19-1
CHAPTER 19
JOB ORDER COST ACCOUNTING
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, 19-12
19-1, 19-3,
19-4
19-1, 19–2,
19-4, 19–5,
19-6, 19-7
C2. Explain job cost sheets and how
they are used in job order cost
accounting.
3, 4
19-2, 19-12,
19-13
19-2, 19-4,
19-7
19-1, 19-4
19-4, 19-8
Analytical objectives:
A1 Apply job order costing in
pricing services.
2
19–11
19–17
Procedural objectives:
P1. Describe and record the flow of
materials costs in job order cost
accounting.
5, 6
19-4
19-3, 19–4,
19–7, 19–8,
.19-7, 19–18
19-1, 19–2,
19-3, 19-5
P2. Describe and record the flow of
labor costs in job order cost
accounting
7
19-5
19-3, 19–4,
19-9, 19-16
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
19-6, 19-7,
19–10
19-3, 19–4,
19-5, 19–6,
19-7, 19–10,
19-13, 19–14,
19-15, 19–16
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, 19-9
19-7, 19–11,
19-12, 19–13,
19–14
19-1, 19–2,
19-4, 19-5
19-8
19-2
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.
Narrated PowerPoint Correlation Guide
Learning Objective
Slides
C1
2-5
C2
6-8
P1
9-14,22,25,37-38
P2
15-17,23,26,38-39
P3
18-20, 26-27, 40-41
P4
28-33
A1
35
Synopsis of Chapter Revision
• Astor and Black: NEW opener with new entrepreneurial assignment
19-3
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.
B. Job Order Production—producing products or providing services
individually designed to meet the needs of a specific customer
(special orders).
1. The production activities for a customized product is called a
job.
2. A job lot involves producing more than one unit of a unique
product.
C. Events in Job Order Costing
1. Jobs can be initiated by a customer order or management
decision to begin work on job before order (jobs on
speculation).
2. Step 1: Predict the cost to complete the job. Cost depends on
the product design prepared by either the customer or the
producer.
3. Step 2: Negotiate price and decide whether to pursue the job.
Price is determined on a cost-plus basis or producer evaluates
market price and determines a target cost that would allow a
reasonable profit while meeting competitive market price.
4. Step 3: Schedule production of the job. This must meet
materials and labor is applied to the job.
Chapter Outline
Notes
D. Job Cost Sheet—separate record maintained for each job used to
record costs as incurred
1. Classifies costs as direct materials, direct labor, or overhead.
2. Used by managers to monitor costs incurred to date and to
predict and control costs to complete each job.
3. Accumulated job costs are kept in the goods in process
inventory while goods are being produced.
4. Job cost sheets filed for all of the jobs in process make up a
subsidiary ledger controlled by the Goods in Process
Inventory account in the general ledger.
5. Finished job cost sheets—moved from jobs in process file to
finished jobs file (subsidiary ledger controlled by Finished
Goods Inventory) awaiting delivery to customers.
6. As finished jobs are sold, file moves to permanent file
supporting the cost of goods sold.
II. Job Order Cost Flows and Reports
A. Cost Flows and Documents—the three cost components and
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
to Accounts Payable.
b. Materials ledger cards (or files)—perpetual records that
units are issued for use in production. Serves as the
subsidiary ledger for the Raw Materials Inventory
account.
c. Materials Requisition⎯document identifying the type and
quantity of material needed in production. Job number is
also identified on direct materials requisitions.
Chapter Outline
Notes
2. Labor Cost Flows and Documents
a. Clock cards—used by employees to record hours worked.
Used to determine total labor costs for pay period. This
amount is debited to Factory Payroll account and credited
to Cash.
b. Time tickets—indicate how much time employees spent
on each job. Used to assign (direct) labor costs to specific
jobs and (indirect) to overhead. Direct labor costs are
debited to Goods in Process Inventory and credited to
Factory Payroll.
c. Job Cost Sheets—accumulates the cost of direct labor
(from time tickets and related entry) as these costs are
incurred.
d. Indirect labor card in Factory Overhead Ledger—
accumulates indirect labor costs (from time tickets and
related entry). Entry to record indirect labor costs debits
Factory Overhead and credits Factory Payroll.
(Estimated overhead costs divided by estimated factor
costs).
f. Recording Overhead Costs—debited Factory Overhead;
account credited varies by overhead element and action at
point the cost is incurred.
19-6
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) Goods In
Process Inventory (direct materials) and (debit) Factory
Overhead (indirect materials) as good are requisitioned.
Direct material costs also accumulated on Job Cost Sheets.
c. Into (debit) Factory Payroll as labor is incurred.
d. From (credit) Factory Payroll to (debit) Goods In Process
Inventory (direct labor) and (debit) Factory Overhead
(indirect labor) as labor costs are analyzed. Direct labor
costs also accumulated on Job Cost Sheets.
incurred during the period based on bills received.
2. The credit side shows the amount applied during the period
that was an estimate based on the predetermined overhead
rate.
applied than incurred; an overapplied FOH amount.
B. Underapplied and Overapplied Overhead
1. Factory Overhead debit balance (underapplied amount) is
2. Factory Overhead credit balance (overapplied amount) is
debited (closed) and credited to Cost of Goods Sold.
19-7
Chapter Outline
Notes
IV. Decision Analysis—Pricing for Services
A. Job order costing concepts and procedures are applicable to a
service setting.
B. Procedure to determine:
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.
VISUAL #19-1
Tracing Product Costs
Through a Cost Accounting System
Work in Progress Finished Goods
labor
costs
(6) Overhead
costs
Factory Overhead Factory Payroll Cost of Goods Sold
labor costs
(5) Other
factory OH
costs incurred (Cr varies)
19-9
Quantity 200 Dates: Started 9/1/xx Completed 9/20/xx
Direct Material Direct Labor Cost Summary
Mat’l. Payroll Direct Material $ 900.00
Req’n. Summary
No. Amount Dated Dept. Amount Direct Labor 600.00
667 $ 340.00 9/2 A $ 70.00
673 180.00 9/9 A 240.00 Factory Overhead
691 200.00 9/16 B 190.00 (applied at):
623 180.00 9/23 B 100.00
150% of direct
labor cost 900.00
19-10
Alternate Demo Problem Nineteen
The following information was taken from the accounting records of the
Superior Company:
Depreciation of equipment ………………………………………………
$ 70,000
Direct labor …………………………………………………………………….
120,000
Factory taxes ………………………………………………………………….
2,000
Goods in process inventory, Dec. 31, 2013 ………………………
250,000
Indirect labor …………………………………………………………………..
10,000
Power ……………………………………………………………………………..
16,000
Raw materials inventory, Dec. 31, 20113 ………………………….
60,000
Raw materials purchases, for year …………………………………..
230,000
Goods in process inventory, January 1, 2013 …………………..
302,000
Raw materials inventory, January 1, 2013 ………………………..
110,000
Required:
Prepare a manufacturing statement for the Superior Company for 2013.
19-11
Solution: Alternate Demo Problem Nineteen
SUPERIOR MANUFACTURING COMPANY
Manufacturing Statement
For Year Ended December 31, 2013
Direct materials:
Raw materials inventory, 1/1/13 ……………………..
$110,000
Raw materials purchases ………………………………
230,000
Raw materials available for use ……………………..
340,000
Raw materials inventory, 12/31/13 ………………….
60,000
Direct materials used …………………………………….
$280,000
Direct labor …………………………………………………..
120,000
Factory overhead costs: ………………………………..
Indirect labor …………………………………………………
10,000
Power ……………………………………………………………
16,000
Factory taxes ………………………………………………..
2,000
Depreciation of equipment …………………………….
70,000
Total factory overhead costs …………………………
98,000
Total manufacturing costs …………………………….
498,000
Goods in process inventory, 1/1/13 ………………..
302,000
Total goods in process during the year ………….
800,000
Goods in process inventory, 12/31/13 …………….
250,000
Cost of goods manufactured …………………………
$550,000