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Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
19-1
CHAPTER 19
JOB ORDER COSTING
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, 19-14
19-1
19-1, 19-2,
19-4, 19-5,
19-6, 19-7,
19-9
they are used in job order
costing.
19-8
Analytical objectives:
A1 Apply job order costing in
pricing services.
2, 14
19-13
19-18
Procedural objectives:
P1. Describe and record the flow of
materials costs in job order cost
accounting.
5, 6
19-3, 19-4,
19-10
19-4, 19-5,
19-6, 19-7,
19-8, 19-13,
19-19
19-1, 19-2,
19-3, 19-5, SP
GL, ES
19-8
P2. Describe and record the flow of
7
19-3, 19-5,
19-10
19-4, 19-5,
19-6, 19-7,
19-1, 19-2,
19-3, 19-5,
19-8
P3. Describe and record the flow of
overhead costs in job order
costing.
1, 2, 8, 11
19-3, 19-6,
19-7, 19-8,
19-9, 19-10,
19-4, 19-5,
19-6, 19-7,
19-10, 19-11,
19-12, 19-15,
19-16, 19-17
19-1, 19-2,
19-3, 19,-4,
19-5, SP, GL
19-3, 19-8
overapplied and underapplied
factory overhead.
19-13, 19-14,
19-15, 19-16
19-4, 19-5,
GL
*See additional information on next page that pertains to these quick studies, exercises and problems.
SP refers to the Serial Problem
GL refers to the General Ledger Problems
ES refers to Excel Simulations
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
19-2
Additional Information on Related Assignment Material
Connect
Available on the instructor’s course-specific website) repeats all numerical Quick Studies, all Exercises
and Problems Set A. Connect also provides algorithmic versions for Quick Study, Exercises and
Problems. It allows instructors to monitor, promote, and assess student learning. It can be used in
practice, homework, or exam mode.
Connect Insight
The first and only analytics tool of its kind, Connect Insight is a series of visual data displays that are each framed
The Serial Problem (SP) for Success Systems continues in this chapter.
General Ledger
Assignable within Connect, General Ledger (GL) problems offer students the ability to see how transactions post
from the general journal all the way through the financial statements. Critical thinking and analysis components are
added to each GL problem to ensure understanding of the entire process. GL problems are auto-graded and provide
instant feedback to the student.
Excel Simulations
Assignable within Connect, Excel Simulations allow students to practice their Excel skills—such as basic formulas
and formatting—within the context of accounting. These questions feature animated, narrated Help and Show Me
tutorials (when enabled). Excel Simulations are auto-graded and provide instant feedback to the student.
Synopsis of Chapter Revision
NEW opener—Neha Assar and entrepreneurial assignment.
Simplified discussion of cost accounting systems.
Simplified direct material and direct labor cost flows and entries.
Added time period information to graphic on 4-step overhead process.
Simplified discussion of recording overhead costs.
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
19-3
Chapter Outline
Notes
I. Job Order Costing
A. Cost accounting system
1. Accumulates manufacturing costs and assigns them to
products and services.
2. Provides timely information about inventories and costs
3. Two basic types of cost accounting systems are job order cost
accounting and process cost accounting.
a.. Job Order Production—producing products or providing
services individually designed to meet the needs of a
specific customer (special orders).
i. The production activities for a customized product is
called a job
ii. A job lot involves producing more than one unit of a
unique product.
b. Process Operations
i. Mass production of products in a continuous flow of
steps.
ii. Designed to mass produce large quantities of identical
products. Covered in Chapter 20.
B. Production Activities in Job Order Costing
an overview of job order production activity and cost flows is
shown in Exhibit 19.2
1. Cost Flows:
a. Because they are product costs, manufacturing costs flow
through inventory accounts (Raw Materials Inventory,
Work in Process Inventory, Finished Goods Inventory)
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
19-4
Chapter Outline
Notes
2. Job Cost Sheet—separate record maintained for each job used
to record costs.
a. Classifies costs as direct materials, direct labor, or
overhead.
b. Used by managers to monitor costs incurred to date and to
predict and control costs to complete each job.
c. Accumulated job costs are kept in the Work in Process
Inventory while goods are being produced.
d. Job cost sheets filed for all of the jobs in process make up
a subsidiary ledger controlled by the Work in Process
II. Materials and Labor Cost Flows
1. Cost Flows and Documents—the three cost components and
documents used to account for them are:
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 electronic files)—perpetual
2. Materials Purchases – includes direct and indirect materials.
Updates to individual materials ledger cards. Debit Raw
Materials Inventory to increase.
3. Materials Use (Requisition)
a. Materials Requisition⎯document identifying the type and
quantity of material needed in production. Job number is
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
19-5
Chapter Outline
Notes
4. Labor Cost Flows and Documents
a. Time tickets - used by employees to record hours worked.
Used to determine total labor costs for pay period. They
indicate how much time employees spent on each job and
b. Job Cost Sheets—accumulates the cost of direct labor
(from time tickets and related entry) as these costs are
incurred.
5. Overhead Cost Flows and Reports
a. Overhead costs can’t be traced to individual jobs. The
accounting for overhead follows a 4-step process shown in
Exhibit 19.11. Managers must first estimate total
overhead for the coming period. We can’t wait until the
b. Step 1: Set Predetermined Overhead Rate
i. Requires an estimated of total overhead cost and an
allocation factory such as total direct labor, total labor
hours, or total machine hours.
ii. Predetermined Overhead rate = Estimated overhead
costs divided by estimated activity based
iii. The allocation case should have a cause and effect
relation between the base and the overhead costs.
c. Step 2: Apply Estimated Overhead to Specific Jobs
i. Predetermined overhead rate times actual activity
where the activity is the allocation base such as direct
labor cost, direct labor hours, machine hours.
ii. The entry to record the applied overhead is a debit to
work in process inventory and a credit to factory
overhead.
iii. The overhead is allocated to each job based on the
resource the job used (rate x actual activity).
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
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Chapter Outline
Notes
d. Step 3: Record Actual Overhead costs
i. Actual factory overhead costs include indirect
materials, indirect labor, supplies, utilities, adjusting
entries for depreciation on factory assets, etc.
ii. Indirect materials ledger cards in factory overhead
ledger—accumulates indirect material costs as they
are placed into production. This subsidiary ledger is
iii. 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 Wages
Payable.
e. Step 4: Adjusting Factory Overhead—
i. Factory Overhead T-Account
a) The debit side shows the actual amount of factory
overhead incurred during the period based on bills
received.
b) The credit side shows the amount applied during
the period that was an estimate based on the
predetermined overhead rate.
d) A credit balance in the FOH account indicates
more was applied than incurred; an overapplied
FOH amount.
ii. Underapplied and Overapplied Overhead
a) Factory Overhead debit balance (underapplied
amount) is credited (closed) and debited (charged)
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
19-7
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) Work In
Process Inventory (direct materials) and (debit) Factory
Overhead (indirect materials) as good are requisitioned.
Direct material costs also accumulated on Job Cost Sheets.
f. From (credit) Factory Overhead and into (debit) Work In
Process as overhead costs are applied using overhead rate.
g. From (credit) Work In Process Inventory to (debit)
Finished Goods Inventory as jobs are completed. Full cost
from Job Cost Sheets.
h. From (credit) Finished Goods Inventory to (debit) Cost of
Goods Sold as goods are sold.
III. Decision Analysis—Pricing for Services
A. Service providers also use job order costing.
B. Procedure to determine:
1. Determine direct labor costs
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
19-8
VISUAL #19-1
Tracing Product Costs
Through a Cost Accounting System
Work in Process Finished Goods
Materials Inventory Inventory Inventory
(1) Buy Send (2) (2) Direct (7) Goods (7) Cost of (8) Goods
(4) Direct
(6) Overhead
costs
Factory Overhead Factory Payroll Cost of Goods Sold
(2) Indirect (6) Overhead (3) Labor (4) Labor (8)
(4) Indirect payables)
labor costs
(5) Other
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
19-9
VISUAL #19-2
Job Cost Sheet
Customer Build We Must, Inc. Job No. 114
Product Bracket-H3 Date Promised 10/1
Quantity 200 Dates: Started 9/1 Completed 9/20
Direct Material Direct Labor Cost Summary
Req’n. Summary
No. Amount Dated Dept. Amount Direct Labor 600.00
667 $ 340.00 9/2 A $ 70.00
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
19-10
Chapter 19 Alternate Demo Problem
The following information is the Work in Process and Factory Overhead
Accounts for Superior Company:
Work in Process Inventory
Beg Inv. 302,000
Direct Materials 280,000
Factory Overhead
Required:
1. Prepare a manufacturing statement for Superior Company for 2017.
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
19-11
Chapter 19 Solution: Alternate Demo Problem
SUPERIOR MANUFACTURING COMPANY
Manufacturing Statement
For Year Ended December 31, 2017
Direct materials used ...........................................
$280,000
Adjusting entry for under or over-applied overhead
Factory Overhead
Actual Overhead 98,000
96,000 Applied Overhead
