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Chapter 19 - Job Order Costing
CHAPTER 19
JOB ORDER COSTING
Related Assignment Materials
Student Learning Objectives Questions Quick
Studies*
Exercises* Problems* Beyond the
Numbers
Conceptual objectives:
C1. Describe important features of
job order production.
10, 11, 12,
13
19-1, 19-14 19-1
19-1, 19-2,
19-4, 19-5,
19-6, 19-7,
19-9
C2. Explain job cost sheets and how
they are used in job order cost
accounting.
3, 4 19-3 19-2, 19-3
19-1 19-4, 19-7,
19-8
Analytical objectives:
A1 Apply job order costing in pricing
services.
2, 14 19-13 19-18
Procedural objectives:
P1. Describe and record the flow of
materials costs in job order cost
accounting.
5, 6 19-2, 19-4,
19-12
19-3, 19-6,
19-7, 19-8,
19-13, 19-17,
19-19
19-1, 19-2,
19-3, 19-5
19-8
P2. Describe and record the flow of
labor costs in job order cost
accounting
7 19-2, 19-5,
19-12
19-3, 19-6,
19-7, 19-9,
19-13, 19-17
19-1, 19-2,
19-3, 19-5
19-8
P3. Describe and record the flow of
overhead costs in job order cost
accounting.
1, 2, 8, 11 19-2, 19-6,
19-7, 19-9,
19-11, 19-12
19-3, 19-4,
19-5, 19-6,
19-7, 19-10,
19-13, 19-14,
19-15, 19-16,
19-17
19-1, 19-2,
19-3, 19-4,
19-5
19-3, 19-8
P4. Determine adjustments for
overapplied and underapplied
factory overhead.
9 19-8, 19-10 19-7, 19-11,
19-12, 19-13,
19-14, 19-15
19-1, 19-2,
19-4, 19-5
*See additional information on next page that pertains to these quick studies, exercises and problems.
19-1
Chapter 19 - Job Order Costing
Additional Information on Related Assignment Material
Corresponding problems in set B (in text) and set C (on book’s website), also relate to learning
objectives identified in grid on previous page. The Serial Problem for Success Systems continues in
this chapter. Problem 19-4A can be completed using Excel. Problem 19-1A, 19-2A can be completed
with Sage 50 Software.
Connect reproduces assignments online, in static or algorithmic mode, which allows instructors to
monitor, promote, and assess student learning. It can be used for practice, homework, or exams.
Synopsis of Chapter Revision
Middleton Made Knives—NEW opener and entrepreneurial assignment
New discussion of process operations.
New discussion of differences between job order and process operations.
Moved discussion of job order costing for services.
Revised discussion of time tickets to include the use of technology.
Revised text and added new exhibit on four-step process to record overhead.
Revised discussion of applying overhead.
Revised discussion of recording actual overhead.
Added new discussion and presentation of journal entries for indirect materials and
Added sustainability section—Porsche.
Added several Need-to-Know demo exercises throughout chapter.
Revised and added several end-of-chapter assignments, including two new Quick
Studies and two new Exercises.
19-2
Chapter 19 - Job Order Costing
Chapter Outline Notes
I. Job Order Cost Accounting
A. Cost accounting system
1. Records manufacturing activities using a perpetual inventory
system.
2. Continuously updates records for costs of materials, goods in
process, and finished goods inventories.
3. Provides timely information about inventories, and
manufacturing costs per unit of product.
4. Two basic types of cost accounting systems are job order cost
accounting and process cost accounting.
a.. Job Order Production—producing products or providing
services individually designed to meet the needs of a
1. Cost Flows:
a. Because they are product costs, manufacturing costs flow
through inventory accounts (Raw Materials Inventory,
Work in Process Inventory, Finished Goods Inventory)
19-3
Chapter 19 - Job Order Costing
Chapter Outline Notes
2. Job Cost Sheet—separate record maintained for each job used
to record costs as incurred
a. Classifies costs as direct materials, direct labor, or
overhead.
documents used to account for them are:
1. Materials Cost Flows and Documents
a. Receiving report—Source document used to record the
quantity and cost of items received. Materials purchased
are used as a debit to Raw Materials Inventory and a credit
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Chapter 19 - Job Order Costing
Chapter Outline Notes
2. Labor Cost Flows and Documents
a.
—used by employees to record hours worked. Used to
3. Overhead Cost Flows and Documents
a. Overhead costs can’t be traced to individual jobs. The
accounting for overhead follows a 4 step process shown in
Exhibit 19.11. Managers must first estimate total
overhead for the coming period. We can’t wait until the
i. Requires an estimated of total overhead cost and an
allocation factory such as total direct labor, total labor
hours, or total machine hours.
ii. Predetermined Overhead rate = Estimated overhead
costs divided by estimated activity based
cost, direct labor hours, machine hours.
ii. The entry to record the applied overhead is a debit to
work in process inventory and a credit to factory
overhead.
iii. The overhead is allocated to each job based on the
19-5
Chapter 19 - Job Order Costing
Chapter Outline Notes
d. Step 3: Record Actual Overhead costs
are placed into production. This subsidiary ledger is
controlled by the Factory Overhead account in the
general ledger. Use of indirect materials is recorded as
a debit to Factory overhead and a credit to Raw
Materials Inventory
iv. Other sources include vouchers authorizing payments
for items such as supplies or utilities and adjusting
entries for costs such as depreciation. Debit Factory
Overhead and Credit the other accounts such as Cash,
Accounts Payable, Accumulated Depreciation, etc.
b) The credit side shows the amount applied during
the period that was an estimate based on the
predetermined overhead rate.
c) A debit balance in the FOH account indicated less
was applied than incurred; an underapplied FOH
amount.
d) A credit balance in the FOH account indicates
more was applied than incurred; an overapplied
FOH amount.
ii. Underapplied and Overapplied Overhead
a) Factory Overhead debit balance (underapplied
amount) is credited (closed) and debited (charged)
to Cost of Goods Sold.
b) Factory Overhead credit balance (overapplied
amount) is debited (closed) and credited to Cost of
19-6
Chapter 19 - Job Order Costing
Chapter Outline Notes
4. Summary of Cost Flows—Summary journal entries are used
to record cost flows as follows:
a. Into (debit) Raw Materials Inventory as acquired.
b. From (credit) Raw Materials Inventory to (debit) Work In
i. Any under or over applied factory overhead cost is
accounted for in an adjustment to Cost of Goods Sold and
Factory Overhead
5. Schedule of Cost of Goods Manufactured Statement
a. Similar to statement covered in chapter 18.
1. Determine direct labor costs
2. Determine the overhead based on predetermined rate(s).
3. Combine labor and overhead to obtain cost of job. Note:
service firms do not have material costs or inventory.
19-7
19-8
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Chapter 19 - Job Order Costing
19-11
