1. a. Job order cost system and process cost system.
2. Job order costing is used by firms that sell custom goods and services to customers. The job
4. a. Purchase invoice or receiving report
b. Materials requisition
5. A job cost sheet is the subsidiary ledger to the work in process control account. The cost of
7. The predetermined overhead rate is computed using estimated amounts at the beginning of the
p
eriod. This is because managers need timely information on the product costs of each job. If
8. a. The predetermined factory overhead rate is determined by dividing the estimated total
9. a. (1) If the amount of factory overhead applied is greater than the actual factory overhead
incurred, factory overhead is overapplied.
(2) If the amount of actual factory overhead is greater than the amount applied, factory
CHAPTER 17 (FIN MAN); CHAPTER 2 (MAN)
JOB ORDER COSTING
DISCUSSION QUESTIONS
17-1
p
CHAPTER 17 Job Order Costing
DISCUSSION QUESTIONS (Continued)
10. Job order cost accumulation would be most appropriate for professional service firms that
p
rovide extended, project-type services for clients. Examples would be architectural,
17-2
CHAPTER 17 Job Order Costing
PE 17–1A (FIN MAN); PE 2–1A (MAN)
6 Materials 720,000
Accounts Payable 720,000
PE 17–1B (FIN MAN); PE 2–1B (MAN)
4 Materials 168,000
Accounts Payable 168,000
PE 17–2A (FIN MAN); PE 2–2A (MAN)
Work in Process* 928,000
PE 17–2B (FIN MAN); PE 2–2B (MAN)
Work in Process* 186,200
PRACTICE EXERCISES
Apr.
Aug.
CHAPTER 17 Job Order Costing
PE 17–3A (FIN MAN); PE 2–3A (MAN)
Factory Overhead 202,000
PE 17–3B (FIN MAN); PE 2–3B (MAN)
Factory Overhead 66,600
PE 17–4A (FIN MAN); PE 2–4A (MAN)
a. $3.50 per direct labor hour = $1,750,000 ÷ 500,000 direct labor hours
PE 17–4B (FIN MAN); PE 2–4B (MAN)
a. $9.00 per direct labor hour = $810,000 ÷ 90,000 direct labor hours
17-4
CHAPTER 17 Job Order Costing
PE 17–5A (FIN MAN); PE 2–5A (MAN)
a. Job 50 Job 51
PE 17–5B (FIN MAN); PE 2–5B (MAN)
a. Job 40 Job 42
Direct materials………………………………………………
…
$ 40,000 $ 86,800
b. = $159,000 ÷ 10,000 units
= $223,300 ÷ 11,000 units
PE 17–6A (FIN MAN); PE 2–6A (MAN)
PE 17–6B (FIN MAN); PE 2–6B (MAN)
Job 42
$15.90
$20.30
Job 40
17-5
…
CHAPTER 17 Job Order Costing
Ex. 17–1 (FIN MAN); Ex. 2–1 (MAN)
a. Materials requisitioned for use (both direct and indirect)
Ex. 17–2 (FIN MAN); Ex. 2–2 (MAN)
a. Cost of goods sold:
b. Direct materials cost:
Materials purchased………………………………………
…
$1,224,000
Less: Indirect materials…………………………………
…
$ 120,000
EXERCISES
17-6
CHAPTER 17 Job Order Costing
Ex. 17–3 (FIN MAN); Ex. 2–3 (MAN)
a.
Materials
Receiving Requi-
Report Unit sition Unit
Number Quantity Price Number Quantity Amount Quantity Price Amount
May 1 285 $30.00 $8,550
40 130 $32 May 4 285 $30.00 8,550
b. Ending inventory balance:
60 at $38.00……………………………………………………………………
…
c. Work in Process ($11,110 + $3,500)
Materials
d. Comparing quantities on hand as reported in the materials ledger with
predetermined order points enables management to order materials before
Ex. 17–4 (FIN MAN); Ex. 2–4 (MAN)
Work in Process
Factory Overhead
14,610
$2,280
14,610
BALANCE
Date
158,700
2,250
RECEIVED ISSUED
17-7
CHAPTER 17 Job Order Costing
Ex. 17–5 (FIN MAN); Ex. 2–5 (MAN)
a. Materials* 1,743,600
Accounts Payable 1,743,600
*$338,400 + $470,400 + $902,400 + $32,400
b. Work in Process 1,726,400
Ex. 17–6 (FIN MAN); Ex. 2–6 (MAN)
Work in Process 97,780
Factory Overhead 6,340
17-8
CHAPTER 17 Job Order Costing
Ex. 17–7 (FIN MAN); Ex. 2–7 (MAN)
a. Work in Process 3,676
Factory Overhead 164
Wages Payable 3,840
Supporting Calculations:
Direct
Labor
Hourly Job Job Job (sum of Indirect
Rate 301 302 303 job costs) Labor
b. The direct labor costs for the completed jobs would become part of the finished
goods inventory. The direct labor costs for Job 503 would remain part of the work
in process inventory.
Ex. 17–8 (FIN MAN); Ex. 2–8 (MAN)
a. Work in Process 21,250
Factory Overhead 2,785
Labor Costs (Hourly Rate × Hours)
17-9
CHAPTER 17 Job Order Costing
Ex. 17–9 (FIN MAN); Ex. 2–9 (MAN)
a. Factory 1: $28.00 per machine hour ($1,456,000 ÷ 52,000 machine hours)
b. Factory 2: $36.00 per direct labor hour ($954,000 ÷ 26,500 direct labor hours)
c. Factory 1:
Work in Process 119,000
Factory 2:
Work in Process 100,620
Ex. 17–10 (FIN MAN); Ex. 2–10 (MAN)
The estimated shop overhead is determined as follows:
Shop and repair equipment depreciation…………………………………………
…
$ 44,500
Shop supervisor salaries……………………………………………………………
…
138,000
17-10
CHAPTER 17 Job Order Costing
Ex. 17–11 (FIN MAN); Ex. 2–11 (MAN)
a. Estimated annual operating room overhead: $812,000
Estimated operating room activity base, number of operating room hours:
Hours per day………………………………………………………
…
8
b. Bill Harris’s procedure:
Number of surgical room hours………………………………
…
5
…
…
c. Actual hours used in January…………………………………………………… 240
Predetermined surgical room overhead rate…………………………………
…
$ 290
×
17-11
…
…
…
CHAPTER 17 Job Order Costing
Ex. 17–12 (FIN MAN); Ex. 2–12 (MAN)
a. Finished Goods* 961,800
Work in Process 961,800
*$197,800 + $240,000 + $160,000 + $364,000
b. Cost of unfinished jobs at August 30:
Balance in Work in Process at August 1……………
…
$ 60,000
Ex. 17–13 (FIN MAN); Ex. 2–13 (MAN)
a. Work in Process 68,000
Factory Overhead 8,000
Materials 76,000
b. Work in Process 55,000
Factory Overhead 12,400
Predetermined overhead rate:
Job 301: $6,000 ÷ $8,000 = 75% or
17-12
CHAPTER 17 Job Order Costing
Ex. 17–14 (FIN MAN); Ex. 2–14 (MAN)
a.
Revenues $1,400,000
Cost of goods sold 789,000
b. Materials inventory:
Purchased materials………………………………………………………
…
$400,000
Less: Materials used in production……………………………………
…
343,750
Materials inventory, June 30……………………………………………
…
$ 56,250
Work in process inventory:
Materials used in production……………………………………………
…
$343,750
Direct labor…………………………………………………………………
…
295,000
…
CHI-LITE
Income Statement
For the Month Ended June 30, 2016
17-13
CHAPTER 17 Job Order Costing
Ex. 17–15 (FIN MAN); Ex. 2–15 (MAN)
a.
Unit
Date Job. No. Quantity Product Amount Cost
Jan. 2 1 520 TT $16,120 $31.00
Jan. 15 22 1,610 SS 20,125 $12.50
Feb. 3 30 1,420 SS 25,560 $18.00
25
30
35
Job Number
Unit Costs for TT
10
12
14
16
18
20
Unit Costs for SS
6
8
10
12
14
16
Unit Cost
17-14
CHAPTER 17 Job Order Costing
Ex. 17–15 (FIN MAN); Ex. 2–15 (MAN) (Concluded)
As can be seen, the unit costs behave differently for each product. SLK has
increasing unit costs during the year, SS is steady, and TT has decreasing
unit costs during the year.
b. Management should want to determine why SLK costs are increasing and
why TT costs are decreasing. This information can be determined from the
17-15
CHAPTER 17 Job Order Costing
Ex. 17–16 (FIN MAN); Ex. 2–16 (MAN)
a. The first item to note is that the cost did not go up due to any increases in the
cost of labor or materials. Rather, the cost of the plaques increased because
Job 105 used more labor and materials per unit than did Job 101. Specifically,
Job 101 required exactly the same number of backboards and brass plates as
the number of actual plaques shipped. However, Job 105 required four more
backboards and brass plates than the number actually shipped (34 versus 30).
This is illustrated as follows:
Job 101:
Materials
Walnut plaques:
Actual units used 40 units
Brass plates:
Actual units used 40 units
Expected units needed to produce 40 plaques 40 units
Difference 0 units
17-16
CHAPTER 17 Job Order Costing
Ex. 17–16 (FIN MAN); Ex. 2–16 (MAN) (Concluded)
Job 105:
Materials
Actual labor hours used 17 hours
Expected labor hours to produce 30 plaques 15 hours
(30 units × 30 min. per unit) ÷ 60 min. per hour
Difference 2 hours
Assembly:
Actual labor hours used 8.5 hours
Expected labor hours to produce 30 plaques 7.5 hours
b. Apparently, the engraving and assembly work is becoming sloppy. Job 105
required 34 engraved brass plates in order to get 30 with acceptable quality. It
is likely that the engraver is not being careful in correctly spelling the names.
The names should be supplied to the engraver, using large typewritten fonts,
so that it is easy to read the names. The engraver should be instructed to be
careful in engraving the names. The assembly operation also needs some
improvement. It took 34 assembly operations to properly assemble 30
17-17
CHAPTER 17 Job Order Costing
Ex. 17–17 (FIN MAN); Ex. 2–17 (MAN)
a. July 3 Work in Process (175 hrs. × $150) 26,250
Salaries Payable 26,250
31 Office Overhead 4,000
Supplies 4,000
31 Salaries Payable 74,350
Cash 74,350
*$26,250 + $12,500 + $48,100 + $30,000 + $26,970
b. Office overhead incurred ($28,500 + $4,000)……………
…
$32,500
Office overhead applied……………………………………… 26,970
Underapplied overhead………………………………………
…
$ 5,530
c. Fees earned……………………………………………………
…
$172,500
Cost of services*………………………………………………
…
149,350
Gross profit……………………………………………………
…
$ 23,150
*$143,820 + $5,530. Assumes the over- or underapplied office overhead is
closed to cost of services monthly.
Note to Instructors: The consultant fees and travel costs can be directly
assigned to the case and thus are not treated as office overhead. Costs such
17-18
CHAPTER 17 Job Order Costing
Ex. 17–18 (FIN MAN); Ex. 2–18 (MAN)
a. Work in Process 1,068,000
Salaries Payable
b. Work in Process 2,130,000
Accounts Payable
1,068,000
2,130,000
17-19
CHAPTER 17 Job Order Costing
Prob. 17–1A (FIN MAN); Prob. 2–1A (MAN)
a. Materials 634,000
Accounts Payable 634,000
e. Factory Overhead 29,200
Selling Expenses 26,800
Administrative Expenses 18,000
Prepaid Expenses 74,000
f. Depreciation Expense—Office Building 84,600
Depreciation Expense—Office Equipment 43,340
Factory Overhead 32,000
PROBLEMS
17-20