Systems Design:

Job-Order Costing

Chapter Three

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Types of Product Costing Systems

Process Job-order
Costing Costing


 AA company
company produces
produces many
many units
units of
of aa single
single
product.
product.

 One
One unit
unit of
of product
product is
is indistinguishable
indistinguishable fromfrom
other
other units
units of
of product.
product.

 The
The identical
identical nature
nature of
of each
each unit
unit of
of product
product enables
enables
assigning
assigning the
the same
same average
average cost
cost per
per unit.
unit.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Types of Product Costing Systems

Process Job-order
Costing Costing


 AA company
company produces
produces many
many units
units of
of aa single
single
product.
product.
Example companies:

 1.One Weyerhaeuser
One unit
unit of (paper
of product
product is manufacturing) from
is indistinguishable
indistinguishable from
other
other2.units
units of
of product.
Reynoldsproduct.
Aluminum (refining aluminum ingots)
 3.The
 Coca-Cola
The identical(mixing
identical nature and
nature of bottling
of each
each unit beverages)
unit of
of product
product enables
enables
assigning
assigning the
the same
same average
average cost
cost per
per unit.
unit.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Types of Product Costing Systems

Process Job-order
Costing Costing


 Many
Many different
different products
products are
are produced
produced each
each period.
period.

 Products
Products are
are manufactured
manufactured to
to order.
order.

 The
The unique
unique nature
nature of
of each
each order
order requires
requires tracing
tracing or
or
allocating
allocating costs
costs to
to each
each job,
job, and
and maintaining
maintaining cost
cost
records
records for
for each
each job.
job.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Types of Product Costing Systems

Process Job-order
Costing Costing


 Many
Many different
different products
products are
are produced
produced each
each period.
period.
Example companies:

 Products
Products are
are manufactured
manufactured to
to order.
order.
1. Boeing (aircraft manufacturing)

 2.TheThe unique
unique
Bechtel nature
nature ofof each
International each
(largeorder
order requires
requires
scale tracing
tracing or
construction) or
allocating
allocating costs
costs to
to each
each job,
job, and
and maintaining
maintaining cost
cost
3. Walt Disney
records for each job.Studios (movie production)
records for each job.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Comparing Process and Job-Order Costing

Job-Order Process
Number of jobs worked Many
Individual Single Product
Cost accumulated by Job Department
Average cost computed by Job Department

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Quick Check 

Which
Which of of the
the following
following companies
companies would
would
be
be likely
likely to
to use
use job-order
job-order costing
costing rather
rather
than
than process
process costing?
costing?
a.
a. Scott
Scott Paper
Paper Company
Company forfor Kleenex.
Kleenex.
b.
b. Architects.
Architects.
c.
c. Heinz
Heinz for
for ketchup.
ketchup.
d.
d. Caterer
Caterer for
for aa wedding
wedding reception.
reception.
e.
e. Builder
Builder ofof commercial
commercial fishing
fishing vessels.
vessels.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Quick Check 

Which
Which of of the
the following
following companies
companies would
would
be
be likely
likely to
to use
use job-order
job-order costing
costing rather
rather
than
than process
process costing?
costing?
a.
a. Scott
Scott Paper
Paper Company
Company forfor Kleenex.
Kleenex.
b.
b. Architects.
Architects.
c.
c. Heinz
Heinz for
for ketchup.
ketchup.
d.
d. Caterer
Caterer for
for aa wedding
wedding reception.
reception.
e.
e. Builder
Builder ofof commercial
commercial fishing
fishing vessels.
vessels.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Direct Manufacturing Costs

Charge
Charge
Direct
DirectMaterials
Materials
Job direct
direct
JobNo.
No.11
material
material and
and
Direct
DirectLabor
Labor direct
direct labor
labor
Job
JobNo.
No.22
costs
costs toto
each
each job
job as
as
Manufacturing
Manufacturing Job
JobNo.
No.33
Overhead work
work isis
Overhead
performed.
performed.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Direct Manufacturing Costs

Manufacturing
Manufacturing
Overhead,
Overhead,
Direct
DirectMaterials
Materials including
including
Job
JobNo.
No.11
indirect
indirect
Direct
DirectLabor
Labor
materials
materials and and
Job
JobNo.
No.22 indirect
indirect labor
labor,,
are
are allocated
allocated to to
Manufacturing
Manufacturing Job
JobNo.
No.33 jobs
jobs rather
rather than
than
Overhead directly
Overhead directly traced
traced
to
to each
each job.
job.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Job-Order Cost Accounting

PearCo Job Cost Sheet

Job Number A - 143 Date Initiated 3-4-05
Date Completed
Department B3 Units Completed
Item Wooden cargo crate
Direct Materials Direct Labor Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours Rate Amount

Cost Summary Units Shipped

Direct Materials Date Number Balance
Direct Labor
Manufacturing Overhead
Total Cost
Unit Product Cost

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 Materials Requisition Form

Will E. Delite

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 Job-Order Cost Accounting

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 Employee Time Ticket

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 Job-Order Cost Accounting

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 Why Use an Allocation Base?

Manufacturing overhead is applied to jobs that

are in process. An allocation base, such as
direct labor hours, direct labor dollars, or
machine hours, is used to assign
manufacturing overhead to individual jobs.
We use an allocation base because:
1. It is impossible or difficult to trace overhead costs to particular jobs.
2. Manufacturing overhead consists of many different items ranging
from the grease used in machines to production manager’s salary.
3. Many types of manufacturing overhead costs are fixed even though
output fluctuates during the period.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Manufacturing Overhead Application

The predetermined overhead rate (POHR)

used to apply overhead to jobs is
determined before the period begins.

Estimated total manufacturing

overhead cost for the coming period
POHR =
Estimated total units in the
allocation base for the coming period

Ideally,
Ideally, the
the allocation
allocation base
base
is
is aa cost
cost driver
driver that
that causes
causes
overhead.
overhead.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 The Need for a POHR

Using a predetermined rate makes it

possible to estimate total job costs sooner.

Actual overhead for the period is not

known until the end of the period.
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
 Application of Manufacturing Overhead

Based
Based on
on estimates,
estimates, and
and
determined
determined before
before the
the
period
period begins.
begins.

Overhead applied = POHR × Actual activity

Actual
Actual amount
amount ofof the
the allocation
allocation
based
based upon
upon the
the actual
actual level
level of
of
activity.
activity.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Overhead Application Rate

Estimated total manufacturing

overhead cost for the coming period
POHR =
Estimated total units in the
allocation base for the coming period

$640,000
POHR =
160,000 direct labor hours (DLH)

POHR = $4.00 per DLH

For
For each
each direct
direct labor
labor hour
hour worked
worked on on aa
particular
particular job,
job, $4.00
$4.00 ofof factory
factory overhead
overhead
will
will be
be applied
applied toto that
that job.
job.
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
 Job-Order Cost Accounting

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Job-Order Cost Accounting

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Interpreting the Average Unit Cost

The average unit cost should not be interpreted

as the costs that would actually be incurred if an
additional unit were produced.

Fixed overhead would not change if another unit

were produced, so the incremental cost of
another unit may be somewhat less than $118.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Quick Check 

Job
Job WR53
WR53 at at NW
NW Fab,
Fab, Inc.
Inc. required
required $200
$200 of
of
direct
direct materials
materials and
and 10
10 direct
direct labor
labor hours
hours at
at
$15
$15 per
per hour.
hour. Estimated
Estimated total
total overhead
overhead for
for
the
the year
year was
was $760,000
$760,000 and and estimated
estimated direct
direct
labor
labor hours
hours were
were 20,000.
20,000. WhatWhat would
would be
be
recorded
recorded asas the
the cost
cost of
of job
job WR53?
WR53?
a.
a. $200.
$200.
b.
b. $350.
$350.
c.
c. $380.
$380.
d.
d. $730.
$730.
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
 Quick Check 

Job
Job WR53
WR53 at at NW
NW Fab,
Fab, Inc.
Inc. required
required $200
$200 of
of
direct
direct materials
materials and
and 10
10 direct
direct labor
labor hours
hours at
at
$15
$15 per
per hour.
hour. Estimated
Estimated total
total overhead
overhead for
for
the
the year
year was
was $760,000
$760,000 and and estimated
estimated direct
direct
labor
labor hours
hours were
were 20,000.
20,000. WhatWhat would
would be
be
recorded
recorded asas the
the cost
cost of
of job
job WR53?
WR53?
a.
a. $200.
$200.
b.
b. $350.
$350.
c.
c. $380.
$380.
d.
d. $730.
$730.
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
 Job-Order Costing
Document Flow Summary

Let’s summarize
the document flow
in a job-order
costing system.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Job-Order Costing
Document Flow Summary

A
A sales
sales order
order isis the
the AA production
production
basis
basis of
of issuing
issuing aa order
order initiates
initiates
production
production order.
order. work
work on
on aa job.
job.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Job-Order Costing
Document Flow Summary

Materials
Materialsused
used
may
maybebeeither
either Direct Job
JobCost
Cost
direct
director
or materials Sheets
Sheets
indirect.
indirect.

Materials
Materials
Requisition
Requisition

Manufacturing
Manufacturing
Indirect
Overhead
Overhead
materials
Account
Account

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Job-Order Costing
Document Flow Summary

An
Anemployee’s
employee’s
time
timemay
maybe beeither
either Direct Job
JobCost
Cost
direct
direct or
orindirect.
indirect. Labor Sheets
Sheets

Employee
EmployeeTime
Time
Ticket
Ticket

Manufacturing
Manufacturing
Indirect
Overhead
Overhead
Labor
Account
Account

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Job-Order Costing
Document Flow Summary

Employee
Employee Indirect
Time
TimeTicket
Ticket Labor

Other
Other Manufacturing
Manufacturing Applied Job
Job Cost
Cost
Actual
ActualOH
OH Overhead
Overhead Overhead Sheets
Sheets
Charges
Charges Account
Account

Materials
Materials Indirect
Requisition
Requisition Material

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 Job-Order System Cost Flows

Let’s examine the

cost flows in a
job-order costing
system.

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 Job-Order System Cost Flows

Raw Materials Work in Process

Material Direct
 (Job Cost Sheet)
Purchases Materials Direct
Indirect Materials
Materials

Mfg. Overhead
Actual Applied
Indirect

Materials

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 Cost Flows – Material Purchases

Raw material purchases are recorded in an

inventory account.

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 Cost Flows – Material Usage

Direct materials issued to a job increase Work in

Process and decrease Raw Materials. Indirect
materials used are charged to Manufacturing
Overhead and also decrease Raw Materials.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Job-Order System Cost Flows

Salaries and Work in Process

Wages Payable (Job Cost Sheet)
Direct  Direct
Labor
Indirect
Materials
Direct

Labor Labor

Mfg. Overhead
Actual Applied
Indirect

Materials
Indirect

Labor
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
 Cost Flows – Labor

The cost of direct labor incurred increases Work in

Process and the cost of indirect labor increases
Manufacturing Overhead.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Job-Order System Cost Flows

Salaries and Work in Process

Wages Payable (Job Cost Sheet)
Direct  Direct
Labor
Indirect
Materials
Direct

Labor Labor
Mfg. Overhead
Actual Applied
Indirect

Materials
Indirect

Labor
Other

McGraw-Hill/Irwin
Overhead Copyright © 2006, The McGraw-Hill Companies, Inc.
 Cost Flows – Actual Overhead

In addition to indirect materials and indirect labor,

other manufacturing overhead costs are charged to
the Manufacturing Overhead account as they are
incurred.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Job-Order System Cost Flows

Salaries and Work in Process

Wages Payable (Job Cost Sheet)
Direct  Direct
Labor
Indirect
Materials
Direct

Labor Labor
Overhead
Mfg. Overhead
Actual Applied Applied
Indirect
IfIf actual
actual and
and applied
applied
Materials Overhead
Indirect
manufacturing
manufacturing overhead
overhead
Applied to are
are notnot equal,
equal, aa year-end
year-end
Labor Work in adjustment
Other adjustment is is required.
required.
Process
McGraw-Hill/Irwin
Overhead Copyright © 2006, The McGraw-Hill Companies, Inc.
 Cost Flows – Overhead Applied

Work in Process is increased when

Manufacturing Overhead is applied to jobs.

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 Nonmanufacturing Cost Flows

Nonmanufacturing costs are not assigned to

individual jobs, rather they are expensed in the
period incurred.

Examples:
Examples:
1.
1. Salary
Salary expense
expense of of employees
employees
that
that work
work in
in aa marketing,
marketing, selling,
selling,
or
or administrative
administrative capacity.
capacity.
2.
2. Advertising
Advertising expenses
expenses areare expensed
expensed
in
in the
the period
period incurred.
incurred.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Nonmanufacturing Cost Flows

Nonmanufacturing costs (period expenses) are

charged to expense as they are incurred.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Job-Order System Cost Flows

Work in Process Finished Goods

(Job Cost Sheet)
 Direct Cost of

Cost of Goods
Materials
Direct
Goods Mfd.
Mfd.
Labor
Overhead

Applied

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Cost Flows – Cost of Goods Manufactured

As jobs are completed, the Cost of Goods

Manufactured is transferred to Finished Goods
from Work in Process.

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 Job-Order System Cost Flows

Work in Process Finished Goods

(Job Cost Sheet)
 Direct Cost of
  Cost of
Cost of Goods Goods
Materials
Direct
Goods Mfd. Sold
Mfd.
Labor
Overhead

Applied Cost of Goods Sold

Cost of
Goods
Sold

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Cost Flows – Sales

When finished goods are sold, two entries are

required: (1) to record the sale, and (2) to
record COGS and reduce Finished Goods.

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 Defining Under- and Overapplied Overhead

The difference between the overhead cost applied to

Work in Process and the actual overhead costs of a
period is termed either underapplied or overapplied
overhead.

Underapplied overhead Overapplied overhead

exists when the amount of
overhead applied to jobs
during the period using the
predetermined overhead
rate is less than the total
amount of overhead actually
incurred during the period.
McGraw-Hill/Irwin
exists when the amount of
overhead applied to jobs
during the period using the
predetermined overhead
rate is greater than the total
amount of overhead actually
incurred during the period.
Copyright © 2006, The McGraw-Hill Companies, Inc.
 Overhead Application Example

PearCo’s
PearCo’s actual
actual overhead
overhead forfor the
the year
year was
was
$650,000
$650,000 with
with aa total
total of
of 170,000
170,000 direct
direct labor
labor
hours
hours worked
worked on on jobs.
jobs.
How
How much
much total
total overhead
overhead was was applied
applied toto
PearCo’s
PearCo’s jobs
jobs during
during the
the year?
year? Use
Use
PearCo’s
PearCo’s predetermined
predetermined overhead
overhead rate
rate ofof
$4.00
$4.00 per
per direct
direct labor
labor hour.
hour.
Overhead Applied During the Period
Applied Overhead = POHR × Actual Direct Labor Hours
Applied Overhead = $4.00 per DLH × 170,000 DLH = $680,000
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
 Overhead Application Example

PearCo’s
PearCo’s actual
actual overhead
overhead for for the
the year
year was
was
$650,000
$650,000 with
with aa total
total of
of 170,000
170,000 direct
direct labor
labor
hours
hours worked
worked on on jobs.
jobs.
PearCo has overapplied
How
How much
much total
total overhead
overhead was
was applied
applied to
to
overhead for the year
PearCo’s
PearCo’s jobs
jobs during
during the
the year?
year? Use
Use
by $30,000. What will
PearCo’s
PearCo predetermined
PearCo’s predetermined overhead
do? overhead rate
rate ofof
$4.00
$4.00 perper direct
direct labor
labor hour.
hour.
Overhead Applied During the Period
Applied Overhead = POHR × Actual Direct Labor Hours
Applied Overhead = $4.00 per DLH × 170,000 DLH = $680,000
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
 Quick Check 

Tiger,
Tiger, Inc.
Inc. had
had actual
actual manufacturing
manufacturing overhead
overhead
costs
costs of
of $1,210,000
$1,210,000 and
and aa predetermined
predetermined
overhead
overhead rate
rate of
of $4.00
$4.00 per
per machine
machine hour.
hour. Tiger,
Tiger,
Inc.
Inc. worked
worked 290,000
290,000 machine
machine hours
hours during
during the
the
period.
period. Tiger’s
Tiger’s manufacturing
manufacturing overhead
overhead is
is
a.
a. $50,000
$50,000 overapplied.
overapplied.
b.
b. $50,000
$50,000 underapplied.
underapplied.
c.
c. $60,000
$60,000 overapplied.
overapplied.
d.
d. $60,000
$60,000 underapplied.
underapplied.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Quick Check 

Tiger,
Tiger, Inc.
Inc. had
had actual
actual manufacturing
manufacturing overhead
overhead
costs
costs of
of $1,210,000
$1,210,000 and
and aa predetermined
predetermined
overhead
overhead rate
rate of
of $4.00
$4.00 per
per machine
machine hour.
hour. Tiger,
Tiger,
Inc.
Inc. worked
worked 290,000
290,000 machine
machine
Overhead hours
hours during
OverheadApplied
Applied during thethe
period.
period. Tiger’s
Tiger’s manufacturing
$4.00
manufacturing peroverhead
$4.00per hour is
hour××290,000
overhead ishours
290,000 hours
== $1,160,000
$1,160,000
a.
a. $50,000
$50,000 overapplied.
overapplied.
Underapplied
UnderappliedOverhead
Overhead
b. $50,000 $1,210,000
$1,210,000--$1,160,000
b. $50,000 underapplied.
underapplied. == $50,000
$1,160,000
$50,000
c.
c. $60,000
$60,000 overapplied.
overapplied.
d.
d. $60,000
$60,000 underapplied.
underapplied.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Disposition of Under- or Overapplied Overhead

PearCo’s
PearCo’s Method
Method

$30,000 $30,000 may be

may be allocated closed directly to
to these accounts. cost of goods sold.
OR
Work
Work in
in Finished
Finished
Process
Process Goods
Goods

Cost
Cost of
of Cost
Cost of
of
Goods
Goods Sold
Sold Goods
Goods Sold
Sold

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Disposition of Under- or Overapplied Overhead

PearCo’s Cost PearCo’s

of Goods Sold Mfg. Overhead
Unadjusted Actual Overhead
Balance overhead applied
costs to jobs
$30,000
$650,000 $680,000
Adjusted $30,000 $30,000
Balance overapplied

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Allocating Under- or Overapplied
Overhead Between Accounts

Assume the overhead applied in ending Work in

Process Inventory, ending Finished Goods
Inventory, and Cost of Goods Sold is shown below:

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Allocating Under- or Overapplied
Overhead Between Accounts

We would complete the following allocation of

$30,000 overapplied overhead:

Percent of Allocation of
Amount Total $30,000
Work in process $ 68,000 10% $ 3,000
Finished Goods 204,000 30% 9,000
Cost of Goods Sold 408,000 60% 18,000
Total $ 680,000 100% $ 30,000

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Allocating Under- or Overapplied
Overhead Between Accounts
Percent of Allocation of
Amount Total $30,000
Work in process $ 68,000 10% $ 3,000
Finished Goods 204,000 30% 9,000
Cost of Goods Sold 408,000 60% 18,000
Total $ 680,000 100% $ 30,000

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Overapplied and Underapplied Manufacturing
Overhead - Summary

PearCo’s
Method
Alternative 1 Alternative 2
If Manufacturing Close to Cost
Overhead is . . . of Goods Sold Allocation

UNDERAPPLIED INCREASE INCREASE

Cost of Goods Sold Work in Process
(Applied OH is less Finished Goods
than actual OH) Cost of Goods Sold

OVERAPPLIED DECREASE DECREASE

Cost of Goods Sold Work in Process
(Applied OH is greater Finished Goods
than actual OH) Cost of Goods Sold

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Quick Check 

What
What effect
effect will
will the
the overapplied
overapplied overhead
overhead
have
have on
on PearCo’s
PearCo’s net net operating
operating income?
income?
a.
a. Net
Net operating
operating income
income will
will increase.
increase.
b.
b. Net
Net operating
operating income
income will
will be
be unaffected.
unaffected.
c.
c. Net
Net operating
operating income
income will
will decrease.
decrease.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

 Quick Check 

What
What effect
effect will
will the
the overapplied
overapplied overhead
overhead
have
have on
on PearCo’s
PearCo’s net net operating
operating income?
income?
a.
a. Net
Net operating
operating income
income will
will increase.
increase.
b.
b. Net
Net operating
operating income
income will
will be
be unaffected.
unaffected.
c.
c. Net
Net operating
operating income
income will
will decrease.
decrease.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.

Multiple Predetermined Overhead Rates

To this point we have assumed that there is a

single predetermined overhead rate called a
plantwide overhead rate.

Large companies May be more

often use multiple complex but . . .
predetermined
overhead rates. May be more
accurate because it
reflects differences
across departments.
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
 Job-Order Costing in Service Companies

Job-order costing is used in many

difference types of service companies.

McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.