Professional Documents
Culture Documents
8th Edition
Weygandt Kimmel Kieso
Chapter 2
ILLUSTRATION 2.1
Process cost system
4. Fry 5. Bag
ILLUSTRATION 2.2
Job order cost system for Disney
LO 1 Copyright ©2018 John Wiley & Son, Inc. 7
Review Question
Cost accounting involves the measuring, recording, and reporting
of:
a. Product costs.
b. Future costs.
c. Manufacturing processes.
d. Managerial accounting decisions.
8
Cost Accounting Systems
Job Order Cost Flow
Flow of costs parallels physical flow of materials as
they are converted into finished goods
Manufacturing costs are assigned to Work in Process
(WIP) Inventory account
Cost of completed jobs is transferred to Finished Goods
Inventory account
When units are sold, cost is transferred to Cost of
Goods Sold account
LO 1 Copyright ©2018 John Wiley & Son, Inc. 9
Job Order Cost Flow
Basic overview of flow of costs in a manufacturing setting for
production of a fire truck.
ILLUSTRATION 2.3
Flow of costs in job order costing
a. Work in Process.
b. Factory Wages Expense.
c. Factory Labor.
d. Factory Wages Payable.
19
Assigning Manufacturing Costs
Assigning manufacturing costs to work in process
results in the following entries.
1. Debits made to Work in Process Inventory
2. Credits made to
a. Raw Materials Inventory
b. Factory Labor
c. Manufacturing Overhead
Manufacturing Overhead
13,800
6,000
LO 2 Copyright ©2018 John Wiley & Son, Inc. 25
ILLUSTRATION 2.6
Job cost sheets–posting of
direct materials
Post individual
direct
materials
requisition
slips to job
cost sheets
Manufacturing Overhead
13,800
6,000
4,000
32
Predetermined Overhead Rate
Manufacturing Overhead Costs
a. Relates to production operations as a whole
b. Cannot be assigned to specific jobs based on actual
costs incurred
c. Companies assign to work in process and to specific
jobs on an estimated basis through use of a …
Actual
Predetermined Is
Activity
x Overhead assigned
Base to
Rate
Used Job 1 Job 2 Job 3
ILLUSTRATION 2.10
Using predetermined overhead rates
ILLUSTRATION 2.13
Proof of job cost sheets to work in process inventory
46
DO IT! 2 Work in Process
Danielle Company is working on two job orders. The job cost
sheets show the following:
Direct materials—Job 120 $6,000; Job 121 $3,600
Direct labor—Job 120 $4,000; Job 121 $2,000
Manufacturing overhead—Job 120 $5,000; Job 121 $2,500
Prepare the three summary entries to record the assignment
of costs to Work in Process from the data on the job cost
sheets.
54 .
54LO 5 Prepare entries for jobs com54pleted an5d sold
ILLUSTRATION 2.15
Flow of costs in a job
order cost system
ILLUSTRATION 2.18
Under- and overapplied overhead