5 -1 Job-Order Job-Order Costing Costing CHAPTER CHAPTER
Nov 12, 2014
5 -1
Job-Order Job-Order CostingCosting
CHAPTERCHAPTER
5 -2
1. Describe the differences between job-order costing and process costing, and identify the types of firms that would use each method.
2. Identify and set up the source documents used in job-order costing.
3. Describe the cost flows associated with job-order costing.
4. Appendix: Prepare the journal entries associated with job-order costing.
ObjectivesObjectivesObjectivesObjectives
After studying this After studying this chapter, you should chapter, you should
be able to:be able to:
After studying this After studying this chapter, you should chapter, you should
be able to:be able to:
5 -3
Comparison of Job-Order andProcess Costing
Process or job-order costing?
Process or job-order costing?
5 -4
Characteristics of Job-Order CostingCharacteristics of Job-Order Costing
Wide-variety of services or products that are quite distinct from each other
Cost accumulated by job
Unit cost computed by dividing total job costs by units produced on that job
BEAT
SOUTH
HIGH
5 -5
Characteristics of Process CostingCharacteristics of Process Costing Produce large quantities of
similar or homogeneous products
Cost accumulated by process or department for a given period of time
Unit cost computed by dividing process costs of period by the units produced in the period
5 -6
Process or Process or job-order job-order costing?costing?
Process or Process or job-order job-order costing?costing?
Process
Process
Job order
Job order
Job order
Process
Job order
Exxon oil refinery
Coca Cola plant
Custom home builder
Shop for customizing vans
Television repair shop
Campbell soup plant
Advertising agency
Law firm Job order
5 -7
Job 425 Job 426 Job 427 Total
Beginning balance $58,600 $51,300 $ 0 $109,900
Current costs:
Direct materials 4,800 3,600 23,500 31,900
Direct labor 6,000 9,000 10,000 25,000
Applied overhead 2,400 3,600 4,000 10,000Total $71,800 $67,500 $37,500 $176,800
This information is used to determine the total cost of goods manufactured.
Job-Order CostingJob-Order Costing
5 -8
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
5 -9
Job-Order Cost SheetJob-Order Cost Sheet
A job-cost sheet is a document used to
accumulate the cost for a specific job in a job-
cost system
A job-cost sheet is a document used to
accumulate the cost for a specific job in a job-
cost systemJob Cost Sheet
Direct Materials
Direct Labor
Factory Overhead
July 1 100 lbs. @ $ 0.25 = $ 25
3 75 oz. @ $1.40 = 105
July 1 3 hrs. @ $10.00 = $ 30
3 7 hrs @ $10.00 = 70
July 7 10 dlh x $2 = $ 20
5 -10
Direct materials $1,000
Direct labor 1,080
Applied Overhead 240
Total cost $2,320
number of units 20
Unit cost $ 116
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
Unit Cost
5 -11
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
DateDepartmentJob
Authorized Signature
Description Quantity Cost/Unit Total Cost
Jim Lawson
Buckles 10 $30 $300
Material Requisition FormMaterial Requisition Form
Material Requisition Number 12January 11, 2004
Briefcase
Assembly
5 -12
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
Authorized Signature
Start Time Stop Time Total Time Hourly Rate Amount Job Number
Jim Lawson
Job Time TicketJob Time Ticket
Job Time Ticket
Number 8Employee Number
Name
Date
8:00 10:00 2 $9 $18 Backpacks10:00 11:00 1 9 9 Briefcases11:00 12:00 1 9 9 Backpacks1:00 5:00 4 9 36 Backpacks
4
Ed Wilson
January 12, 2003
Department Supervisor
5 -13
Through the Accounts
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
5 -14
Materials AccountBeginning balance $0Purchases 2,500Direct material used 1,500Ending balance 1,000
Job Order Cost Sheet Job Order Cost Sheet Job: 20 Backpacks Job: 10 BriefcasesDirect materials 1,000 Direct materials $500Direct labor Direct laborOverhead applied Overhead appliedTotal cost Total costNumber of units 20 Number of units 10 Unit cost Unit cost
Summary of Materials Cost FlowsSummary of Materials Cost Flows
5 -15
Summary of Direct Labor Cost FlowsSummary of Direct Labor Cost Flows
Wages PayableDirect hours 170 x wage rate x $9Total direct labor 1,530$
Job Order Cost Sheet Job Order Cost Sheet Job: 20 Backpacks Job: 10 BriefcasesDirect materials 1,000$ Direct materials 500$ Direct labor 1,080 Direct labor 450 Overhead applied Overhead appliedTotal cost Total costNumber of units 20 Number of units 10 Unit cost Unit cost
5 -16
Accounting for Overhead
Actual overhead costs are never assigned directly to jobs.
Overhead is applied using a predetermined overhead rate.
Actual overhead costs are never assigned directly to jobs.
Overhead is applied using a predetermined overhead rate.
Estimated OverheadOverhead rate =
Estimated Direct Labor Hours
$9,600
4,800
= $2 per direct labor hour
Functional Approach
5 -17
Accounting for Overhead—Using ABC
Estimated Overhead ($) for Each Driver
Expected Demand for Each Driver
Purchasing $3,000 Purchase orders 100
Machining 4,200 Machine hours 2,800
Other 2,400 Direct labor hours 4,800
$3,000 ÷ 100 = $30 per purchase order $4,200 ÷ 2,800 = $1.50 per machine hour
$2,400 ÷ 4,800 = $0.50 per direct labor hour
5 -18
Accounting for Overhead—Using ABC
Backpacks:
Briefcases:
Purchase orders 3
Machine hours 60
Direct labor hours 120
Purchase orders 1
Machine hours 30
Direct labor hours 50
5 -19
Accounting for Overhead—Using ABC
Purchasing:3 orders x $30 $ 901 order x $30
$30Machining:
60 hours x $1.50 9030 hours x $1.50
45Other:
120 DLH x $0.50 6050 DLH x $0.50
25
Total overhead applied $240 $100
5 -20
Summary of Overhead Cost FlowsSummary of Overhead Cost Flows
Actual OverheadLease $200Utilities 50Equipment depreciation 100Indirect labor 65Total actual overhead $415
Job Order Cost SheetJob: 20 Backpacks
Job Order Cost SheetJob: 10 Briefcases
Direct materials $1,000 Direct materials $500Direct labor 1,080 Direct labor 450Overhead applied 240 Overhead applied 100Total cost Total costNumber of units Number of unitsUnit cost Unit cost
Applied OverheadDirect labor hours 170Overhead rate x $2Total applied overhead $340
120 x $2 50 x $2
5 -21
Summary of Overhead Cost FlowsSummary of Overhead Cost Flows
Actual Overhead Applied OverheadLease $200 Direct labor hours $170Utilities 50 Overhead rate x $2Equipment depreciation 100 Total applied overhead $340Indirect labor 65Total actual overhead $415
Job Order Cost Sheet Job Order Cost Sheet Job: 20 Backpacks Job: 10 BriefcasesDirect materials $1,000 Direct materials $500Direct labor 1,080 Direct labor 450Overhead applied 240 Overhead applied 100Total cost Total costNumber of units 20 Number of units 10Unit cost Unit cost
5 -22
Summary of Finished Goods Cost FlowsSummary of Finished Goods Cost Flows
Job Order Cost Sheet Job Order Cost Sheet Job: 20 Backpacks Job: 10 BriefcasesDirect materials $1,000 Direct materials $500Direct labor 1080 Direct labor 450Overhead applied 240 Overhead applied 100Total cost $2,320 Total cost $1,050Number of units 20 Number of unitsUnit cost $116 Unit cost
Finished Goods AccountBackpacks $2,320
5 -23 Johnson LeathergoodsJohnson Leathergoods
Schedule of Cost of Goods ManufacturedSchedule of Cost of Goods ManufacturedFor the Month Ended January 31, 2004For the Month Ended January 31, 2004
Direct materials:Beginning raw materials inventory $ 0Purchases of raw materials 2,500Total raw materials available for use $2,500Ending raw materials 1,000Total raw materials used $1,500
Direct labor 1,530Overhead:
Lease $ 200Utilities 50Depreciation 100Indirect labor 65
$ 415ContinuedContinuedContinuedContinued
5 -24
$ 415Less: Underapplied overhead 75Overhead applied 340
Current manufacturing costs $3,370Add: Beginning work in process 0Total manufacturing cost $3,370Less: Ending work in process 1,050Cost of goods manufactured $2,320
5 -25
Statement of Cost of Goods SoldStatement of Cost of Goods SoldBeginning finished goods inventory $ 0
Cost of goods manufactured 2,320
Cost of goods available for sale $2,320
Less: Ending finished goods inventory 0
Normal cost of goods sold $2,320
Add: Underapplied overhead 75
Adjusted cost of goods sold $2,395
5 -26
Johnson LeathergoodsIncome Statement
For the Month Ended January 31, 2004Sales $3,480Cost of goods sold 2,395Gross margin $1,085Less selling and administrative expenses:
Selling expenses $200Administrative expenses 550 750
Net operating income $ 335
5 -27
Journal Entries Associated With Job-
Order Costing
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
5 -28
1. Materials costing $2,500 were purchased on account.
The receiving report and the invoice are used to record the receipt of the
merchandise and to control the payment.
1 Materials 2 500 00
Accounts Payable 2 500 00
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
5 -29
2. Materials costing $1,500 were requisitioned for use in production.
The receiving report and the invoice are used to record the receipt of the
merchandise and to control the payment.
2 Work in Process 1 500 00
Materials 1 500 00
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
5 -30
3. Direct labor costing $1,530 was recognized.
The receiving report and the invoice are used to record the receipt of the
merchandise and to control the payment.
3 Work in Process 1 530 00
Wages Payable 1 530 00
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
5 -31
4. Overhead was applied to production at the rate of $2 per direct labor hour. A total of 170 direct labor hours were worked.
The receiving report and the invoice are used to record the receipt of the
merchandise and to control the payment.
4 Work in Process 340 00
Overhead Control 340 00
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
5 -32
5. Actual overhead costs of $415 were incurred: lease, $200; utilities, $50; depreciation, $100; accrued wages, $65.
The receiving report and the invoice are used to record the receipt of the
merchandise and to control the payment.
5 Overhead Control 415 00
Lease Payable200 00
Utilities Payable50 00
Accumulated Depreciation100 00
Wages Payable65 00
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
5 -33
6. The backpacks were completed and transferred to finished goods.
The receiving report and the invoice are used to record the receipt of the
merchandise and to control the payment.
6 Finished Goods 2 320 00
Work in Process 2 320 00
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
5 -34
7. The backpacks were sold at cost plus 50 percent.
The receiving report and the invoice are used to record the receipt of the
merchandise and to control the payment.
7 Cost of Goods Sold 2 320 00
Finished Goods 2 320 00
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
7 Accounts Receivable 3 480 00
Sales Revenue 3 480 00
5 -35
8. Underapplied overhead was closed to cost of goods sold.
The receiving report and the invoice are used to record the receipt of the
merchandise and to control the payment.
8 Cost of Goods Sold 75 00
Overhead Control 75 00
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
5 -36
Materials
(1) 2,500
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
(1) Purchased of materials
5 -37
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
(2) Issue of materials
Work in Process
(2) 1,500 (2) 1,500
Materials
(1) 2,500
5 -38
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
(3) Incurrence of direct labor cost
Work in Process
(2) 1,500(3) 1,530
Wages Payable
(3) 1,530
5 -39
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
(4) Estimated overhead applied to Work in Process
Work in Process
(2) 1,500(3) 1,530(4) 340
Overhead Control
(4) 340
5 -40
(5) Actual overhead recorded
Work in Process
(2) 1,500(3) 1,530(4) 340
Overhead Control
(4) 340(5) 415
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
5 -41
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
(6) Transfer of Job 1 to finished goods
Work in Process Finished Goods
(6) 2,320 (6) 2,320(2) 1,500(3) 1,530(4) 340
5 -42
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
(7) Cost of goods sold for Job 1 and revenue from sale on account
Finished Goods
(6) 2,320
Cost of Goods Sold
Accounts Receivable
(7) 3,480
Sales Revenue
(7) 3,480
(7) 2,320 (6) 2,320
5 -43
Johnson LeathergoodsJohnson LeathergoodsJohnson LeathergoodsJohnson Leathergoods
(8) Underapplied overhead closed
Overhead Control
(4) 340(5) 415(8) 75
Cost of Goods Sold
(7) 2,320(8) 75
5 -44
The EndThe EndThe EndThe End
Chapter FiveChapter Five
5 -45