11-1 19-1

J ob Order Costing
19
Student Version
11-2 19-2 19-2
2
Describe and illustrate
a job order cost
accounting system.
11-3 19-3
Materials Information and Cost Flows
To Materials Requisitions
a.
2
Exhibit 3
11-4 19-4
From Materials Ledger Account
Job Cost Sheets
Materials Requisitions
b.
b.
b.
b.
2
Materials Information and
Cost Flows (continued)
Exhibit 3
11-5 19-5
The journal entry to record the suppliers invoice
related to Receiving Report 196 is as follows:
Invoice
Receiving
Report
No. 196
750 units of
No. 8 Maple
Wood
2
11-6 19-6
A summary of the materials
requisitions is used as a basis for the
journal entry recording the materials
used for the month. For the
requisition of direct materials, the
following entry is made:
2
11-7 19-7
Factory Labor
When employees report for work,
they may use clock cards or in-
and-out cards. When employees
work on an individual job, they
use time tickets.
2
11-8 19-8
On December 26, 2010, S. Andrews
spent eight hours on Job 72 at an
hourly rate of $15 for a cost of $120 (8
hrs. $15). A total of 500 hours was
spent by all employees who worked
on Job 72 during December, for a total
cost of $7,500.
A Closer Look at Job 72
2
11-9 19-9
December Job
72 (500 hours)
for a total cost
of $7,500
to Job Cost Sheet
Labor
Information and
Cost Flows (a
closer look)
2
(continued)
Exhibit 4
11-10 19-10
The same procedure is followed for Job 71.
from
Time
Sheets
Labor
Information and
Cost Flows
(continued)
2
Exhibit 4
11-11 19-11
A total of 500 hours was spent by employees on
Job 72 during December for a total cost of $7,500.
A summary of the time tickets is used as the basis
for the following journal entry:
2
11-12 19-12
Factory Overhead Cost
Factory overhead includes all manufacturing
costs except direct materials and direct labor.
Factory overhead costs are derived from a
variety of sources including the following:
1. Indirect materials
2. Indirect labor
3. Factory power
4. Factory depreciation
2
11-13 19-13
The factory overhead of $4,600 incurred in December
for Legend Guitars would be recorded as follows:
2
11-14 19-14
To provide current job costs, factory overhead
may be allocated or applied to production using
a predetermined factory overhead rate.
Predetermined Factory Overhead Rate
Predetermined Factory
Overhead Rate
Estimated Total
Factory Overhead Costs
Estimated Activity Base
=
2
11-15 19-15
Management estimates factory
overhead costs to be $50,000 and the
activity base to be 10,000 direct labor
hours. The predetermined overhead
rate is calculated in Slide 16.
2
11-16 19-16
Estimated Total Factory Overhead Costs
Estimated Activity Base
Predetermined
Factory Overhead
Rate
=
$50,000
10,000 direct labor hours
Predetermined
Factory Overhead
Rate
=
= $5 per direct labor hour
Predetermined
Factory Overhead
Rate
2
11-17 19-17
Two jobs that were worked on in
December. When overhead is applied to
both jobs, the entry is for $4,250 ($1,750 +
$2,500).
2
11-18 19-18
Overapplied and Underapplied
Factory Overhead
Underapplied balance
Overapplied balance
2
11-19 19-19
The journal entry to eliminate Legend Guitars
underapplied overhead balance of $150 at the
end of the calendar year would be:
Disposal of Factory
Overhead Balance
2
11-20 19-20
Work in Process
During the period, Work in Process is
increased (debited) for the following:
1. Direct material cost
2. Direct labor cost
3. Applied factory overhead cost
2
11-21 19-21
At the end of the accounting period (December 31)
the total costs for Job 71 are determined and the
following entry is made:
2
11-22 19-22
Sales and Cost of Goods Sold
During December, Legend Guitars sold 40
Jazz Series guitars for $850, generating total
sales of $34,000 ($850 40 guitars).
2
11-23 19-23
The cost of the guitars sold was $500 per guitar or
a total cost of $20,000 ($500 40 guitars).
2
11-24 19-24
Selling expenses are incurred in
marketing the product and
delivering the sold product to the
customer.
2
Administrative expenses are incurred
in managing the company, but are not
related to the manufacturing or selling
functions.
11-25 19-25
During December, Legend Guitars recorded the
following selling and administrative expenses:
2
11-26 19-26
Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000
Materials Factory Overhead Work in Process
a. Materials purchased
during December
Materials Ledger
No. 8 WoodMaple
Glue
Sandpaper
Dec. 1 6,000
Dec. 1 200
Dec. 1 300
Credit Accounts
Payable for $10,500
(a) 10,500
(a) 10,500
Flow of Manufacturing Costs for Legend Guitars
2
Exhibit 8
11-27 19-27
Materials Factory Overhead Work in Process
Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000
b. Materials requisitioned to jobs
Materials Ledger
No. 8 WoodMaple
Glue
Sandpaper
Dec. 1 6,000
Dec. 1 200
Dec. 1 300
(a) 10,500
(b) 13,000
(a) 10,500 (b) 13,000
(b) 13,000
20 Units of Jazz Series Guitars, Job 71
Dec. 1 3,000
60 Units of American Series Guitars, Job 72
Job Cost Sheets
(b) Direct materials 2,000
(b) Direct materials 11,000
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
11-28 19-28
Materials Factory Overhead Work in Process
c. Factory labor used in
productions of jobs
Materials Ledger
No. 8 WoodMaple
Glue
Sandpaper
Dec. 1 6,000
Dec. 1 200
Dec. 1 300
(a) 10,500
(b) 13,000
(a) 10,500 (b) 13,000
(c) 11,000
Credit Wages
Payable, $11,000
Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000 (b) 13,000
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
11-29 19-29
Materials Factory Overhead Work in Process
Materials Ledger
No. 8 WoodMaple
Glue
Sandpaper
Dec. 1 6,000
Dec. 1 200
Dec. 1 300
(a) 10,500
(b) 13,000
(a) 10,500 (b) 13,000
(c) 11,000
20 Units of Jazz Series Guitars, Job 71
Dec. 1 3,000
(b) Direct materials 2,000
60 Units of American Series Guitars, Job 72
(b) Direct materials 11,000

Job Cost Sheets
Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000 (b) 13,000
(c) Direct labor 3,500
(c) Direct labor 7,500
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
11-30 19-30
Materials Factory Overhead Work in Process
d. Factory overhead
incurred in production
Materials Ledger
No. 8 WoodMaple
Glue
Sandpaper
Dec. 1 6,000
Dec. 1 200
Dec. 1 300
(a) 10,500
(b) 13,000
(a) 10,500 (b) 13,000
(d) 500
(c) 11,000
(d) 500
Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000 (b) 13,000
(d) 200
(d) 300
Indirect materials
used, $500
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
11-31 19-31
Materials Factory Overhead Work in Process
d. Factory overhead
incurred in production
Materials Ledger
No. 8 WoodMaple
Glue
Sandpaper
Dec. 1 6,000
Dec. 1 200
Dec. 1 300
(a) 10,500
(b) 13,000
(a) 10,500 (b) 13,000
(d) 500
(c) 11,000
(d) 500 (d) 900
Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000 (b) 13,000
(d) 200
(d) 300
Utility bill, $900
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
credit Utilities Payable, $900
11-32 19-32
Materials Factory Overhead Work in Process
d. Factory overhead
incurred in production
Materials Ledger
No. 8 WoodMaple
Glue
Sandpaper
Dec. 1 6,000
Dec. 1 200
Dec. 1 300
(a) 10,500
(b) 13,000
(a) 10,500 (b) 13,000
(d) 500
(c) 11,000
(d) 500 (d) 900
Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000 (b) 13,000
(d) 200
(d) 300
(d) 1,200
Depreciation on factory
machinery, $1,200
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
credit Accumulated
Deprecation, $1,200
11-33 19-33
Materials Factory Overhead Work in Process
Materials Ledger
No. 8 WoodMaple
Glue
Sandpaper
Dec. 1 6,000
Dec. 1 200
Dec. 1 300
(a) 10,500
(b) 13,000
(a) 10,500 (b) 13,000
(d) 500
(c) 11,000
(d) 500 (d) 900
Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000 (b) 13,000
(d) 200
(d) 300
(d) 1,200
Indirect labor, $2,000
(d) 2,000
d. Factory overhead
incurred in production
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
credit Wages
Payable, $2,000
11-34 19-34
e. Factory overhead
is applied to jobs
according to the
predetermined
overhead rate
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
11-35 19-35
Materials Factory Overhead Work in Process
Materials Ledger
No. 8 WoodMaple
Glue
Sandpaper
Dec. 1 6,000
Dec. 1 200
Dec. 1 300
(a) 10,500
(b) 13,000
(a) 10,500 (b) 13,000
(d) 500
(c) 11,000
(d) 500 (d) 900
Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000 (b) 13,000
(d) 200
(d) 300
(d) 1,200
(d) 2,000
(e) 4,250
(e) 4,250
20 Units of Jazz Series Guitars, Job 71
Dec. 1 3,000
(b) Direct materials 2,000
(c) Direct labor 3,500
60 Units of American Series Guitars, Job 72
(b) Direct materials 11,000
(c) Direct labor 7,500
Job Cost Sheets
(e) Factory overhead 1,750
(e) Factory overhead 2,500
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
11-36 19-36
f. Closed underapplied factory
overhead to cost of goods sold
Materials Factory Overhead Work in Process
Materials Ledger
No. 8 WoodMaple
Glue
Sandpaper
Dec. 1 6,000
Dec. 1 200
Dec. 1 300
(a) 10,500
(b) 13,000
(a) 10,500 (b) 13,000
(d) 500
(c) 11,000
(d) 500 (d) 900
Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000 (b) 13,000
(d) 200
(d) 300
(d) 1,200
(d) 2,000
(e) 4,250
(e) 4,250
(f) 150
debit Cost of
Goods Sold, $150
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
11-37 19-37
g. Job 71 completed in December
Materials Factory Overhead Work in Process
Materials Ledger
No. 8 WoodMaple
Glue
Sandpaper
Dec. 1 6,000
Dec. 1 200
Dec. 1 300
(a) 10,500
(b) 13,000
(a) 10,500 (b) 13,000
(d) 500
(c) 11,000
(d) 500 (d) 900
Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000 (b) 13,000
(d) 200
(d) 300
(d) 1,200
(d) 2,000
(e) 4,250
(e) 4,250
(f) 150
(g) 10,250
20 Units of Jazz Series Guitars, Job 71
Dec. 1 3,000
(b) Direct materials 2,000
(c) Direct labor 3,500
(d) Factory overhead 1,750
10,250
Job Cost Sheets
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
11-38 19-38
Materials Factory Overhead Work in Process
Materials Ledger
No. 8 WoodMaple
Glue
Sandpaper
Dec. 1 6,000
Dec. 1 200
Dec. 1 300
(a) 10,500
(b) 13,000
(a) 10,500 (b) 13,000
(d) 500
(c) 11,000
(d) 500 (d) 900
Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000 (b) 13,000
(d) 200
(d) 300
(d) 1,200
(d) 2,000
(e) 4,250
(e) 4,250
(f) 150
(g) 10,250
Dec. 1 20,000
(g) 10,250
Finished Goods
Dec. 1 20,000
(g) 10,250
Finished Goods Ledger
Jazz Series Guitars
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
11-39 19-39
Work in Process
(b) 13,000
(c) 11,000
Dec. 1 3,000
(e) 4,250
(g) 10,250
Dec. 1 20,000
(g) 10,250
Finished Goods
Dec. 1 20,000
(g) 10,250
Finished Goods Ledger
Jazz Series Guitars

(f) 150
Cost of Goods Sold
h. Sold 40 units of Jazz
Series guitars on
account
Accounts Receivable XXX
Sales XXX
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
11-40 19-40
Work in Process
(b) 13,000
(c) 11,000
Dec. 1 3,000
(e) 4,250
(g) 10,250
Dec. 1 20,000
(g) 10,250
Finished Goods
Dec. 1 20,000
(g) 10,250
Finished Goods Ledger
Jazz Series Guitars

(i) 20,000
(f) 150
Cost of Goods Sold
i. Cost of 40 units of Jazz
Series guitars sold
(i) 20,000
(i) 20,000
2
Flow of Manufacturing Costs for
Legend Guitars (continued)
Exhibit 8
(continued)
11-41 19-41