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Chapter 15 Job Order Costing and Analysis
Chapter 15
Job Order Costing and Analysis
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, 13
15-1, 15-12
15-1
RIA, CA, CIP,
TTN, TIA,
ED, GD
C2. Explain job cost sheets and how
they are used in job order cost
accounting.
3, 4
15-2, 15-3
15-2, 15-4
15-1
CIP, HTR, ED
Analytical objectives:
A1 Apply job order costing in
pricing services.
12, 14
15-11
15-18
Procedural objectives:
P1. Describe and record the flow of
materials costs in job order cost
accounting.
5, 6
15-4
15-3, 15-4,
15-7, 15-8,
15-13, 15-17,
15-19
15-1, 15-2,
15-3, 15-5
HTR
P2. Describe and record the flow of
labor costs in job order cost
accounting.
7
15-5
15-3, 15-4,
15-7, 15-9,
15-13, 15-17
15-1, 15-2,
15-3, 15-5
HTR
P3. Describe and record the flow of
overhead costs in job order cost
accounting.
1, 2, 8, 11
15-6, 15-7,
15-10
15-3, 15-4,
15-5, 15-6,
15-7, 15-10,
15-13, 15-14,
15-15, 15-16,
15-17
15-1, 15-2,
15-3, 15-4,
15-5
EC, HTR
P4. Determine adjustments for
overapplied and underapplied
factory overhead.
8, 9
15-8, 15-9
15-7, 15-11,
15-12, 15-13,
15-14, 15-15
15-1, 15-2,
15-4, 15-5
*See additional information on next page that pertains to these quick studies, exercises and problems.
Chapter 15 Job Order Costing and Analysis
Additional information on Related Assignment Material
Assignment materials that can be completed by students using:
Sage 50 and QuickBooks Pro 2013 templates – Problem 15-1A, 15-2A.
Excel templates – Problems 15-4A
** The Serial Problem for Success Systems, which covers numerous learning objectives, can be
the chapters. Even if previous segments were not assigned, students can begin the segment of the
serial problem that is included in this chapter. It is most readily solved if students use the Working
Papers that accompany the book.).
Synopsis of Chapter Revision
• Astor and Black: NEW opener with new entrepreneurial assignment
• Reorganized discussion of job order costing for service companies
• New discussion of accounting for nonmanufacturing costs and their role in pricing decisions
• Added new journal entries for indirect materials and indirect labor for improved learning
PowerPoint® Show Slides
Chapter Learning Objective
PowerPoint® Slides
C1
6-9
C2
10
P1
11-13, 20, 31-32
P2
14-16, 33-34
P3
17-19, 21-22, 35-38
P4
23-30
A1
39
Chapter 15 Job Order Costing and Analysis
Chapter Outline
Notes
I. Job Order Cost Accounting
A. Cost Accounting System
1. Records manufacturing activities using a perpetual inventory
system which continuously updates records for costs of
materials, goods in process, and finished goods inventories.
2. Provides timely information about inventories, changes and
manufacturing costs per unit of product.
3. Two basic types of cost accounting systems are job order cost
accounting and process cost accounting.
B. Job Order Production— products individually designed to meet
the needs of a specific customer (special orders).
1. The production activities for a customized product represents
a job.
C. Job Order Costing of Services – the same principles apply to both
manufacturing and service companies.
D. Events in Job Order Costing
1. Jobs can be initiated by a customer order or less often,
2. First step is to predict the cost to complete the job.
3. Second step is to negotiate a price and decide whether to
pursue the job. Some jobs are priced on cost-plus basis where
the customer pays for manufacturing costs plus a negotiated
production occurs as materials and labor are applied to the job.
determines the cost of each job.
1. Classifies costs as direct materials, direct labor, or overhead.
3. Cost Flows: During production, accumulated job costs are kept
in the goods in process inventory while goods are being
manufactured.
Collection of job cost sheets for all jobs in process make up a
Inventory account in the general ledger.
Chapter 15 Job Order Costing and Analysis
Chapter Outline
time tickets and related entry as these costs are incurred.
d. Indirect labor cards in Factory Overhead Ledger—
accumulates indirect labor costs from time tickets and related
entry.
Notes
3. Overhead Cost Flows and Documents
a. Materials requisitions forms for indirect materials.
b. Time tickets for indirect labor.
c. Other sources include vouchers authorizing payments for
items such as supplies or utilities and adjusting entries for
costs such as depreciation.
d. Factory Overhead Ledger—contains a separate account
for each overhead cost. It is controlled by the Factory
Overhead account in the General Ledger which
accumulates costs until they are allocated to specific jobs.
4. Overhead Allocation Bases –generally allocate overhead by
a. Job Cost Sheets—show factory overhead costs that have
been applied using the predetermined factory overhead
b. Recording Overhead Costs—debited to Goods in Process
Inventory and credited to Factory Overhead as allocated to
specific jobs.
6. Recording Allocated Overhead – entry to record allocation
b. Debit Goods In Process Inventory for direct materials and
debit Factory Overhead for indirect materials as goods are
c. Debit Factory Payroll as labor is incurred.
d. Debit Goods In Process for direct labor and debit Factory
Overhead for indirect labor as costs are analyzed. Credit
Chapter 15 Job Order Costing and Analysis
Chapter Outline
Factory Payroll. Direct labor costs are also accumulated
on Job Cost Sheets.
Notes
e. Debit Factory Overhead as other overhead costs are
incurred.
f Debit Goods In Process as overhead costs are applied
using overhead rate. Credit Factory Overhead.
g Debit Finished Goods Inventory as jobs are completed and
credit Goods in Process for the full cost of job taken from
completed Job Cost Sheets.
h Debit Cost of Goods Sold as goods are sold and credit
Finished Goods Inventory.
i. Any under or over applied factory overhead cost is
accounted for in an adjustment.
III. Adjusting Factory Overhead—Overhead applied rarely equals that
incurred because a predetermined overhead rate based on estimates is
used in applying factory overhead costs to jobs.
A. Underapplied overhead
1. Overhead incurred is less than amount applied.
2. Results in a debit balance in Factory Overhead.
3. Reflects manufacturing costs not charged to jobs.
4. If immaterial—Factory Overhead balance is credited to close
this account and debited to Cost of Goods Sold.
B. Overapplied overhead
1. Overhead applied exceeds the overhead incurred.
2. Results in a credit balance in Factory Overhead.
3. If immaterial—Factory Overhead balance is debited to close
this account and credited to Cost of Goods Sold resulting in a
reduction of Cost of Goods Sold.
C. Material overhead balances are allocated among Goods in
Process, Finished Goods, and Cost of Goods Sold.
IV. Decision Analysis—Pricing for Services
service setting.
B. Procedure to determine:
1. Direct labor costs
2. Overhead costs based on predetermined rate(s).
4. Cost of job by combining labor and overhead costs. Note:
Chapter 15 Job Order Costing and Analysis
15-7
VISUAL #25
Tracing Product Costs
Through a Cost Accounting System
Work in Progress Finished Goods
Materials Inventory Inventory Inventory
(1) Buy Send (2) (2) Direct (7) Goods (7) Cost of (8) Goods
(Cr. A/P) materials material completed Finished Sold
to factory costs Goods
(4) Direct
labor
costs
(6) Overhead
costs
Factory Overhead Factory Payroll Cost of Goods Sold
(2) Indirect (6) Overhead (3) Labor (4) Labor (8)
materials cost costs applied costs costs applied
or factory to production incurred
supplies (Cr
Chapter 15 Job Order Costing and Analysis
website, in whole or part. 15-8
VISUAL #26
Job Cost Sheet
Customer Build We Must, Inc. Job No. 114
Product Bracket-H3 Date Promised 10/1/xx
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
Total Cost $2,400.00
Totals $ 900.00 $ 600.00 Units Finished 200
Unit Cost $12.00
Chapter 15 Job Order Costing and Analysis
website, in whole or part. 15-9
Chapter 15 -- Alternate Demonstration Problem #1
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, 2013 .................................
60,000
Raw materials purchases, for year .........................................
230,000
Goods in process inventory, January 1, 2013 .......................
302,000
Raw materials, January 1, 2013 ..............................................
110,000
Required:
Prepare a manufacturing statement for the Superior Company for the year
ended December 31, 2013.
Chapter 15 Job Order Costing and Analysis
website, in whole or part. 15-10
Solution: Chapter 15 -- Alternate Demonstration Problem #1
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
