Chap06 Job Order Costing
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Transcript of Chap06 Job Order Costing
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Job Order Costing
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Learning Objective 1
Distinguish between job
costing and process costing.
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Job-Costing and
Process-Costing SystemsJob-costing
system
Process-costing
system
Distinct unitsof a product
or service
Masses of identicalor similar units of
a product or service
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The Job Cost SheetRoseCo Job Cost SheetJob Number A - 143 Date Initiated 3-4-X9
Date Completed
Department B3 Units Completed
Item Wooden cargo crate
Direct Materials Direct Labor Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours Rate Amount
X7-6890 116$
Cost Summary Units ShippedDirect Materials 116$ Date Number Balance
Direct Labor
Manufacturing Overhead
Total Cost
Unit Cost
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The Job Cost SheetRoseCo Job Cost SheetJob Number A - 143 Date Initiated 3-4-X9
Date Completed
Department B3 Units Completed
Item Wooden cargo crate
Direct Materials Direct Labor Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours Rate Amount
X7-6890 116$ 36 8 88$
Cost Summary Units ShippedDirect Materials 116$ Date Number Balance
Direct Labor 88$
Manufacturing Overhead
Total Cost
Unit Cost
Accumulate
direct labor
costs bymeans of a
work record,
such as a time
ticket, for eachemployee.
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The Job Cost SheetRoseCo Job Cost SheetJob Number A - 143 Date Initiated 3-4-X9
Date Completed 3-5-X9
Department B3 Units Completed 2
Item Wooden cargo crate
Direct Materials Direct Labor Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours Rate Amount
X7-6890 116$ 36 8 88$ 8 4$ 32$
Cost Summary Units ShippedDirect Materials 116$ Date Number Balance
Direct Labor 88$
Manufacturing Overhead 32$
Total Cost 236$
Unit Cost 118$
Apply manufacturing overhead to jobs using a
predetermined overhead rate (POHR) based on direct
labor hours (DLH).
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Learning Objective 2
Outline a seven-step
approach to job costing.
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Seven-Step Approach
to Job CostingStep 1:
Identify the chosen cost object.
Step 2:Identify the direct costs of the job.
Step 3:
Select the cost-allocation bases.
Step 4:
Identify the indirect costs.
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Seven-Step Approach
to Job Costing
Step 5:
Compute the rate per unit.Step 6:
Compute the indirect costs.
Step 7:Compute the total cost of the job.
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General Approach to Job Costing
A manufacturing company is planning to sell
a batch of 25 special machines (Job 650) to a
retailer for $114,800.
Step 1:
The cost object is Job 650.
Step 2:Direct costs are: Direct materials = $50,000
Direct manufacturing labor = $19,000
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General Approach to Job Costing
Step 3:
The cost allocation base is machine-hours.Job 650 used 500 machine-hours.
2,480 machine-hours were used by all jobs.
Step 4:Manufacturing overhead costs were $65,100.
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General Approach to Job Costing
Step 5:
Actual indirect cost rate is$65,100 2,480 = $26.25 per machine-hour.
Step 6:
$26.25 per machine-hour 500 hours = $13,125
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General Approach to Job Costing
Step 7:
Direct materials $50,000Direct labor 19,000
Factory overhead 13,125
Total $82,125
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General Approach to Job Costing
What is the gross margin of this job?
Revenues $114,800Cost of goods sold 82,125
Gross margin $ 32,675
What is thegross margin percentage?
$32,675 $114,800 = 28.5%
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Source Documents
Job cost record
Materials requisition record
Labor time record
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Learning Objective 3
Track the flow of costs
in a job-costing system.
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Transactions
Purchase of materials and other manufacturing inputs
Conversion into work in process inventory
Conversion into finished goods inventory
Sale of finished goods
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Transactions
$80,000 worth of materials (direct and
indirect) were purchased on credit.
Materials
Control
1. 80,000 1. 80,000
Accounts Payable
Control
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Transactions
Materials costing $75,000 were sent to the
manufacturing plant floor.$50,000 were issued to Job No. 650 and
$10,000 to Job 651.
$15,000 of indirect materials were issued.
What is the journal entry?
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Transactions
Work in Process Control:
Job No. 650 50,000Job No. 651 10,000
Factory Overhead Control 15,000
Materials Control 75,000
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Transactions
Materials
Control1. 80,000 2. 75,000
Work in Process
Control2. 60,000
ManufacturingOverheadControl
2. 15,000Job 650
2. 50,000
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Transactions
Total manufacturing payroll for
the period was $27,000.
Job No. 650 incurred direct labor costs
of $19,000 and Job No. 651 incurred
direct labor costs of $3,000.
$5,000 of indirect labor was also incurred.
What is the journal entry?
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Transactions
Work in Process Control:
Job No. 650 19,000Job No. 651 3,000
Manufacturing Overhead Control 5,000
Wages Payable 27,000
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Transactions
Wages PayableControl
3. 27,000
Work in ProcessControl
2. 60,0003. 22,000
Manufacturing
OverheadControl2. 15,0003. 5,000
Job 6502. 50,0003. 19,000
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Transactions
Wages payable were paid.
Wages Payable
Control
4. 27,000 4. 27,000
Cash
Control
Wages Payable Control 27,000Cash Control 27,000
3. 27,000
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Transactions
Assume that depreciation for the
period is $26,000.Other manufacturing overhead
incurred amounted to $19,100.
What is the journal entry?
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Transactions
Manufacturing Overhead Control 45,100
Accumulated DepreciationControl 26,000
Various Accounts 19,100
What is the balance of the ManufacturingOverhead Control account?
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Transactions
$62,000 of overhead was allocated to the
various jobs of which $12,500 went to Job 650.Work in Process Control 62,000
Manufacturing Overhead Control 62,000
What are the balances of the control accounts?
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Transactions
Manufacturing Overhead
Control
Work in Process
Control2. 15,000
3. 5,000
5. 45,100Bal. 3,100
2. 60,000
3. 22,000
6. 62,000Bal. 144,000
6. 62,000
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Transactions
The cost of Job 650 is:
Job 650
2. 50,000
3. 19,000
6. 12,500Bal. 81,500
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Transactions
Jobs costing $104,000 were completed and
transferred to finished goods, including Job 650.What effect does this have on the control accounts?
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Transactions
Job 650 was sold for $114,800.
What is the journal entry?
Accounts Receivable Control 114,800
Revenues 114,800
Cost of Goods Sold 81,500Finished Goods Control 81,500
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Transactions
What is the balance in the Finished Goods
Control account?$104,000$81,500 = $22,500
Assume that marketing and administrative
salaries were $9,000 and $10,000.
What is the journal entry?
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Transactions
Marketing and Administrative Costs 19,000
Salaries Payable Control 19,000
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Transactions
Direct Materials Used $60,000
Direct Labor and Overhead $84,000
Ending WIP Inventory $40,000
Cost of Goods Manufactured $104,000
=
+
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Transactions
Cost of Goods Manufactured $104,000
Ending Finished Goods Inventory $22,500
Cost of Goods Sold $81,500=
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Learning Objective 5
Account for end-of-period
underallocated or overallocated
indirect costs.
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End-Of-Period Adjustments
Underallocated indirect costsOverallocated indirect costs
Manufacturing
Overhead Control
Bal. 65,100
Manufacturing
Overhead Applied
Bal. 62,000
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End-Of-Period Adjustments
How was the allocated overhead determined?
2,480 machine-hours $25 budgeted rate = $62,000
$65,100$62,000 = $3,100 (underallocated)
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End of Chapter