1. Managerial Accounting Second Edition Weygandt / Kieso / Kimmel
Prepared by:
Ellen L. Sweatt
Georgia Perimeter College
ELS

2. Job Order Cost Accounting

3. Cost Accounting
An area of accounting that involves:
Measuring
Recording
Reporting
PRODUCT COSTS

4. Why Do We Need Product Costs?
To determine:
Which products to produce?
What price to charge?
What amounts to produce?
What evaluation to give employees?

5. Cost Accounting System
Manufacturing cost accounts that are fully integrated into the general ledger of the company.
Perpetual inventory system used
to provide, immediate up-to-date
information on cost of product.

6. Two Cost Accounting Systems
Job Order Cost System
Process Cost System

7. Job Order System
A cost accounting system where costs are assigned to each job or batch of goods.
Custom built factory
Production of movie
Batch of menus
Audit engagement

8. Job Order Cost System Two Jobs: Wedding Invitations and Menus $ $ $
Illustration 2-1
Job Order Cost System
Two Jobs: Wedding Invitations and Menus
Job #9501
Black ink $
Typesetting $
225 Invitations $
225 Envelopes $
Vellum stock $ $
Colored Ink $
Job #9502
Typesetting
Yellow Stock
Yellow stock
Lamination$
50 Copies $ $
Each job has distinguishing characteristics and related costs.

9. Process Cost System
A system of accounting used by companies that manufacture
Relatively homogeneous (same or similar) products
Through a series of continuous processes or operations.

10. Compact Disc Production
Illustration 2-2
Process Cost System
Compact Disc Production
1. Oil is pumped.
2. Benzene is removed.
3. The benzene is made into pellets...
4. ...from which compact discs are made.
Relatively similar products are produced over a specified time period.

11. Illustration 2-3
Job Order Cost Flow

12. Job Order Cost Accounting
Illustration 2-4
Job Order Cost Accounting

13. Two Major Steps in Flows of Costs
Accumulating the manufacturing costs incurred
Raw materials inventory
Factory Labor
Manufacturing Overhead
Assigning the accumulated costs to the work done

14. Material Inventory Record
Illustration 2-5
Each individual item of raw materials has a card or record.
The sum of the balances of all these records should equal raw materials in the general ledger.

15. Summary Entry
A journal entry that summarizes the total from multiple transactions.

16. Accumulating Manufacturing Costs
Date
Account Titles and Explanation
Debit
Credit
(3)
Jan. 31
Manufacturing Overhead
Utilities Payable
Prepaid Insurance
Accounts Payable - for repairs
Accumulated Depreciation
Property Taxes Payable
(To record overhead costs)
13,800
4,800 2,000 2,600 3,000 1,400
(2)
Factory Labor
Factory Wages Payable
Employer Payroll Taxes Payable
(To record factory labor costs)
32,000
27,000
5,000
(1)
Jan. 4
Raw Materials Inventory
Accounts Payable
(Purchase of raw materials on account)
42,000

17. Illustration 2-6
Job Cost Sheet
A form used to record the costs chargeable to a job to determine:
the total and
unit cost
of the
completed
job.

18. Materials Requisition Slip
Illustration 2-7
Materials Requisition Slip
A document authorizing the issuance of raw materials from the store to production.
Wallace Manufacturing Company
Materials Requisition Slip
Deliver to:
Assembly Department
Req. No.
R247
Charge to:
Work in Process – Job No. 101
Date
1/6/96
Quantity
Description
Stock No.
Cost Per Unit
Total
200
Handles
AA2746
$5.00
$1,000
Requested by:
Received by:
Approved by:
Costed by:

19. Job Cost Sheets – Direct Materials
Illustration 2-8
Job Cost Sheets – Direct Materials

20. Illustration 2-10
Time Ticket
A document that indicates the employee, the hours worked, the account and the job to be charged, and the total labor cost.
Bob Kadler
M.Cher

21. Job Cost Sheets – Direct Labor
Illustration 2-11
Job Cost Sheets – Direct Labor

22. Predetermined Overhead Rate
Illustration 2-12
Predetermined Overhead Rate
A rate based on the relationship between estimated annual overhead costs and expected annual operating activity, expressed in terms of a common activity base.
Estimated Annual Overhead Costs
Expected Annual Operating Activity ÷ =
Predetermined Overhead Rate

23. Using Predetermined Overhead Rate
Illustration 2-13
Using Predetermined Overhead Rate X
Activity Base
Predetermined Overhead Rate
is assigned to
Work in Process
Job 1
Job 2
Job 3

24. Job Cost Sheets – Manufacturing Overhead Applied
Illustration 2-14
Job Cost Sheets – Manufacturing Overhead Applied

25. Assigning Manufacturing Costs
Date
Account Titles and Explanation
Debit
Credit
(4)
Jan. 31
Work in Process Inventory
Manufacturing Overhead
Raw Materials Inventory
(To assign materials to jobs and overhead)
24,000
6,000
30,000
(5)
Factory Labor
(To assign labor to jobs and overhead)
28,000 4,000
32,000
(6)
(To assign overhead to jobs)
22,400

26. Jobs Completed and Sold
Date
Account Titles and Explanation
Debit
Credit
(1)
Jan. 31
Accounts Receivable
Sales
Cost of Goods Sold
To record cost of Job 101A
24,000
18,000
Finished Goods Inventory
To record sale of Job 101A

27. Job Order Cost Accounting
Illustration 2-18
Job Order Cost Accounting
Flow of Costs
Key to Entries: 7 5 8 4 6

28. Underapplied Overhead
A situation in which overhead assigned to work in process is less than the overhead incurred.

29. Overapplied Overhead
A situation in which overhead assigned to work in process is greater than the overhead incurred.

30. Under- or Overapplied Manufacturing Overhead
Year-End Balance- adjust to Cost of Goods Sold
Date
Account Titles and Explanation
Debit
Credit
(5)
Dec. 31
Manufacturing Overhead
2,500
2,500
Cost of Goods Sold
(To transfer overapplied overhead to cost of goods sold)

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