2-1
CHAPTER 2
JOB ORDER
COSTING
Prepared by
Dan R. Ward
Suzanne P. Ward
University of Louisiana at Lafayette
Chapter
2-2
Study Objectives
Chapter
2-3
Study Objectives
Chapter
2-4
Job Order Costing
Cost
Job Order Reporting Job
Accounting
Cost Flow Cost Data
Systems
Chapter
2-5
Preview of Chapter
Chapter
2-6
Cost Accounting Systems
A key feature:
Each job or batch has its own
distinguishing characteristics
Chapter
2-10 LO 1: Explain the characteristics and purposes of cost accounting.
Job Order Cost System
Chapter
2-11 LO 1: Explain the characteristics and purposes of cost accounting.
Process Cost System
Chapter
2-12 LO 1 Explain the characteristics and purposes of cost accounting.
Process Cost System
Chapter
2-13 LO 1 Explain the characteristics and purposes of cost accounting.
Cost Accounting Systems
Review Question
a. Product costs.
costs
b. Future costs.
c. Manufacturing processes.
d. Managerial accounting decisions.
Chapter
2-14 LO 1 Explain the characteristics and purposes of cost accounting.
Job Order Cost Flows
Chapter
2-15 LO 2 Describe the flow of costs in a job order costing system.
Job Order Cost Flows - Overview
Chapter
2-16 LO 2 Describe the flow of costs in a job order costing system.
Job Order Cost System
Chapter
2-17 LO 2 Describe the flow of costs in a job order costing system.
Job Order Cost Flow
Raw Materials
Factory Labor
Manufacturing Overhead
Chapter
2-18 LO 2 Describe the flow of costs in a job order costing system.
Accumulating Manufacturing Cost
Raw Materials Costs
Raw Materials are debited to Raw Materials Inventory when
purchased.
At this point, the cost of materials are not assigned to
specific jobs or orders.
Example:
On January 4, Wallace Manufacturing Company purchases 2,000 handles at $5 per unit
($10,000) and 800 modules at $40 per unit ($32,000) for a total cost of $42,000.
Chapter
2-19 LO 2 Explain the flow of costs in a job order costing system.
Accumulating Manufacturing Cost
Consists of:
Gross earnings of factory workers
Employer payroll taxes on such earnings, and
Fringe benefits incurred by the employer
Chapter
2-20 LO 2: Explain the flow of costs in a job order costing system.
Accumulating Manufacturing Cost
Example:
Wallace Manufacturing incurs $32,000 of factory labor costs, of which
$27,000 relates to wages payable and $5,000 relates to payroll taxes payable in
January.
Chapter
2-21 LO 2: Explain the flow of costs in a job order costing systems.
Accumulating Manufacturing Cost
Chapter
2-22 LO 2 Explain the flow of costs in a job order costing system.
Accumulating Manufacturing Cost
Example:
The following is a summary entry to record the totals from multiple
transactions that occurred during January for the Wallace Manufacturing
Company.
Chapter
2-23 LO 2 Explain the flow of costs in a job order costing system.
Accumulating Manufacturing Costs
Review Question
a. Work in Process.
Process
b. Factory Wages Expense.
c. Factory Labor.
d. Factory Wages Payable.
Chapter
2-24 LO 2 Explain the flow of costs in a job order costing system.
Assigning Manufacturing Costs to Work In Process
Chapter
2-25 LO 3 Explain the nature and importance of a job cost sheet.
Assigning Manufacturing Costs to Work In Process
Chapter
2-26 LO 3 Explain the nature and importance of a job cost sheet.
Assigning Manufacturing Costs to Work In Process
Chapter
2-27 LO 3 Explain the nature and importance of a job cost sheet.
Assigning Manufacturing Costs to Work In Process
Chapter
2-28 LO 3 Explain the nature and importance of a job cost sheet.
Assigning Manufacturing Costs to Work In Process
Chapter
2-29 LO 3 Explain the nature and importance of a job cost sheet.
Assigning Manufacturing Costs to Work In Process
Example:
Assume that $24,000 of direct materials and $6,000 of indirect materials are used by
Wallace Company in January.
Chapter
2-30 LO 3 Explain the nature and importance of a job cost sheet.
Assigning Manufacturing Costs to Work In Process
Assigning
Raw Materials
Cost
The sum of the
direct materials
columns of the job
cost sheets should
equal the direct
materials debited
to Work in Process
Inventory
Chapter
2-31 LO 3 Explain the nature and importance of a job cost sheet.
Assigning Manufacturing Costs to Work In Process
Chapter
2-32 LO 3 Explain the nature and importance of a job cost sheet.
Assigning Manufacturing Costs to Work In Process
Example:
Assume that total factory labor cost is $32,000 of total factory labor cost which
consists of $28,000 of direct labor cost and $4,000 of indirect labor cost.
Chapter
2-33 LO 3 Explain the nature and importance of a job cost sheet.
Assigning Manufacturing Costs to Work In Process
Time Ticket
Chapter
2-34 LO 3 Explain the nature and importance of a job cost sheet.
Assigning Manufacturing Costs to Work In Process
Job Cost
Sheets
After Posting
The sum of the
direct labor
columns of the
job cost sheets
should equal the
direct labor
debited to Work
in Process
Inventory.
Chapter
2-35 LO 3 Explain the nature and importance of a job cost sheet.
Assigning Manufacturing Costs
to Work in Process
Review Question
Chapter
2-36 LO 3 Explain the nature and importance of a job cost sheet.
Assigning Manufacturing Costs to Work In Process
Chapter
2-37 LO 4 Indicate how the predetermined overhead rate is determined and used.
Assigning Manufacturing Costs to Work In Process
Chapter
2-38 LO 4 Indicate how the predetermined overhead rate is determined and used.
Assigning Manufacturing Costs to Work In Process
Chapter
2-39 LO 4 Indicate how the predetermined overhead rate is determined and used.
Assigning Manufacturing Costs to Work In Process
Chapter
2-40 LO 4 Indicate how the predetermined overhead rate is determined and used.
Assigning Manufacturing Costs to Work In Process
Example:
Wallace Manufacturing uses direct labor cost as the activity base.
Chapter
2-41 LO 4 Indicate how the predetermined overhead rate is determined and used.
Assigning Manufacturing Costs to Work In Process
Assigning
Manufacturing
Overhead
The sum of the
manufacturing
overhead columns
of the job cost
sheets should equal
the manufacturing
overhead debited
(i.e., applied) to
Work in Process
Inventory.
Chapter
2-42 LO 4 Indicate how the predetermined overhead rate is determined and used.
Assigning Manufacturing Costs to Work In Process
Chapter
2-43 LO 4 Indicate how the predetermined overhead rate is determined and used.
Assigning Manufacturing Overhead
to Work in Process
Review Question
The formula for computing the predetermined
manufacturing overhead rate is estimated annual
overhead costs divided by an expected annual
operating activity, expressed as:
Chapter
2-44 LO 4 Indicate how the predetermined overhead rate is determined and used.
Assigning Costs to Finished Goods
When a job
is completed,
the costs
are
summarized
and the job
cost sheet is
completed.
Chapter
2-45 LO 5 Prepare entries for jobs completed and sold.
Assigning Costs to Finished Goods
Chapter
2-46 LO 5 Prepare entries for jobs completed and sold.
Assigning Costs to Cost of Goods Sold
Example:
On January 31 Wallace Manufacturing sells Job No. 101, costing
$39,000, for $50,000.
Chapter
2-47 LO 5 Prepare entries for jobs completed and sold.
Summary of Job Order Cost Flows
Chapter
2-49 LO 5 Prepare entries for jobs completed and sold.
Reporting Job Cost Data
The cost of goods manufactured schedule now shows
manufacturing overhead applied rather than actual overhead
costs
Applied overhead is added to direct materials and direct
labor to determine total manufacturing costs
Chapter
2-50 LO 5 Prepare entries for jobs completed and sold.
Entries to Report Job Cost Data
Review Question
M Company completes Job No. 26 at a cost of
$4,500 and later sells it for $7,000 cash. A
correct entry is:
a. Debit Finished Goods Inventory $7,000 and credit Work
in Process Inventory $7,000.
$7,000
b. Debit Cost of Goods Sold $7,000 and credit Finished
Goods Inventory $7,000.
c. Debit Finished Goods Inventory $4,500 and credit Work
in Process Inventory $4,500.
d. Debit Accounts Receivable $7,000 and credit Sales
$7,000.
Chapter
2-51 LO 5 Prepare entries for jobs completed and sold.
Under-
Under - or Overapplied Manufacturing Overhead
Chapter
2-52 LO 6 Distinguish between under-
under- and overapplied manufacturing overhead.
Under-
Under - or Overapplied Manufacturing Overhead
Example:
Wallace Manufacturing Company has a $2,500 credit balance in Manufacturing
Overhead at December 31. The adjusting entry for the overapplied overhead is:
Chapter
2-53 LO 6 Distinguish between under-
under- and overapplied manufacturing overhead.
Under-
Under - or Overapplied Manufacturing Overhead
Review Question
Manufacturing overhead is underapplied if:
Chapter
2-54 LO 6 Distinguish between under-
under- and overapplied manufacturing overhead .
All About You
Chapter
2-55
All About You
Chapter
2-56
Chapter Review – Brief Exercise 2-
2-6
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Chapter
2-58