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J ob Order Costing
19
Student Version
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2
Describe and illustrate
a job order costaccounting system.
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Materials Information and Cost Flows
To Materials Requisitions
a.
2
Exhibit 3
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From Materials Ledger Account
Job Cost Sheets
Materials Requisitions
b.
b.
b.
b.
2
Materials Information andCost Flows(continued)
Exhibit 3
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The journal entry to record the suppliers invoice
related to Receiving Report 196 is as follows:
InvoiceReceiving
ReportNo. 196
750 units ofNo. 8 Maple
Wood
2
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A summary of the materialsrequisitions is used as a basis for the
journal entry recording the materials
used for the month. For the
requisition of direct materials, thefollowing entry is made:
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Factory Labor
When employees report for work,
they may use clock cardsor in-
and-out cards. When employeeswork on an individual job, they
use time tickets.
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On December 26, 2010, S. Andrews
spent eight hours on Job 72 at an
hourly rate of $15 for a cost of $120 (8hrs.$15). A total of 500 hours was
spent by all employees who worked
on Job 72 during December, for a totalcost of $7,500.
A Closer Look at Job 72
2
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December Job72 (500 hours)for a total cost
of $7,500
to Job Cost Sheet
LaborInformation andCost Flows(acloser look)
2
(continued)
Exhibit 4
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The same procedure is followed for Job 71.
fromTime
Sheets
LaborInformation andCost Flows(continued)
2
Exhibit 4
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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:
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Factory Overhead CostFactory overheadincludes all manufacturingcosts 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 power4. Factory depreciation
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The factory overhead of $4,600 incurred in December
for Legend Guitars would be recorded as follows:
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To provide current job costs, factory overhead
may be allocated or applied to production using
apredetermined factory overhead rate.
Predetermined Factory Overhead Rate
Predetermined Factory
Overhead Rate
Estimated TotalFactory Overhead Costs
Estimated Activity Base
=
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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 inSlide 16.
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Two jobs that were worked on inDecember.When overhead is applied to
both jobs, the entry is for $4,250 ($1,750 +
$2,500).
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Overapplied and Underapplied
Factory Overhead
Underapplied balance
Overapplied balance
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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
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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
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The cost of the guitars sold was $500 per guitar or
a total cost of $20,000 ($50040 guitars).
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During December, Legend Guitars recorded the
following selling and administrative expenses:
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Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000
Materials Factory Overhead Work in Process
a. Materials purchasedduring December
Materials Ledger
No. 8 WoodMaple
Glue
Sandpaper
Dec. 1 6,000
Dec. 1 200
Dec. 1 300
CreditAccountsPayable for $10,500
(a) 10,500
(a) 10,500
Flow of Manufacturing Costs for Legend Guitars
2
Exhibit 8
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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 71Dec. 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 forLegend Guitars(continued)
Exhibit 8
(continued)
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Materials Factory Overhead Work in Process
c. Factory labor used inproductions 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 WagesPayable, $11,000
Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000(b) 13,000
2
Flow of Manufacturing Costs forLegend Guitars(continued)
Exhibit 8
(continued)
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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 71Dec. 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 forLegend Guitars(continued)
Exhibit 8
(continued)
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Materials Factory Overhead Work in Process
d. Factory overheadincurred 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) 500Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000(b) 13,000
(d) 200
(d) 300
Indirect materialsused, $500
2
Flow of Manufacturing Costs forLegend Guitars(continued)
Exhibit 8
(continued)
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Materials Factory Overhead Work in Process
d. Factory overheadincurred 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) 900Dec. 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 forLegend Guitars(continued)
Exhibit 8
(continued)
credit Utilities Payable, $900
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Materials Factory Overhead Work in Process
d. Factory overheadincurred 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) 900Dec. 1 6,500 Dec. 1 200 Dec. 1 3,000(b) 13,000
(d) 200
(d) 300
(d) 1,200
Depreciation on factorymachinery, $1,200
2
Flow of Manufacturing Costs forLegend Guitars(continued)
Exhibit 8
(continued)
credit AccumulatedDeprecation, $1,200
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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) 900Dec. 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 overheadincurred in production
2
Flow of Manufacturing Costs forLegend Guitars(continued)
Exhibit 8
(continued)
credit WagesPayable, $2,000
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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) 900Dec. 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 71Dec. 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 forLegend Guitars(continued)
Exhibit 8
(continued)
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f. Closed underapplied factoryoverhead 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) 900Dec. 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 ofGoods Sold, $150
2
Flow of Manufacturing Costs forLegend Guitars(continued)
Exhibit 8
(continued)
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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) 900Dec. 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 71Dec. 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 forLegend Guitars(continued)
Exhibit 8
(continued)
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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) 900Dec. 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 forLegend Guitars(continued)
Exhibit 8
(continued)
2
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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 JazzSeries guitars onaccount
Accounts Receivable XXXSales XXX
2
Flow of Manufacturing Costs forLegend Guitars(continued)
Exhibit 8
(continued)
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