CHAPTER 3

JOB-ORDER COSTING: COST

FLOWS AND EXTERNAL
REPORTING
LEARNING OBJECTIVES
After studying Chapter 3, you should be able to:

LO3–1 Understand the flow of costs in a job-order costing system and prepare appropriate journal
entries to record costs.

LO3–2 Use T-accounts to show the flow of costs in a job-order costing system.

LO3–3 Prepare schedules of cost of goods manufactured and cost of goods sold and an income
statement.

LO3–4 Compute underapplied or overapplied overhead cost and prepare the journal entry to close
the balance in Manufacturing Overhead to the appropriate accounts.

LO3–5 (Appendix 3A) Use Microsoft Excel to summarize the flow of costs in a job-order costing
system.
JOB-ORDER COSTING—THE FLOW OF COSTS
JOB-ORDER COSTING—THE FLOW OF COSTS
THE PURCHASE AND ISSUE OF MATERIALS
THE PURCHASE AND ISSUE OF MATERIALS
LABOR COST
LABOR COST
MANUFACTURING OVERHEAD COSTS
MANUFACTURING OVERHEAD COSTS
MANUFACTURING OVERHEAD COSTS
APPLYING MANUFACTURING OVERHEAD
APPLYING MANUFACTURING OVERHEAD
NONMANUFACTURING COSTS
NONMANUFACTURING COSTS
COST OF GOODS MANUFACTURED
COST OF GOODS SOLD
T-ACCOUNTS TO SHOW THE FLOW OF COSTS IN A JOB-ORDER COSTING SYSTEM
T-ACCOUNTS TO SHOW THE FLOW OF COSTS IN A JOB-ORDER COSTING SYSTEM
T-ACCOUNTS TO SHOW THE FLOW OF COSTS IN A JOB-ORDER COSTING SYSTEM
T-ACCOUNTS TO SHOW THE FLOW OF COSTS IN A JOB-ORDER COSTING SYSTEM
T-ACCOUNTS TO SHOW THE FLOW OF COSTS IN A JOB-ORDER COSTING SYSTEM

(1) Raw materials purchased.

Raw Materials Accounts Payable

(1) 60,000 (1) 60,000

T-ACCOUNTS TO SHOW THE FLOW OF COSTS IN A JOB-ORDER COSTING SYSTEM

(2) Direct and indirect materials issued to production.

Raw Materials Work in Process

(2) 52,000 (2) 50,000

Manufacturing Overhead

(2) 2,000
T-ACCOUNTS TO SHOW THE FLOW OF COSTS IN A JOB-ORDER COSTING SYSTEM

(3) Direct and indirect factory labor cost incurred.

Salaries and Wages Payable Work in Process

(3) 75,000 (3) 60,000

Manufacturing Overhead

(3) 15,000
SCHEDULES OF COST OF GOODS MANUFACTURED AND COST OF GOODS SOLD
SCHEDULE OF COST OF GOODS MANUFACTURED
SCHEDULE OF COST OF GOODS MANUFACTURED
SCHEDULE OF COST OF GOODS SOLD 
SCHEDULE OF COST OF GOODS SOLD 
INCOME STATEMENT
UNDERAPPLIED AND OVERAPPLIED OVERHEAD—A CLOSER LOOK
UNDERAPPLIED AND OVERAPPLIED OVERHEAD—A CLOSER LOOK
DISPOSITION OF UNDERAPPLIED OR OVERAPPLIED OVERHEAD BALANCES
CLOSED TO COST OF GOODS SOLD
CLOSED PROPORTIONALLY TO WORK IN PROCESS, FINISHED GOODS, AND COST OF
GOODS SOLD 
CLOSED PROPORTIONALLY TO WORK IN PROCESS, FINISHED GOODS, AND COST OF
GOODS SOLD 
COMPARING THE TWO METHODS FOR DISPOSING OF UNDERAPPLIED OR OVERAPPLIED OVERHEAD
A GENERAL MODEL OF PRODUCT COST FLOWS