Chapter 19 – Job Order Costing
Comparative Analysis — BTN 19-2
1. Actual inventory changes and operating cash flow effects as found on
the cash flow statement (amounts are in $millions)
Apple Current Year
One Year
Prior
Two Years
Prior
Inventory change………………………...Increase Increase Decrease
Operating cash
flow effect from
inventory change………………………...
Decrease of
$973
Decrease of
$15
Increase of
$275
Google Current Year
One Year
Prior
Two Years
Prior
2. A successful JIT system should reduce inventory levels. This reduction
in inventory should increase operating cash flows. In the solution of
part 1, notice that decreases in inventory yield increases in operating
3. This is a one-time occurrence of a release of cash. However, this one-
time adjustment can yield a recurring impact on returns if such freed up
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Chapter 19 – Job Order Costing
Ethics Challenge — BTN 19-3
Instructor note: This problem is designed to illustrate why the accounting professional
must be aware of management’s and employees’ biases when working with and relying
on accounting estimates and data.
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
Suggested content outline
market jobs will show greater profits because more overhead is allocated
to government jobs and less to private jobs.
This type of abuse in overhead allocation is a real problem in practice.
This is why we hear of “$500 hammers” sold to the U.S. Government.
Communicating in Practice — BTN 19-4
Student notes should include but not be limited to the following points:
1. You recommend replacing the general accounting (periodic inventory)
system with a cost accounting (perpetual inventory) system—
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2. This new system would require use of many different documents to
control the acquisition, use, and availability of materials. It also requires
3. The focal point of the new system is the job cost sheet, which is used to
Taking It to the Net — BTN 19-5
Instructor note: There is no single solution to this assignment.
The Website [amsi.com] provides details about what its job costing
software can provide to users. After careful examination, students can
write a report to the CEO, which may include the following points:
Teamwork in Action — BTN 19-6
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Chapter 19 – Job Order Costing
1. A medical clinic can be considered as appropriate for a job order cost
accounting system. This is because each patient is unique in many
2. In light of the differences identified in part 1, the doctors will consider
the individual characteristics of every patient in determining the type
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Chapter 19 – Job Order Costing
Entrepreneurial Decision — BTN 19-7
1. A job cost sheet for a service company would likely not have any costs
2. Examples of direct labor and overhead costs for Middleton Made Knives
include:
and screws.
Hitting the Road — BTN 19-8
1. The framework for the job cost sheet should follow that in the third
exhibit in the chapter. This includes the descriptions for: company
name, date, quantity, etc. In addition, the direct costs should include
2. Results of the comparison of job cost sheets to a builder’s actual job
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Chapter 19 – Job Order Costing
Global Decision — BTN 19-9
1. Actual inventory amounts and changes. Apple’s amounts are in $millions
and Samsung’s amounts are in millions of Korean won.
Apple ($millions)
Balance,
Current Year
Balance,
Prior Year
Change in
Inventory
Inventory…………………………….………$1,764 $791 $973 Increase
Operating cash
flow effect from
inventory change………………………...
Decrease of
$973
Samsung (₩millions)
Balance,
Current Year
Balance,
Prior Year
Change in
Inventory
2. A successful JIT system should reduce inventory levels. This reduction
in inventory should increase operating cash flows. In the solution of
part 1, notice that increases in inventory yield decreases in operating
3. We cannot definitively determine which company of the two would
benefit the most from JIT implementation. The benefit of JIT would
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