MANAGEMENT ACCOUNTING

AGUS SISWANDI 01153056

PPT 5 -1

Chapter Five

Job-Order Costing

PPT 5 -2

Learning Objectives
 Describe the differences between job-

order costing and process costing, and identify the types of firms that would use each method.
 Describe the cost flows and prepare the

journal entries associated with job-order costing.
PPT 5 -3

Learning Objectives (continued)

 Identify and set up the source documents

used in job-order costing.

PPT 5 -4

Comparison of Job-Order and Process Costing
Job-Order Costing 1. Wide variety of distinct products 2. Cost accumulated by job 3. Unit cost computed by dividing total job costs by units produced on that job Process Costing 1. Homogeneous products 2. Costs accumulated by process or department 3. Unit cost computed by dividing process costs of the period by the units produced in the period

PPT 5 -5

Johnson Leathergoods - Example
Suppose that Stan Johnson forms a new company, Johnson Leathergoods, which specializes in the production of custom leather products. Stan believes that there is a market for one-of-a-kind leather purses, briefcases, and backpacks. In its first month of operation, he obtains two orders: the first is for 20 leather backpacks for a local sporting goods store; the second is for 10 distinctively tooled briefcases for the coaches of a local college. Stan agrees to provide these orders at a price of cost plus 50 percent.

PPT 5 -6

Johnson Leathergoods - Unit Cost

Direct materials Direct labor Overhead Total cost  number of units Unit cost

======

\$1,000 1,080 240 \$2,320  20 \$ 116

PPT 5 -7

Job-Order Costing – Material Purchases
A. Raw materials account is debited for the cost of materials purchased

Raw Materials (A)

Work in Process

PPT 5 -8

Exercise 5-10
A. Materials costing \$3,000 were purchased on account. Raw Materials Accounts Payable 3,000

3,000

PPT 5 -9

Job-Order Costing – Material Requisitions
B. Raw Materials is credited for the cost of materials issued to jobs. Work in Process is debited for the cost of materials issued to jobs.

Raw Materials (A) (B)

Work in Process (B)

PPT 5 -10

Exercise 5-10 (continued)
B. Materials totaling \$1,700 were requisitioned for use in production, \$500 for Job 443 and the remainder for Job 444.

Work in Process Raw Materials

1,700
1,700

PPT 5 -11

Job-Order Costing – Direct Labor Incurred
C. Wages Payable is credited for the cost of direct labor. Work in Process is debited for the cost of direct labor.

Wages Payable (C)

Work in Process (C)

PPT 5 -12

Exercise 5-10 (continued)
C. During the month, direct laborers worked 50 hours on Job 443 and 100 hours on Job 444. Direct laborers are paid at the rate of \$8 per hour. Work in Process Wages Payable 1,200 1,200

PPT 5 -13

Work in Process

PPT 5 -14

Exercise 5-10 (continued)
D. Actual overhead for the month was \$1,230 and was paid in cash. Overhead Control Cash 1,230

1,230

PPT 5 -15

(E)

Work in Process
(E)

PPT 5 -16

Exercise 5-10 (continued)
E. Overhead is applied using a plantwide rate of \$7.50 per direct labor hour. Work in Process Overhead Control 1,125

1,125

PPT 5 -17

Job-Order Costing – Transfer of Completed Goods
F. Credit Work in Process for the COGM. Debit Finished Goods for the COGM.

Work in Process (B) (C) (E)
(F)

Finished Goods
(F)

PPT 5 -18

Exercise 5-10 (continued)
F. Job 443 was completed and transferred to Finished Goods. Finished Goods Work in Process 1,275

1,275

PPT 5 -19

Job-Order Costing – Recognition of Expense
G. Credit Finished Goods for value of units sold. Debit Cost of Goods Sold for value of units sold.

Finished Goods
(G)

Cost of Goods Sold
(G)

PPT 5 -20

Exercise 5-10 (continued)
G. Job 442, which had been completed and transferred to Finished Goods in March, was sold on account for cost (\$2,000) plus 25 percent. Cost of Goods Sold Finished Goods Accounts Receivable Sales Revenue 2,000 2,000 2,500 2,500
PPT 5 -21

General Contractor Example
Direct Materials House #1 House #2 House #3 House #1\$65,000 House #2 House #3 \$ 90,000 100,000 30,000

Direct Labor

70,000 15,000

Overhead is applied at 50 percent of DLC. Houses #1 and #2 are completed during the period House #1 is sold for \$200,000 cash.

PPT 5 -22

General Contractor Example – Solution

Work in Process
(1) (2) (3) 220,000 150,000 (4) 187,500 75,000 (5) 205,000

Finished Goods
(4) 187,500 (5) 205,000 (6) 187,500

52,500

205,000

Cost of Goods Sold
(6) 187,500
187,500
PPT 5 -23

Job Cost Sheets for Example
House #1
(1) 90,000 (2) 65,000 (3) 32,500
187,500

House #2
(1) 100,000 (2) 70,000 (3) 35,000
205,000

House #3
(1) 30,000 (2) 15,000 (3) 7,500 52,500

PPT 5 -24

A Job Order Cost Sheet
Drill Bits Item Description: _________ 100 Quantity Competed: ______ 16-C Job Order Number: _______ 1/25/01 Date Started: _____________ 1/31/01 Date Completed:_________

Direct Materials
Req. No. Amount 24-A \$500 46-B 650

Direct Labor

Ticket # Hours Rate Amt. Hours Rate Amt. 49 40 \$10 \$400 40 \$1.60 \$64 71 30 8 240 30 3.00 90 \$1,944 Total Costs_________ \$19.44 Unit Cost _________

Cost Summary \$1,150 Direct Materials_______ \$640 Direct Labor _______ \$154 Overhead _______

PPT 5 -25

A Materials Requisition Form
24-A Requisition No._______ Fabrication 1/25/01 Date:______ Department___________ Description Steel Stock Quantity 100 Cost/Unit \$5.00 16-C Job No._____

Total Cost \$500

J. Jones D. Reller Delivered By___________ Received by______________

PPT 5 -26

A Job Time Ticket
49 Ticket No._________

101 Employee No.______
Start Time 10:00 a.m.

F. Flintstone Name____________

1/24/01 Date_________
Amt. Job No. \$60 16-C

Stop Time Total Time Rate 4:00 p.m. 6.0 hours \$10

Approved by __________________________ Department Supervisor
PPT 5 -27

End of Chapter 5

PPT 5 -28