Job Order CostingChapter 15

PowerPoint Editor:Beth Kane, MBA, CPA

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Wild, Shaw, and ChiappettaFinancial & Managerial Accounting6th Edition

Wild, Shaw, and ChiappettaFinancial & Managerial Accounting6th Edition

15-C1: Job Order Costing

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19 - 3

ProcessCosting

JobCosting

Used for production of large, unique, or high-cost items.

Built to order rather than mass produced. Many costs can be directly traced to each job.

Cost Accounting Systems

Chapter 20

C 13

19 - 4

Job Order Production

C 14

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Job Order Production Activities

C 15

15-C2: Job Cost Sheet

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Job Order Cost Documents

The primary document for

tracking the costs associated with a given job is the job cost sheet.

C 27

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Job Cost Sheet

C 28

15-P1: Materials Cost Flows and Documents

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Materials Ledger Card

P 110

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Materials Requisition

P 111

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Materials Requisition

P 112

NEED-TO-KNOWA manufacturing company purchased $1,200 of materials (on account) for use in production. The companyused $200 of direct materials on Job 1 and $350 of direct materials on Job 2. Prepare journal entriesto record the above transactions.

Debit CreditPurchase Raw Materials Inventory 1,200

Accounts Payable 1,200

Use - DM Work in Process Inventory 550Raw Materials Inventory 550

Beg. Inv. XXX Beg. Inv.

Purchases 1,200 Direct Materials 550

Direct Material 550 Direct Labor

Factory OH

Direct Materials 200 Direct Materials 350

Direct Labor Direct Labor

Factory OH Factory OH

Job 1 Job 2

General Journal

Raw Materials Inventory Work in Process Inventory

P 113

15-P2: Labor Cost Flows and Documents

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Labor Cost Flows

P 215

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Labor Time Ticket

P 216

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Labor Time Ticket

P 2

Direct labor—traceable to specific jobs

Job B15 . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000

Job B16 . . . . . . . . . . . . . . . . . . . . . . . . . 800

Job B17 . . . . . . . . . . . . . . . . . . . . . . . . . 1,100

Job B18 . . . . . . . . . . . . . . . . . . . . . . . . . 700

Job B19 . . . . . . . . . . . . . . . . . . . . . . . . . 600

Total direct labor . . . . . . . . . . . . . . . $4,200

Indirect labor . . . . . . . . . . . . . . . . . . . . . . 1,100

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,300

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NEED-TO-KNOW

A manufacturing company used $5,400 of direct labor in production activities in May. Of this amount,$3,100 of direct labor was used on Job A1 and $2,300 of direct labor was used on Job A2. Prepare thejournal entry to record direct labor used.

Debit CreditWork in Process Inventory 5,400

Factory Wages Payable 5,400

Beginning Inv.

Direct Materials 5,400

Direct Labor 5,400

Factory OH

Direct Materials Direct Materials

Direct Labor 3,100 Direct Labor 2,300

Factory OH Factory OH

Job A1 Job A2

General Journal

Factory Wages PayableWork in Process Inventory

P 218

15-P3: Overhead Cost Flows and Documents

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Overhead Cost Flows and Predetermined Overhead Rate

P 320

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Road Warriors uses a predetermined overhead rate (POHR) based on direct labor cost to apply overhead to jobs.

Predetermined Overhead Rate

P 321

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Predetermined Overhead Rate

P 322

NEED-TO-KNOWA manufacturing company estimates it will incur $240,000 of overhead costs in the next year. The companyallocates overhead using machine hours, and estimates it will use 1,600 machine hours in the next year.During the month of June, the company used 80 machine hours on Job 1 and 70 machine hours on Job 2.1. Compute the predetermined overhead rate to be used to apply overhead during the year.

2. Determine how much overhead should be applied to Job 1 and to Job 2 for June.

3. Prepare the journal entry to record overhead applied for June.

= $150 per machine hour

Machine Hours Used

Job 1Job 2Total

Debit CreditWork in Process Inventory 22,500

Factory Overhead 22,500

150 hours x $150 per hour

General Journal

x Predetermined OH rate = OH Applied

80 hours70 hours

x $150 per hourx $150 per hour

= $12,000 OH applied= $10,500 OH applied= $22,500 OH applied

$240,0001,600 machine hours

Predetermined Overhead Rate = Estimated Overhead CostsEstimated Activity Base

P 323

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RECORDING ACTUAL OVERHEAD

Indirect MaterialIndirect LaborOther

P 324

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RECORDING INDIRECT MATERIALS USED

P 325

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RECORDING INDIRECT LABOR USED

P 326

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RECORDING OTHER OVERHEAD COSTS

P 327

NEED-TO-KNOWA manufacturing company used $400 of indirect materials and $2,000 of indirect labor during the month.The company also incurred $1,200 of depreciation on factory equipment, $500 of depreciation on officeequipment, and $300 of factory utilities. Prepare the journal entry to record actual factory overhead costsincurred during the month.

Debit CreditFactory Overhead 3,900

Raw Materials Inventory 400Factory Wages Payable 2,000Accumulated Depreciation - Factory Equipment 1,200Utilities Payable 300

General Journal

Actual OH Incurred OH Applied to Production

Ind. Materials 400

Ind. Labor 2,000

Fact. Deprec. 1,200

Fact. Utilities 300

3,900

Factory Overhead

P 328

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Summary of Cost Flows

P 329

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Summary of Cost Flows

P 330

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Summary of Cost Flows

P 331

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Schedule of Cost of Goods Manufactured

P 332

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Adjusting Factory Overhead

P 333

15-P4: Underapplied or Overapplied Overhead

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Underapplied or Overapplied Overhead

P 435

NEED-TO-KNOW

A manufacturing company applied $300,000 of overhead to its jobs during the year. For the independentscenarios below, prepare the journal entry to adjust over- or underapplied overhead. Assume the adjustmentamounts are not material.

1. Actual overhead costs incurred during the year equal $305,000.

305,000 300,000

Underapplied OH 5,000

Debit CreditCost of Goods Sold 5,000

Factory Overhead 5,000

Factory Overhead

Actual OH Incurred OH Applied to Production

General Journal

P 436

NEED-TO-KNOW

A manufacturing company applied $300,000 of overhead to its jobs during the year. For the independentscenarios below, prepare the journal entry to adjust over- or underapplied overhead. Assume the adjustmentamounts are not material.

2. Actual overhead costs incurred during the year equal $298,500.

298,500 300,000

Overapplied 1,500

Debit CreditFactory Overhead 1,500

Cost of Goods Sold 1,500

Factory Overhead

Actual OH Incurred OH Applied to Production

General Journal

P 437

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Global View

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Porsche AG manufactures high-performance cars. Each car is built according to individual customer specifications. Customers can use the Internet to place orders for their dream cars. Porsche employs just-in-time inventory techniques to ensure a flexible production process that can respond rapidly to customer orders. For a recent year, Porsche reported €33,781 million in costs of materials and €9,038 million in personnel costs, which helped generate €57,081 million in revenue.

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End of Chapter 15

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