University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

362

Pages:

2
Author:

stud_ice13

Job Order Costing Overview 1. Job: A job is the production of a unique, custom product. o A job lot involves producing multiple units of the same custom product. o A job cost sheet records costs associated with each job or job lot. 2. Cost Components: o Direct Materials: Materials specifically used and identifiable with a particular job. o Direct Labor: Employee labor directly involved in producing a specific job. o Overhead: Costs that support the production of multiple jobs, allocated using a predetermined rate. o Flow of Manufacturing Costs 1. Materials and Labor Costs: o Acquire raw materials and record direct materials used for each job. o Record direct labor used for job-specific work. 2. Overhead Costs: o Indirect materials and indirect labor costs support overall production. o Apply overhead using a predetermined rate to allocate costs to jobs. o Record actual overhead costs and track job completion. 3. Recording Job Completion and Sales: o Record completion and transfer costs to Finished Goods Inventory. o Record Cost of Goods Sold (COGS) for jobs sold. o Record sales revenue for jobs sold. 4. Closing Overhead: o Close any underapplied or overapplied overhead to COGS at the end of the period. Key Terms • • • • • Predetermined Overhead Rate: Rate used to allocate overhead based on estimated costs. Underapplied/Overapplied Overhead: Difference between actual and applied overhead costs. Work in Process (WIP) Inventory: Costs for jobs still in production. Finished Goods Inventory: Costs of completed jobs awaiting sale. Cost of Goods Sold (COGS): Expense of goods sold during the period. Multiple Choice Quiz Solutions 1. Question: A company’s overhead rate is 150% of direct labor costs. For a job with $30,000 in direct labor costs, how much overhead is applied? o Answer: 30,000×150%=45,00030,000 \times 150\% = 45,00030,000×150%=45,000 (Option c). 2. Question: A company applies overhead using direct labor costs. With direct materials at $45,000, direct labor at $35,000, and applied overhead at $38,500, what is the predetermined overhead rate? o Answer: 38,500/35,000=110%38,500 / 35,000 = 110\%38,500/35,000=110% (Option b). 3. Question: A company’s ending finished goods inventory totals $10,000 for 500 units. Overhead applied is $4,000 with an 80% overhead rate based on direct labor. Calculate the direct materials cost. o Answer: Direct materials = $1,000 (Option e). 4. Question: Given a Work in Process Inventory T-account with various transactions, determine the cost of goods manufactured. o Answer: $176,200 (Option e). 5. Question: At period-end, a company has $1,500 of underapplied overhead, which is immaterial. What should the company do? o Answer: Debit COGS for $1,500 (Option c).