• Spring Air operates on tight deadlines; sometimes having to manufacture 300 beds overnight to meet
an order.
• Founded in 1926, The Spring Air Company is one of the world’s largest mattress manufacturing
companies with more than 1,000 employees in 13 locations.
• Spring Air consumer brands include: Back Supporter, Nature’s Rest, Four Seasons, and Chattam &
Wells.
• Spring Air operates plants in the U.S., Canada, Mexico, Ireland, the Middle East, Australia, and
Argentina.
• It is appropriate for businesses that produce each customer’s order as a special order or that produce
orders for their products in batches rather than in a continuous operation.
2. Job order number, customer, units produced, unit cost, and direct materials, labor, overhead applied
to a job.
4. Provides authorization for materials to be issued from the storeroom.
6. Dr. Manufacturing Overhead, Cr. Raw Materials Inventory.
8. Direct materials—from summaries of materials requisitions; Direct labor—from summaries of the
labor time tickets; Overhead—from a computation based on the established application rate.
10. Indirect labor; indirect materials; depreciation of factory building and equipment; payroll taxes,
repairs and maintenance; taxes and insurance on factory assets.
12. Dr. Finished Goods Inventory, Cr. Work in Process Inventory.
These questions are designed to check students’ understanding of new terms, concepts, and procedures
presented in the chapter.
Discussion Questions
CHAPTER 27
JOB ORDER COST ACCOUNTING
Chapter Opener: Thinking Critically
Answers will vary. Students may suggest raw materials inventories of fabric, wood, springs, foam, nails,
staples, or glue.
Fast Facts
Managerial Implications: Thinking Critically
Discussion Questions (continued)
14. Three businesses that would use a job order cost accounting system could be a specialty cabinet
manufacturer, large house boat manufacturer, and a construction company.
16. A just-in-time inventory system is a system in which raw materials are ordered so they arrive just
EXERCISE 27.1
PAGE
POST.
REF.
1 2013 1
EXERCISE 27.2
PAGE
POST.
REF.
1 2013 1
EXERCISE 27.3
PAGE
POST.
REF.
1 2013 1
EXERCISE 27.4
PAGE
POST.
REF.
1 2013 1
CREDIT
DESCRIPTION DEBIT CREDIT
GENERAL JOURNAL
DATE DESCRIPTION DEBIT
DATE DESCRIPTION DEBIT CREDIT
DATE
GENERAL JOURNAL
GENERAL JOURNAL
DATE DESCRIPTION DEBIT CREDIT
GENERAL JOURNAL
EXERCISE 27.5
PAGE
POST.
REF.
1 2013 1
2 Jan. 31 Work in Process (Direct Labor) 40 0 0 0 00 2
3 Manufacturing Overhead (Indirect Labor) 4 0 0 0 00 3
EXERCISE 27.6
EXERCISE 27.7
Application Rate = 60% × direct labor costs
$100,000 × 0.6 = $60,000
PAGE
POST.
REF.
1 2013 1
GENERAL JOURNAL
DATE DESCRIPTION DEBIT CREDIT
GENERAL JOURNAL
DATE DESCRIPTION DEBIT CREDIT
EXERCISE 27.8
2. Total Cost
Materials 40,000.00$
EXERCISE 27.9
2. Actual Overhead Costs 90,000.00$
EXERCISE 27.10
PAGE
POST.
REF.
1 2013 1
2 Dec. 31 Finished Goods Inventory 150 0 0 0 00 2
9 9
GENERAL JOURNAL
DATE DESCRIPTION DEBIT CREDIT
PROBLEM 27.1A
POST.
REF.
1 2013 1
12 Manufacturing Overhead (Indirect Labor) 200000 12
13 Social Security Tax Payable 3224 00 13
14 Medicare Tax Payable 7 5 4 00 14
15 Employee Income Tax Payable 780000 15
16 Salaries and Wages Payable 40 2 2 2 00 16
27 30 Finished Goods Inventory 150 0 0 0 00 27
28 Work in Process Inventory 150 0 0 0 00 28
29 Cost of jobs completed during month 29
30 30
31 30 Cost of Goods Sold 120 0 0 0 00 31
GENERAL JOURNAL
DATE DESCRIPTION DEBIT CREDIT
PAGE
PROBLEM 27.1A (continued)
Manufacturing Overhead
Indirect Materials
Indirect Labor
Sales 250 0 0 0 00
NoCal Trailers Company
Manufacturing Overhead Computations
Month Ended April 30, 2013
$5,000.00
2,000.00
Partial Income Statement
Month Ended April 30, 2013
NoCal Trailers Company
PROBLEM 27.2A
For Stock Job No. D42 Date 1/05/13
Customer’s Name Dallas Apartment Corporation Started December 21, 2012
Address Completed January 19, 2013
JOB ORDER COST SHEET
PROBLEM 27.2A (continued)
PAGE
POST.
REF.
1 2013 1
2 Jan. 31 Finished Goods Inventory 475000 2
9 9
OVERHEAD COMPUTATIONS
Total charged to Manufacturing Overhead $3,000
Manufacturing overhead applied
GENERAL JOURNAL
DATE DESCRIPTION DEBIT CREDIT
PROBLEM 27.1B
POST.
REF.
1 2013 1
12 Manufacturing Overhead (Indirect Labor) 800000 12
13 Social Security Tax Payable 576600 13
14 Medicare Tax Payable 1 3 6 3 00 14
15 Employee Income Tax Payable 1410000 15
16 Salaries and Wages Payable 7277100 16
27 30 Finished Goods Inventory 20000000 27
28 Work in Process Inventory 20000000 28
29 Cost of jobs completed during month 29
30 30
31 30 Cost of Goods Sold 18000000 31
GENERAL JOURNAL
DATE DESCRIPTION DEBIT CREDIT
PAGE
PROBLEM 27.1B (continued)
Manufacturing Overhead
Indirect Materials
Indirect Labor
Florida Fab, Inc.
Manufacturing Overhead Computations
Month Ended June 30, 2013
$8,000.00
8,000.00
PROBLEM 27.2B
For Stock Job No. O45 Date 10/05/13
Customer’s Name Clift Apartments Started
Address Completed
Item Special Order Bath Quantity 10 10
(ordered) (completed)
Item
For Stock Job No. O48 Date 10/05/13
Customer’s Name Clift Apartments Started
Address Completed
Item Kitchen Std Quantity 10
(ordered) (completed)
Item
Totals 16,000 00 10,000 00 5,000 00
For Stock XXX Job No. NO1 Date 11/01/13
Customer’s Name Started
Address Completed
Item Kitchen Std Wall Unit Quantity 5
(ordered) (completed)
Item
Totals 6,000 00 2,000 00 1,000 00
00Unit cost 1,800
00
00
1,000
Total
Overhead
Comments
9,000
Amount
Materials 6,000 00
Amount
002,000
JOB ORDER COST SHEET
MATERIAL LABOR OVERHEAD APPLIED SUMMARY
November 1, 2013
Labor
Rate
11/20/2013 4,000 00 11/20/2013
Date Amount Date Amount Date
003,100
0031,000
Unit cost
Comments:
4,000 00
00
Labor
Overhead
11/20/2013
00
50% 10,000
5,000
Total
2,000 00
16,000
MATERIAL LABOR
Amount Amount
Materials
Date Amount Date
Amount Date Rate
OVERHEAD APPLIED SUMMARY
October 5, 2013
JOB ORDER COST SHEET
Unit cost
Comments:
00
00
50%
Overhead
11/20/2013 1,500
5,000
00
9,000 00
11/20/2013 3,000 00 11/20/2013 3,000
15,000
JOB ORDER COST SHEET
MATERIAL LABOR OVERHEAD APPLIED SUMMARY
November 21, 2013
October 5, 2013
Amount
Materials 23,000 00
Rate
20,000 00
Amount
7,500 00
11/2/13
Date
00
Date Amount Date Amount
11/2/13 11/2/13
PROBLEM 27.2B (continued)
P
AGE
POST.
REF.
1 2013 1
2 Nov. 30 Finished Goods Inventory 5000000 2
3 Work in Process Inventory 5000000 3
Actual Manufacturing Overhead
Manufacturing overhead applied
Job No. O45
Analyze: The November cost of goods sold was $49,900 ($50,000 í $100).
OVERHEAD COMPUTATIONS
$4,400
$1,500
GENERAL JOURNAL
DATE DESCRIPTION DEBIT CREDIT
CRITICAL THINKING PROBLEM 27.1
Job DE31 Job JA01 Job JA02
Materials $10,000 $9,500 $12,500
Cost of Goods Sold
Finished Goods, January 1, 2013 $30,000
Notes:
1. Overhead rate is calculated on the beginning costs of Job DE31; the ratio of overhead/direct manufacturing
2. Total cost of Job DE31 $21,700
Less beginning costs $16,500
Costs added in January $5,200
3.
4.
If total materials added for January were $22,000, and $9,500 of that amount was for Job JA01, the
remainder of materials added had to belong to Job JA02—$12,500.
If total labor added in January was $30,000, and $4,000 of that amount was for Job JA01 and $4,000 was
CRITICAL THINKING PROBLEM 27.2
a. Work in Process, July 1
$2,150 + $500 + $300 = $2,950
$6,000 + $1,900 = $7,900
e. Finished Goods Inventory, July 31
$4,500 + $6,000 + $7,000 = $17,500
Sales 44 6 0 0 00
Cost of Goods Sold 22 3 0 0 00
Gross Profit 22 3 0 0 00
Containers Inc.
Condensed Income Statement
Month Ended July 31, 2013
SOLUTIONS TO BUSINESS CONNECTIONS
Managerial Focus:
2. The debit recorded for actual changes for overhead was less than the amount applied. Can result from an
error in estimating overhead or the overhead application rate.
4. Detailed data on direct labor cost is available in company payroll records.
Ethical Dilemma:
Financial Statement Analysis:
Teamwork:
Internet Connection:
Terry should bring the problem to the attention of the Corporate Financial Officer (CFO). The CFO will probably
The job cost card should list the vendor supplying the material and the employee working on the job. The amount
and cost of the material should be included. The labor hours and cost should be listed with the indirect costs
included.
Part A True-False
1. TRUE 8. TRUE
3. FALSE 10. FALSE
5. TRUE 12. FALSE
7. TRUE 14. TRUE
Part B Completion
2. receiving report
4. underapplied
6. manufacturing overhead
8. FIFO
SOLUTIONS TO PRACTICE TEST