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© 2016 Pearson Education Ltd. 19-3 © 2016 Pearson Education Ltd. 19-4
Job Order Costing Process Costing
Job
order A job order costing A process costing
costing system is an Process
system Unique costing system is an
accounting system
products
that accumulates
system Identical accounting system
costs by job. units that accumulates
Costs costs by process. It
accumulated A job is the Costs is used when
by job production of a accumulated companies
unique product or by process
manufacture
specialized service.
May be one unit or a identical units.
batch of units.
© 2016 Pearson Education Ltd. 19-5 © 2016 Pearson Education Ltd. 19-6
© 2016 Pearson Education Ltd. 19-7 © 2016 Pearson Education Ltd. 19-8
Materials Purchasing Materials
© 2016 Pearson Education Ltd. 19-9 © 2016 Pearson Education Ltd. 19-10
A materials
requisition
is a request
to transfer
materials to
the
production
floor.
© 2016 Pearson Education Ltd. 19-11 © 2016 Pearson Education Ltd. 19-12
Using Materials Using Materials
Transaction 2—Materials Used: In 2018,
Smart Touch Learning used direct materials
costing $355,000 and indirect materials
costing $17,000. The $17,000 of indirect
materials are transferred from Raw Materials
Inventory to Work-in-Process through the
Manufacturing Overhead account.
© 2016 Pearson Education Ltd. 19-13 © 2016 Pearson Education Ltd. 19-14
Labor Labor
Most companies
Transaction 3—Labor Costs Incurred:
use electronic During 2018, Smart Touch Learning incurred
labor/time to total labor costs of $197,000, of which
track labor costs.
$169,000 was direct labor and $28,000 was
If a manual indirect labor.
system is used,
each employee
completes a
labor time
record to track
and assign direct
labor to jobs.
© 2016 Pearson Education Ltd. 19-15 © 2016 Pearson Education Ltd. 19-16
How Do Overhead Costs Flow Through
Learning Objective 3
the Job Order Costing System?
© 2016 Pearson Education Ltd. 19-19 © 2016 Pearson Education Ltd. 19-20
Before the Period—Calculating
During the Period—Allocating
Predetermined Overhead Allocation
Overhead
Rate
• Common manufacturing company cost
drivers are:
– Direct labor hours (for labor-intensive
production environments).
© 2016 Pearson Education Ltd. 19-21 © 2016 Pearson Education Ltd. 19-22
© 2016 Pearson Education Ltd. 19-23 © 2016 Pearson Education Ltd. 19-24
What Happens When Products Are
Learning Objective 4
Completed and Sold?
• After accumulating, assigning, and
allocating the costs of direct materials,
Record the completion and direct labor, and overhead to jobs, a
sales of finished goods company:
– Accounts for the completion of jobs.
– Accounts for the sale of jobs.
– Adjusts Manufacturing Overhead at the end of
the period.
© 2016 Pearson Education Ltd. 19-25 © 2016 Pearson Education Ltd. 19-26
© 2016 Pearson Education Ltd. 19-27 © 2016 Pearson Education Ltd. 19-28
Transferring Costs to Cost of
Learning Objective 5
Goods Sold
Transaction 11—Cost of Jobs Sold: The
cost of all jobs that Smart Touch Learning
sold during 2018 was $584,600.
Adjust for overallocated and
underallocated overhead
© 2016 Pearson Education Ltd. 19-29 © 2016 Pearson Education Ltd. 19-30
© 2016 Pearson Education Ltd. 19-31 © 2016 Pearson Education Ltd. 19-32
How Is the Manufacturing
Summary
Overhead Account Adjusted?
© 2016 Pearson Education Ltd. 19-33 © 2016 Pearson Education Ltd. 19-34
Summary Summary
© 2016 Pearson Education Ltd. 19-35 © 2016 Pearson Education Ltd. 19-36
Summary Summary
© 2016 Pearson Education Ltd. 19-37 © 2016 Pearson Education Ltd. 19-38
Learning Objective 6
Summary