Chapter 19
Job Order Cost Accounting
QUESTIONS
1. Factory overhead is not identified with specific units (jobs) or batches (job lots).
Therefore, to assign costs, estimates of the relation between factory overhead cost
2. Several other factors (allocation bases) are possible and reasonable. These common
factors often include direct materials or machine hours.
3. The job order cost sheet captures information on cost and quantity of direct material
4. Each job is assigned a subsidiary ledger account. This account serves as the
“posting account” (accumulates all increases and decreases) during production for
direct material, direct labor, and applied factory overhead. The collection of job cost
5. A debit (increase) to Goods in Process Inventory for direct materials, a debit
6. The materials requisition slip is designed to track the movement of materials from
7. The clock card is used to record the number of hours each employee works and is
used to compute total payroll. The time ticket is used to record how much time an
1078 Fundamental Accounting Principles, 21st Edition
8. Debits (increases) to factory overhead are the recording of actual overhead costs,
9. Assuming that the overapplied or underapplied overhead is immaterial, it is closed to
the Cost of Goods Sold account. However, if the amount is material—meaning it
10. This production run should be accounted for as a job lot (batch). Although individual
snowmobile helmets could be viewed as individual jobs, the costs of tracking this
11. A predetermined factory overhead rate must be calculated for at least two reasons:
(1) Not all costs are known in advance, yet the costs must be applied to products
during the current period. (2) A predetermined rate is used to spread indirect costs
12. Each patient in a hospital can be viewed as a “job.” In this case, a job order cost
13. Each of the 30 luxury motorcycles will likely be accounted for as an individual job.
Although similar in many respects, each would have custom features that would
14. Sprint employees can use job cost sheets to accumulate the costs (e.g. labor and
materials) used on each job. Managers can use this job cost information to monitor
QUICK STUDIES
Quick Study 19-1 (5 minutes)
Quick Study 19-2 (5 minutes)
Direct materials, direct labor, and factory overhead are the three types of
Quick Study 19-3 (10 minutes)
Finished Goods Inventory ……………………………..………
10,500
Goods in Process Inventory ……………………..……
10,500
To transfer cost of completed job to Fin. Goods.
Cost of Goods Sold ……………………………………….………
10,500
Finished Goods Inventory ………………………..…
10,500
To transfer cost of delivered job to COGS.
Cash ……………………………………………………………..………
14,900
Sales ……………………………………………………….
14,900
To record sales price of delivered job.
1080 Fundamental Accounting Principles, 21st Edition
Quick Study 19-4 (15 minutes)
Raw Materials Inventory ………………………………….…….
50,000
Cash ………………………………………………………….…….
50,000
To record raw material purchases.
Factory Overhead ………………………………………………….
12,000
Raw Materials Inventory …………………………….…….
12,000
To record raw materials used in production.
Goods in Process Inventory …………………………….…….
32,000
Raw Materials Inventory …………………………….…….
32,000
To record raw materials used in production.
Quick Study 19-5 (10 minutes)
Factory Payroll ………………………………………………..…….
180,000
Cash ………………………………………………………….…….
To record factory payroll.
Goods in Process Inventory …………………………….…….
140,000
Factory Overhead ………………………………………………….
40,000
Factory Payroll …………………………………………..…….
To record direct and indirect labor.
Quick Study 19-6 (10 minutes)
Goods in Process Inventory (Job lot) ……………….…….
117,900
Factory Overhead …………………………………………….
To apply overhead to job lot [($175,000–$44,000) x 90%].
Quick Study 19-7 (10 minutes)
1. Factory overhead, $117,000 / Direct labor, $468,000 = 25%
Quick Study 19-8 (5 minutes)
Factory Overhead ………………………………………………….
22,000
Cost of Goods Sold* …………………………………..…….
To assign overapplied overhead.
*Computation of over- or underapplied overhead
Actual overhead (total debits) …………………………..
Applied overhead (total credits) …………………………..
Overapplied overhead ……………………………….…………….
Quick Study 19-9 (15 minutes)
Cost of Goods Sold ……………………………………………….
50,000
Factory Overhead* ……………………………………..…….
To assign underapplied overhead.
*Computation of over- or underapplied overhead
Actual overhead………………………………………..…………….
Overhead applied ($600,000 x 150%) ………….…………….
Underapplied overhead ……………………………..…………….
Quick Study 19-10 (10 minutes)
Estimated direct materials $900,000
Quick Study 19-11 (10 minutes)
JOB COST SHEET
Direct labor ($50 x 200) ……………………………………….…………
$10,000
Overhead ($65 x 200) …………………………………………….…………
13,000
Total cost …………………………………………………………….…………
$23,000
Quick Study 19-12 (5 minutes)
1082 Fundamental Accounting Principles, 21st Edition
EXERCISES
Exercise 19-1 (10 minutes)
1.
C
3.
B
5.
A
2.
D
4.
F
6.
E
Exercise 19-2 (15 minutes)
JOB COST SHEET: Job 9-1005
Direct materials cost
Q-4698 ………………………………….….
$1,250
Q-4725 ………………………………….….
1,000
$2,250
Direct labor cost
W-3393 …………………………………….
600
W-3479 …………………………………….
450
W-3559 …………………………………….
300
1,350
Overhead ($1,350 X 110%) …………….
1,485
Total cost ………………………………..….
$5,085
Exercise 19-3 (10 minutes)
1.
A
3.
C
5.
D
7.
B
2.
F
4.
E
6.
G
Exercise 19-4 (25 minutes)
1. The cost of direct materials requisitioned in the month equals the total
direct materials costs accumulated on the three jobs less the amount of
direct materials cost assigned to Job 102 in May:
Job 102 …………………………………………………...
$15,000
Less prior costs ……………………………………….
( 6,000)
$ 9,000
Job 103 …………………………………………………...
33,000
Job 104 …………………………………………………...
27,000
Total materials used (requisitioned) ………….
$69,000
2. Direct labor cost incurred in the month equals the total direct labor
costs accumulated on the three jobs less the amount of direct labor cost
assigned to Job 102 in May:
Job 102 …………………………………………………..…..
$8,000
Less prior costs ……………………………………………
(1,800)
$ 6,200
Job 103 …………………………………………………..…..
14,200
Job 104 …………………………………………………..…..
21,000
Total direct labor ……………………………………..……
$41,400
3. The predetermined overhead rate equals the ratio of the amount of
overhead assigned to jobs divided by the amount of direct labor cost
assigned to them. Since the same rate is used for all jobs started and
completed within a month, the ratio for any one job equals the rate that
was applied. This table shows the ratio for jobs 102 and 104:
Job 102
Job 104
Overhead ………………………………………………..……
$ 4,000
$10,500
Direct labor ……………………………………………..……
8,000
21,000
Ratio ……………………………………………………….
50%
50%
4. The cost transferred to finished goods in June equals the total costs of
the two completed jobs for the month, which are Jobs 102 and 103:
Job 102
Job 103
Total
Direct materials …………………….…….
$15,000
$33,000
$48,000
Direct labor …………………………..
8,000
14,200
22,200
Overhead ……………………………..…….
4,000
7,100
11,100
Total transferred cost ………………….
$27,000
$54,300
$81,300
1084 Fundamental Accounting Principles, 21st Edition
Exercise 19-5 (15 minutes)
1.
Rate = = = 130%
2.
Direct materials ………………………………………………………………..……..
$15,350
Direct labor …………………………..………………………………………….……..
3,200
Overhead ($3,200 x 130%) ……………………………………………………….
4,160
Total cost of Job No. 13-56 ……………………………………………….……..
$22,710
Exercise 19-6 (20 minutes)
2.
Total cost of job in process (given) …………………………………..………….
$ 50,000
Less materials cost of job in process (given) …………………….…….
(30,000)
Less overhead applied (30,000 x 40%) ……………………………….………….
(12,000)
Direct labor cost ……………………………………………………………….………….
$ 8,000
Estimated overhead costs
Estimated direct labor
$747,500
$575,000
$1,500,000
Direct material costs
Exercise 19-7 (30 minutes)
1.
Cost of direct materials used
Beginning raw materials inventory………………………………..………….
$ 43,000
Plus purchases …………………………………………………………….………….
210,000
Raw materials available ………………………………………………..……..
253,000
Less ending raw materials inventory …………………………….………….
(52,000)
Total raw materials used ……………………………………………………….
201,000
Less indirect materials used …………………………………………………….
(15,000)
Cost of direct materials used ………………………………………..………….
$ 186,000
2.
Cost of direct labor used
Total factory payroll ……………………………………………………....
$ 345,000
Less indirect labor ……………………………………………………….
(80,000)
Cost of direct labor used ……………………………………………………….
$ 265,000
3.
Cost of goods manufactured
Beginning goods in process inventory …………………………..
$ 10,200
Plus direct materials …………………………………………………….…
186,000
Plus direct labor …………………………………………………………..………….
265,000
Plus overhead applied (70% of direct labor cost) ……………..………….
185,500
Total cost of goods in process ……………………………………..………….
646,700
Less ending goods in process inventory …………………………..
(21,300)
Cost of goods manufactured ………………………………………..………….
$ 625,400
4.
Cost of goods sold
Beginning finished goods inventory ……………………………..………….
$ 63,000
Plus cost of goods manufactured …………………………………………….
625,400
Less ending finished goods inventory…………………………..
(35,600)
Cost of goods sold ……………………………………………………….
$ 652,800
5.
Gross profit
Sales ……………………………………………………………………………………
$1,400,000
Cost of goods sold ……………………………………………………….
(652,800)
Gross profit ………………………………………………………………….………….
$ 747,200
6.
Actual overhead incurred
Indirect materials ………………………………………………………….………….
$ 15,000
Indirect labor ………………………………………………………………..………….
80,000
Other overhead costs …………………………………………………..…..
120,000
Total actual overhead incurred ……………………………………..………….
215,000
Overhead applied …………………………………………………………………….
185,500
Underapplied overhead ………………………………………………..……..
$ 29,500
1086 Fundamental Accounting Principles, 21st Edition
Exercise 19-8 (10 minutes)
1.
Raw Materials Inventory …………………………..
210,000
Cash ………………………………………………….……
210,000
To record materials purchases.
2.
Goods in Process Inventory …………………………..
186,000
Raw Materials Inventory …………………….…….
186,000
To assign direct materials to jobs.
3.
Factory Overhead …………………………..……….……………..
15,000
Raw Materials Inventory …………………….…….
15,000
To record indirect materials.
Exercise 19-9 (10 minutes)
1.
Factory Payroll ……………………………………….……………..
345,000
Cash ………………………………………………….……
345,000
To record factory payroll.
2.
Goods in Process Inventory …………………………..
265,000
Factory Payroll ………………………………….……………..
265,000
To assign direct labor to jobs.
3.
Factory Overhead …………………………..……….……………..
80,000
Factory Payroll ………………………………….……………..
80,000
To record indirect labor.
Exercise 19-10 (10 minutes)
1.
Factory Overhead …………………………..……….……………..
120,000
Other Accounts ………………………………………………..
120,000
To record other factory overhead.
2.
Goods in Process Inventory …………………………..
185,500
Factory Overhead ……………………………………………..
185,500
To apply overhead to jobs.
Computed as: 70% Predetermined overhead rate x
Direct labor of $265,000
Exercise 19-11 (10 minutes)
Cost of Goods Sold …………………………..…….……………..
29,500
Factory Overhead ……………………………………………..
29,500
To allocate (close) underapplied overhead to cost of
goods sold. Applied overhead equals $265,000 x 70%
= $185,500. Actual overhead = $215,000, computed as
$15,000 + $80,000 + $120,000.
Exercise 19-12 (15 minutes)
Factory Overhead …………………………..……….……………..
3,200
Cost of Goods Sold …………………………………………..
3,200
To close overapplied overhead for Marsh.
Cost of Goods Sold …………………………..…….……………..
800
Factory Overhead ……………………………………………..
800
To close underapplied overhead for Ellis.
Exercise 19-13 (25 minutes)
a.
Raw Materials Inventory ………………………………….……..
90,000
Accounts Payable ……………………………………..……..
To record materials purchases.
b.
Goods in Process Inventory …………………………………..
36,500
Raw Materials Inventory …………………………….……..
To assign costs of direct materials used.
Factory Overhead …………………………………………………..
19,200
Raw Materials Inventory …………………………….……..
To record indirect materials.
c.
Factory Payroll ……………………………………………….……..
50,000
Cash ………………………………………………………………..
To record payroll costs paid.
Goods in Process Inventory …………………………………..
38,000
Factory Payroll ………………………………………….……..
To assign costs of direct labor used.
Exercise 19–13 (Continued)
[continued from prior page]
c.
Factory Overhead …………………………………………………..
12,000
Factory Payroll ………………………………………….……..
To record indirect labor costs as overhead.
d.
Factory Overhead …………………………………………………..
11,475
Cash ………………………………………………………………..
To record other factory overhead paid.
e.
Goods in Process Inventory …………………………………..
47,500
Factory Overhead ……………………………………………..
To apply overhead to jobs at the rate of 125% of
direct labor cost.
f.
Finished Goods Inventory ……………………………….……..
56,800
Goods in Process Inventory …………………………..
To record jobs completed.
g.
Cost of Goods Sold ………………………………………………..
56,800
Finished Goods Inventory …………………………..
To record cost of sale of job.
Accounts Receivable ……………………………………………..
82,000
Sales ………………………………………………………………..
To record sale of job.
h.
Factory Overhead* ………………………………………….……..
3,000
Cost of Goods Sold …………………………………….……..
To close overapplied overhead.
Exercise 19-14 (25 minutes)
1.
Predetermined overhead rate
Estimated overhead costs ………………………………………….…………
$1,680,000
Estimated direct labor costs …………………………………………………
$ 480,000
Rate ($1,680,000/$480,000) ……………………………………………………
350%
2. & 3.
Overhead
Incurred …………………….
1,652,000
Applied* …………………………..
1,662,500
Overapplied …………………………..
10,500
*Overhead applied to jobs = 350% x $475,000 = $1,662,500
4.
Dec. 31
Factory Overhead …………………………..…………….………..
10,500
Cost of Goods Sold …………………………………………..
10,500
To close overapplied overhead.
Exercise 19-15 (35 minutes)
1.
Predetermined overhead rate
Estimated overhead costs …………………………………………….……….
$750,000
Estimated direct labor costs ………………………………………….……….
$625,000
Rate (Overhead/Direct labor) ………………………………………………….
120%
2. & 3.
Factory Overhead
Incurred …………….……..
Applied* ………..…………………
822,000
Underapplied ……..……..
*Overhead applied to jobs = 120% x $685,000 = $822,000
4.
Dec. 31
Cost of Goods Sold ……………………………….……………….
8,000
Factory Overhead …………………………….……………….
8,000
To allocate underapplied overhead.
1090 Fundamental Accounting Principles, 21st Edition
Exercise 19-16 (30 minutes)
1. Overhead rate = Total overhead costs / Total direct labor costs
= $1,800,000 / $3,000,000 = 60%
2.
Total cost of goods in process inventory ………………………..
$ 71,000
Deduct: Direct labor ……………………………………………………….
(20,000)
Deduct: Factory overhead ($20,000 x 60%)………………………
(12,000)
Direct materials ………………………………………………………………
$ 39,000
3.
Total cost of finished goods inventory …………………………...
$490,000
Deduct: Direct materials …………………………..……………………
(250,000)
Direct labor and factory overhead costs ………………………….
$240,000
We also know that the total of direct labor costs (X) and factory
overhead costs (0.6X) equals $240,000. Thus, to get the individual
Exercise 19-17 (35 minutes)
1. Overhead rate = Total estimated overhead cost_
Total estimated direct labor cost
= $375,000 / $300,000 = 125%
2. Cost of the two ending inventories
Goods in Process
Finished Goods
Cost
per Unit
Units
Total
Cost
Cost
per Unit
Units
Total
Cost
Direct materials …..…….
$10.00
5,000
$ 50,000
$12.00
12,000
$144,000
Direct labor ……………….
7.00
5,000
35,000
9.00
12,000
108,000
Overhead* …………..…….
8.75
5,000
43,750
11.25
12,000
135,000
Total …………………..…….
$25.75
$128,750
$32.25
$387,000
3.
Step 1
Cost of goods manufactured
Direct materials cost ………………………………………………………….…….
$ 535,000
Direct labor cost ………………………………………………………………..…….
290,000
Factory overhead cost applied …………………………………………..…….
362,500
Total manufacturing cost …………………………………………………..…..
1,187,500
Add beginning goods in process ……………………………………….…….
0
Total cost of goods in process …………………………………………..…….
1,187,500
Less ending goods in process …………………………………………..…….
(128,750)
Cost of goods manufactured ……………………………………………..…….
$1,058,750
Step 2
Cost of goods sold
Beginning finished goods …………………………..……………………..……
$ 0
Add cost of goods manufactured ……………………………………….…….
1,058,750
Goods available for sale
1,058,750
Less ending finished goods ……………………………………………….…….
(387,000)
Cost of goods sold …………………………………………………………….…….
$ 671,750