Actual
Overhead
Costs
19 - 26

P2
P3
Dr Cr Dr Cr
Factory Payroll Goods in Process
Incurred Direct Direct
Labor Material
Indirect Direct
Labor Labor
Overhead
Dr Cr
Factory Overhead When
Actual Overhead Actual Applied
Overhead Applied to overhead
/
factory = factory
overhead
Costs Work in an adjustment is needed.
Process We will look at how to
accomplish this later.
19 - 27

P3
Dr Cr Dr Cr
Goods in Process Finished Goods
Direct
Material Cost of Cost of Cost of
Direct Goods Goods Goods
Labor Mfd. Mfd. Sold
Overhead
Dr Cr
Cost of Goods Sold
Cost of
Goods
Sold
19 - 28
P4
OVERHEAD APPLICATION
Tell me again how

we use the POHR to We multiply the POHR
assign overhead times the number of
to jobs. activity units (direct labor
cost for Road Warriors)
incurred for the job.
19 - 29
P4
OVERHEAD APPLICATION
Reasons for using a POHR

(predetermined overhead rate)
Overhead is not Actual overhead rate

incurred uniformly might vary from
during the year. month to month.
Predetermined rate
makes it possible to
estimate job costs sooner.
19 - 30
P4 ADJUSTMENT OF OVERAPPLIED OR
UNDERAPPLIED OVERHEAD
The POHR is based
on estimates. The result will be either
What happens if underapplied or overapplied
actual results differ overhead and we
from the estimates? will adjust Cost of Goods
Sold at the end of the period.
Here, let me show you.
19 - 31
Overhead is
overapplied.
Actual
overhead
costs Overhead
incurred applied to
Work in Process
(POHR × Activity)
19 - 32
Overhead is
underapplied.
Overhead
applied to
Work in Process
Actual
(POHR × Activity)
overhead
costs
incurred
19 - 33
Adjusting Cost of Goods Sold for

underapplied or overapplied overhead
Cost of Goods
Overhead is: Sold is: Adjustment will:
Actual overhead > Increase Cost

Underapplied Too low
applied overhead of Goods Sold
Actual overhead < Decrease Cost

Overapplied Too high
applied overhead of Goods Sold
19 - 34
GLOBAL VIEW
Expensive European sports cars are often built

according to individual customer specifications.
Customers place orders for their dream cars, and then
each car is built to order and shipped to the customer.
19 - 35
A1
PRICING FOR SERVICES
Pricing for services is based on direct labor. Any material
costs are usually incidental and are a part of overhead.
Acme Consulting prepared the following bid for a job

that will require a total of 1,000 hours of direct labor.
Direct Labor:
Consultants (600 hours @ $75) $ 45,000
Research staff (400 hours @ $40) 16,000
Total direct labor costs $ 61,000
Overhead:
Consultant related (600 hours @ $50) 30,000
Research staff related (400 hours @ $30) 12,000
Total overhead cost 42,000
Total bid amount $ 103,000
19 - 36
ENTRIES FOR JOB ORDER

PRODUCTION COSTS
Let’s look at summary

accounting journal
entries for the job order
cost system at Road
Warriors. The dollar
amounts are from Exhibit
19.12 in your textbook.
19 - 37
P1 ENTRIES FOR JOB ORDER

PRODUCTION COSTS
19 - 38

P2
PRODUCTION COSTS
19 - 39

PRODUCTION COSTS
19 - 40

PRODUCTION COSTS
19 - 41

PRODUCTION COSTS
19 - 42
END OF CHAPTER 19

Chapter 19 PPT

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 19 PPT

Uploaded by

Copyright:

Available Formats

Chapter 19

JOB ORDER COST

Copyright © 2015 by McGraw-Hill Education (Asia). All rights reserved

 Used for production of large, unique, or

Typical job order cost applications:

Receive order Schedule

Predict cost Negotiate a sales price

C1 JOB ORDER PRODUCTION

Factory Allocate Goods in Finished

Total Total Total

Road Warriors Materials Requisition No. R-4705

Job No. B15 Date 3-7-11

Quantity Requested 1 Requested By C. Luther

Quantity Provided 1 Date Provided 3-7-11

Job No. B15 Date 3-7-11

Quantity Requested 1 Requested By C. Luther

Quantity Provided 1 Date Provided 3-7-11

Job No. B15 Date 3-7-11

Quantity Requested 1 Requested By C. Luther

Quantity Provided 1 Date Provided 3-7-11

Road Warriors Materials Requisition No. R-4705

Job No. B15 Date 3-7-11

Quantity Requested 1 Requested By C. Luther

Road Warriors Materials Ledger Card

Item Alarm sys. wiring Stock No. M-347 Location Bin137

Received Issued Balance

Total Total Total

Road Warriors Time Ticket No. L-3479

Job No. B15 Date 3/8/11

TIME AND RATE INFORMATION:

Start Time 9:00 Finish Time 12:00

Total Total $ 60 Total

Total Total $ 60 Total $ 96

JOB ORDER COST FLOWS AND

Material Cost Flows and Documents

The materials Direct JobCost

Labor Cost Flows and Documents

Employee time Direct JobCost

Summary of Cost Flows

Let’s examine the

Summary of Cost Flows

Summary of Cost Flows

Summary of Cost Flows

Tell me again how

Reasons for using a POHR

Overhead is not Actual overhead rate

Adjusting Cost of Goods Sold for

Actual overhead > Increase Cost

Actual overhead < Decrease Cost

Expensive European sports cars are often built

Acme Consulting prepared the following bid for a job

ENTRIES FOR JOB ORDER

Let’s look at summary

P1 ENTRIES FOR JOB ORDER

P1 ENTRIES FOR JOB ORDER

P2 ENTRIES FOR JOB ORDER

P3 ENTRIES FOR JOB ORDER

P3 ENTRIES FOR JOB ORDER

You might also like