CH 19 FAP19 e

Chapter 19
Job Order Cost Accounting

QUESTIONS
1. Factory overhead is not identified with specific units (jobs) or batches (job lots).
Therefore, to assign costs, estimates of the relation between factory overhead cost
and job or job lot are necessary. Also, since job order cost accounting is a perpetual
system, we need to estimate a predetermined overhead rate to compute (perpetual)
inventory costs. This estimated amount also helps job order companies determine
prices on a timely basis.
2. Several other factors (allocation bases) are possible and reasonable. These common
factors often include direct materials or machine hours.
3. The job order cost sheet captures information on cost and quantity of direct material
and direct labor, and on the amount of factory overhead applied to the respective job
or job lot. Management and employees use this information to monitor costs during
production and to estimate total cost of production.
4. Each job is assigned a subsidiary ledger account. This account serves as the
posting account (accumulates all increases and decreases) during production for
direct material, direct labor, and applied factory overhead. The collection of job cost
sheets for all of the jobs in process make up a subsidiary ledger controlled by the
Goods in Process Inventory account in the general ledger.
When a job is finished, its job cost sheet is completed and moved from the file of jobs
in process to the file of finished jobs awaiting delivery to customers. This latter file
acts as a subsidiary ledger controlled by the Finished Goods Inventory account. In
this way, management and employees can obtain the costs, direct and indirect,
associated with any job or job lot at any time.
5. A debit (increase) to Goods in Process Inventory for direct materials, a debit
(increase) to Factory Overhead for indirect materials, and a credit (decrease) to Raw
Materials Inventory.
6. The materials requisition slip is designed to track the movement of materials from
raw materials to production. It also serves as an internal control document because
without the slip the inventory department should not release inventory to production.
7. The clock card is used to record the number of hours each employee works and is
used to compute total payroll. The time ticket is used to record how much time an
employee spends on each job. Time tickets are also used to determine the amount of
overhead to charge to jobs when overhead is based on direct labor.
McGraw-Hill Companies, 2009

Solutions Manual, Chapter 19
8. Debits (increases) to factory overhead are the recording of actual overhead costs,
such as indirect materials, indirect labor, factory rent, and factory insurance. Credits
(decreases) represent the allocation of factory overhead to jobs or job lots.
9. Assuming that the overapplied or underapplied overhead is immaterial, it is closed to
the Cost of Goods Sold account. However, if the amount is materialmeaning it
would change business decisions that rely on the informationthen the amount of
overapplied or underapplied overhead is allocated to goods in process, finished
goods, and cost of goods sold (using an allocation base such as direct labor).
10. This production run should be accounted for as a job lot (batch). Although individual
iPods could be viewed as individual jobs, the costs of tracking this detailed
information would outweigh the benefits. Determining the cost of the batch should
provide management and employees with sufficient information about this product
for all decision making purposes.
11. A predetermined factory overhead rate must be calculated for at least two reasons:
(1) Not all costs are known in advance, yet the costs must be applied to products
during the current period. (2) A predetermined rate is used to spread indirect costs
to products and/or services throughout an accounting period, where overhead costs
are not incurred uniformly throughout the period and production may not be uniform
throughout the period. For instance, property taxes on the factory building of $20,000
may be paid in July, but some of that $20,000 must be allocated to all items produced
during the year, January through December. A predetermined rate is necessary,
because we must estimate the rate at the beginning of the year, based on estimated
costs and activity, before the period begins.
12. Each patient in a hospital can be viewed as a job. In this case, a job order cost
sheet would be used to capture cost of direct materials (supplies, medicine, and so
forth), direct labor, and hospital overhead.
13. Each of the 30 luxury motorcycles will likely be accounted for as an individual job.
Although similar in many respects, each would have custom features that would
impact costs. As the luxury motorcycles are shipped to dealers each will have a
separate invoice detailing the cost associated with producing that motorcycle. Also,
the price of a custom-made motorcycle is probably large enough (in the area of
$20,000 to $50,000) that each would be accounted for individually.
14. GeekSquad employees can use job cost sheets to accumulate the costs (e.g. labor
and materials) used on each job. Managers can use this job cost information to
monitor whether the GeekSquad is meeting its target costs and producing reasonable
profits. This information can be used to adjust the prices of certain services and/or
cease providing certain services if the costs cannot be controlled to yield a
reasonable profit.

2
Fundamental Accounting Principles, 19th Edition
QUICK STUDIES
Quick Study 19-1 (5 minutes)
Manufactured as a job:
1, 4, 5
Manufactured as a job lot:
2, 3, 6

JOB COST SHEET
Direct materials cost
Q-4698......................................................................
Q-4725......................................................................
Direct labor cost
W-3393......................................................................
W-3479......................................................................
W-3559......................................................................
Overhead ($2,700 X 110%)...........................................
Total cost....................................................................
$2,500
2,000
1,200
900
600
$ 4,500
2,700
2,970
$10,170

Raw Materials Inventory.......................................
Cash.................................................................
25,000
25,000
To record raw material purchases.
Factory Overhead..................................................
Raw Materials Inventory.................................
6,000
6,000
To record raw materials used in production.
Goods in Process Inventory................................

16,000
16,000
To record raw materials used in production.


Factory Payroll......................................................
Cash.................................................................
75,000
75,000
To record factory payroll.

Factory Payroll................................................
46,000
29,000
75,000
To record direct and indirect labor.

1. Factory overhead, $58,500 / Direct labor, $234,000
= 25%
2. Factory overhead, $58,500 / Direct materials, $292,000 = 20%

Goods in Process Inventory (Job 65A)............... 234,000
Factory Overhead............................................
234,000
To apply overhead to job lot [($350,000$90,000) x 90%].

Cost of Goods Sold...............................................
Factory Overhead*..........................................
25,000
25,000
To assign underapplied overhead.

*Computation of over- or underapplied overhead
Actual overhead............................................ $475,000
Overhead applied ($300,000 x 150%)...........
450,000
Underapplied overhead................................ $ 25,000

4
EXERCISES
Exercise 19-1 (10 minutes)
1.
2.
G
E
3.
4.
D
F
5.
6.
A
C
7.

1. The cost of direct materials requisitioned in the month equals the total
direct materials costs accumulated on the three jobs less the amount of
direct materials cost assigned to Job 102 in May:
Job 102 .........................................................
Less prior costs............................................
Job 103 .........................................................
Job 104 .........................................................
Total materials used (requisitioned)..........
$25,000
(13,000)
$ 12,000
59,000
56,000
$127,000
2. Direct labor cost incurred in the month equals the total direct labor
costs accumulated on the three jobs less the amount of direct labor cost
assigned to Job 102 in May:
Job 102 .........................................................
Less prior costs............................................
Job 103 .........................................................
Job 104 .........................................................
Total direct labor..........................................
$14,000
(3,600)
$ 10,400
26,700
40,000
$ 77,100
3. The predetermined overhead rate equals the ratio between the amount
of overhead assigned to the jobs divided by the amount of direct labor
cost assigned to them. Since its assumed the rate is constant across
months in this exercise, and the same rate is used for all jobs within a
period, the ratio for any one of them equals the rate that was applied.
This table shows the ratio for jobs 102 and 104:
Overhead.......................................................
Direct labor...................................................
Ratio..............................................................
Job 102
$ 7,000
14,000
50%
Job 104
$20,000
40,000
50%

Exercise 19-2 (Continued)

4. The cost transferred to finished goods in June equals the total costs of
the two completed jobs for the month, which are Jobs 102 and 103:
Direct materials.......................
Direct labor..............................
Overhead..................................
Total transferred cost.............
Job 102
$ 25,000
14,000
7,000
$ 46,000
Job 103
$ 59,000
26,700
13,350
$ 99,050
Total
$ 84,000
40,700
20,350
$145,050

1.
Rate =
Estimated overhead costs

Estimated direct labor
$750,000
$500,000
150%
2.
Direct materials........................................................................
Direct labor...............................................................................
Overhead ($3,280 x 150%).......................................................
Total cost of Job No. 13-56.....................................................
$15,250
3,280
4,920
$23,450

1.
Rate =
Overhead costs
Direct material costs
$480,000
= $1,200,000
= 40%
2. Total cost of job in process (given).......................................

Less materials cost of job in process (given).......................
Less overhead applied (40,000 x 40%)..................................
Direct labor cost.......................................................................
$ 90,000
(40,000)
(16,000)
$ 34,000

6

1.
2.
3.
4.
5.
6.
Cost of direct materials used

Beginning raw materials inventory...................................
Plus purchases....................................................................
Raw materials available......................................................
Less ending raw materials inventory................................
Total raw materials used....................................................
Less indirect materials used..............................................
Cost of direct materials used.............................................
Cost of direct labor used
Total factory payroll............................................................
Less indirect labor..............................................................
Cost of direct labor used....................................................
Cost of goods manufactured
Beginning goods in process inventory............................
Plus direct materials...........................................................
Plus direct labor..................................................................
Plus overhead applied (55% of DLC)................................
Total cost of goods in process..........................................
Less ending goods in process inventory.........................
Cost of goods manufactured.............................................
Cost of goods sold
Beginning finished goods inventory.................................
Plus cost of goods manufactured.....................................
Less ending finished goods inventory.............................
Cost of goods sold..............................................................
Gross profit
Sales.....................................................................................
Cost of goods sold..............................................................
Gross profit..........................................................................
Overapplied or underapplied overhead
Indirect materials................................................................
Indirect labor.......................................................................
Other overhead costs.........................................................
Total actual overhead incurred..........................................
Overhead applied................................................................
Overapplied overhead........................................................
27,000
183,000
210,000
(41,000)
169,000
(6,000)
$ 163,000
$ 500,000
(74,000)
$ 426,000
$
9,000
163,000
426,000
234,300
832,300
(20,600)
$ 811,700
$
70,000
811,700
(33,000)
$ 848,700
$1,500,000
(848,700)
$ 651,300
$
6,000
74,000
95,500
175,500
234,300
$ 58,800


1.
Raw Materials Inventory.............................

Cash.......................................................
183,000
183,000
To record materials purchases.
2.
Goods in Process Inventory......................

Raw Materials Inventory.......................
163,000
163,000
To assign direct materials to jobs.
3.
Factory Overhead.......................................
Raw Materials Inventory.......................
6,000
6,000
To record indirect materials.
4.
Factory Payroll............................................
Cash.......................................................
500,000
500,000
5.

Factory Payroll......................................
426,000
426,000
To assign direct labor to jobs.
6.
Factory Payroll......................................
74,000
74,000
To record indirect labor.
7.
Other Accounts.....................................
95,500
95,500
To record other factory overhead.
8.

Factory Overhead.................................
234,300
234,300
To apply overhead to jobs.
9.
Finished Goods Inventory..........................

Goods in Process Inventory................
811,700
811,700
To record completion of jobs.
10.
Cost of Goods Sold....................................

Finished Goods Inventory....................
848,700
848,700
To record cost of sales of jobs.
Cash.............................................................
Sales.......................................................
1,500,000
1,500,000

8
......................................................................
To record sale of jobs.
11.
Cost of Goods Sold..............................
58,800
58,800
To allocate (close) overapplied overhead to

cost of goods sold.


1.
Predetermined overhead rate

Estimated overhead costs...............................................
$1,700,000
Estimated direct labor costs...........................................
$ 500,000
Rate ($1,700,000 / $500,000)............................................
340%
2. & 3.
Overhead
Incurred........ 1,710,000 Applied*............. 1,666,000
Underapplied
44,000
*Overhead applied to jobs = 340% x $490,000 = $1,666,000
4.
Dec. 31
Cost of Goods Sold...........................................

Factory Overhead........................................
44,000
44,000
To allocate underapplied overhead.

10

1.
Predetermined overhead rate

Estimated overhead costs................................................
$1,500,000
Estimated direct labor costs.............................................
$1,250,000
Rate ($1,500,000 / $1,250,000)...........................................
120%
2. & 3.
Factory Overhead
Incurred............
Underapplied. . .
1,660,000 Applied*.........
1,644,000
16,000
*Overhead applied to jobs = 120% x $1,370,000 = $1,644,000
4.
Dec. 31
Cost of Goods Sold...................................

Factory Overhead................................
16,000
16,000
To allocate underapplied overhead.

11

1.
Overhead rate = Total overhead costs applied / Total direct labor costs
= $1,200,000 / $2,000,000 = 60%
2.
Total cost of goods in process inventory............................
Deduct: Direct labor...............................................................
Deduct: Factory overhead ($13,000 x 60%).........................
Direct materials.......................................................................
$ 54,000
(13,000)
( 7,800)
$ 33,200
Total cost of finished goods inventory................................

Deduct: Direct materials.......................................................
Direct labor and factory overhead costs..............................
$337,435
(137,435)
$200,000
3.
We also know that the total of direct labor costs (X) and factory
overhead costs (0.6X) equals $200,000. Thus, to get the individual
amounts we need to solve: [X + 0.6X = $200,000]. The solution is:
Direct labor costs = $125,000
Factory overhead costs = $125,000 x .6 = $75,000

12

1. Overhead rate
=
=
Total estimated overhead cost_

Total estimated direct labor cost
$750,000 / $600,000 = 125%
2. Cost of the two ending inventories

Goods in Process
Cost
Total
per Unit Units
Cost
Finished Goods
Cost
Total
per Unit Units
Cost
Direct materials...
$20.00 10,000
$200,000
$24.00 12,000
$288,000
Direct labor..........
14.00 10,000
140,000
18.00 12,000
216,000
Overhead (125%
of labor)..............
17.50 10,000
175,000
22.50 12,000
270,000
Total......................
$51.50
$515,000
$64.50
$774,000
3.
Step 1
Cost of goods manufactured

Direct materials cost.................................................................
Direct labor cost........................................................................
Factory overhead cost applied................................................
Total manufacturing costs.......................................................
Add beginning goods in process............................................
Total cost of goods in process................................................
Less ending goods in process................................................
Cost of goods manufactured...................................................
$1,070,000
580,000
725,000
2,375,000
0
2,375,000
(515,000)
$1,860,000
Step 2
Cost of goods sold

Beginning finished goods........................................................
Add cost of goods manufactured............................................
Goods available for sale
Less ending finished goods.....................................................
Cost of goods sold....................................................................
$
0
1,860,000
1,860,000
(774,000)
$1,086,000

13

1.
Estimated cost of the architectural job
Labor type
Architects.....................
Staff...............................
Clerical..........................
Estimated
hours
300
300
600
Hourly rate
$400
65
20
Total labor cost..................................................................

Overhead @ 160% of direct labor cost............................
Total estimated cost..........................................................
Total cost
$ 120,000
19,500
12,000
151,500
242,400
$ 393,900
2. Troy should first determine an estimated selling price, based on its cost
and desired profit for this job
Total estimated cost........................................................... $ 393,900
Desired profit.....................................................................
90,000
Estimated selling price..................................................... $ 483,900
This $483,900 price may or may not be the bid. Troy must consider past
experiences and competition. It might make the bid at the low end of
what it believes the competition will bid. By bidding at about $450,000,
the profit on the job will only be $56,100 ($450,000 $393,900). While
this may allow Troy to get the job, it must consider several other factors.
Among them:
a. How accurate are its estimates of costs? If costs are understated,
the bid may be too low. This will cause profits to be lower than
anticipated. If costs are overestimated, it may bid too high and
lose the job.
b. How accurate is the estimate of the competitions probable
bidding range? If it has underestimated the low end, it may be
unnecessarily underbidding. If it has overestimated the low end, it
may lose the job.
c. Is it willing to meet the expected low bid of the competition? In the
example above, would it be acceptable to earn only $56,100 on this
job (about a 12% gross profit ratio), rather than the normal $90,000
(20% gross profit ratio)? Can it earn a better profit on another job?
There is no exact answer to these questions, but Troy must consider
these and other factors before it submits the bid.

14
PROBLEM SET A
Problem 19-1A (80 minutes)
Part 1
Total manufacturing costs and the costs assigned to each job
306
From March
Direct materials.............
Direct labor....................
Applied overhead*.........
Beginning goods
in process..................
For April
Direct materials.............
Direct labor ...................
Applied overhead*.........
Total costs added
in April.........................
Total costs.....................
307
308
April Total
9,000
19,000
12,350
$ 17,000
5,000
3,250
40,350
25,250
75,000
31,000
20,150
160,000
74,000
48,100
$ 65,000
100,000
65,000
300,000
205,000
133,250
126,150
$166,500
282,100
$307,350
230,000
$230,000
638,250
$703,850
$ 65,600
*Equals 65% of direct labor cost.
Part 2
Journal entries for April
a.

Accounts Payable...........................................
310,000
310,000
Factory Payroll......................................................
Cash.................................................................
224,000
224,000
25,000
25,000
To record indirect materials.
Factory Payroll................................................
19,000
19,000
To record indirect labor.

15
Problem 19-1A (Continued)

a.
[continued from prior page]
Cash.................................................................
25,000
25,000
To record factory rent.
Cash.................................................................
13,000
13,000
To record factory utilities.
Accumulated DepreciationFactory Equip.
41,000
41,000
b.

300,000
300,000
To assign direct materials to jobs.

Factory Payroll................................................
205,000
205,000
To assign direct labor to jobs.

133,250
133,250
To apply overhead to jobs.
c.
Finished Goods Inventory (306 & 307).................

Goods in Process Inventory..........................
473,850
473,850
To record jobs completed ($166,500 + $307,350).
d.
Cost of Goods Sold (306)......................................

Finished Goods Inventory..............................
166,500
166,500
To record cost of sale of job.
e.
Cash.......................................................................
Sales.................................................................
................................................................................
400,000
400,000
To record sale of job.
f.
Factory Overhead*................................................
Cost of Goods Sold.........................................
10,250
10,250
To assign overapplied overhead.

*Overhead applied to jobs................
Overhead incurred
$133,250

16
Indirect materials...........................
Indirect labor..................................
Factory rent....................................
Factory utilities..............................
Factory equip. depreciation..........
Overapplied overhead...................
$25,000
19,000
25,000
13,000
41,000
123,000
$ 10,250

17

Part 3
LEMMON COMPANY
Manufacturing Statement
For Month Ended April 30
Direct materials used.......................................................
Direct labor used..............................................................
Factory overhead
Indirect materials...........................................................
Indirect labor..................................................................
Factory rent....................................................................
............................................................................................
Factory utilities..............................................................
Depreciation of equipment............................................
Total manufacturing costs...............................................
Add goods in process, March 31 (306 & 307).................
Total cost of goods in process........................................
Deduct goods in process, April 30 (308)........................
Add overapplied overhead*.............................................
Cost of goods manufactured (306 & 307).......................
$ 300,000
205,000
$25,000
19,000
25,000
13,000
41,000
123,000
628,000
65,600
693,600
(230,000)
10,250
$ 473,850
*Alternatively, overapplied overhead can be listed among factory overhead items.
Part 4
Gross profit on the income statement for the month ended April 30
Sales
Cost of goods sold ($166,500 - $10,250)...........................................
Gross profit.........................................................................................
$ 400,000
(156,250)
$ 243,750
Presentation of inventories on the April 30 balance sheet

Inventories
Raw materials .....................................................................................
Goods in process (Job 308)...............................................................
Finished goods (Job 307)...................................................................
Total inventories ................................................................................
* Beginning raw materials inventory...........
Purchases..................................................
Direct materials used................................
Indirect materials used.............................
Ending raw materials inventory...............
$ 155,000*
230,000
307,350
$ 692,350
$ 170,000
310,000
(300,000)
(25,000)
$ 155,000
Part 5
18
Overhead is overapplied by $10,250, meaning that individual jobs or batches of

jobs are over-costed. Thus, profits at the job (and batch) level are understated.

19

Part 1
a.
Dec. 31
Goods in Process Inventory.............................

11,200
11,200
To record direct materials costs for

Jobs 402 and 404 ($4,100 + 7,100).
b.
Dec. 31

Factory Payroll............................................
17,000
17,000
To record direct labor costs for

Jobs 402 and 404 ($2,000 + $15,000).
c.
Dec. 31

25,500
25,500
To allocate overhead to Jobs 402 and 404

at 150% of direct labor cost assigned.
d.
Dec. 31
Factory Overhead..............................................
2,400
2,400
To add cost of indirect materials

to actual factory overhead.
e.
Dec. 31
Factory Overhead..............................................
Factory Payroll............................................
1,000
1,000
To add cost of indirect labor to

actual factory overhead.
Part 2
Revised Factory Overhead account
Ending balance from trial balance........................................
Applied to Jobs 402 and 404.................................................
Additional indirect materials.................................................
Additional indirect labor........................................................
Underapplied overhead.........................................................
Dec. 31
Cost of Goods Sold...........................................

$ 26,000 debit
(25,500) credit
2,400 debit
1,000 debit
$ 3,900 debit
3,900
3,900
To remove $3,900 of underapplied overhead

from the Factory Overhead account and add
20
it to cost of goods sold.

21

Part 3
MEAD BAY COMPANY
Trial Balance
December 31, 2009
Debit
Cash
Accounts receivable.....................................................
Raw materials inventory *............................................
Goods in process inventory **....................................
Finished goods inventory ...........................................
Prepaid rent ..................................................................
Accounts payable ........................................................
Notes payable ..............................................................
Common stock .............................................................
Retained earnings .......................................................
Sales .............................................................................
Cost of goods sold ($112,000 + $3,900)..........................
Factory payroll..............................................................
Factory overhead..........................................................
Operating expenses.....................................................
Totals.............................................................................
* Raw materials inventory
Balance per trial balance................................................
Less: Amounts recorded for Jobs 402 and 404..........
Less: Indirect materials.................................................
Ending balance................................................................
Credit
$ 40,000
34,000
8,400
53,700
12,000
4,000
$ 8,500
11,500
40,000
84,000
178,000
115,900
0
0
54,000
$322,000
_______
$322,000
$22,000
(11,200)
(2,400)
$ 8,400
** Goods in process inventory
Direct materials..........
Direct labor.................
Overhead....................
Total cost....................
Job 402
$ 4,100
2,000
3,000
$ 9,100
Job 404
$ 7,100
15,000
22,500
$44,600
Total
$11,200
17,000
25,500
$53,700

22

Part 4
MEAD BAY COMPANY
Income Statement
For Year Ended December 31, 2009
Sales........................................................................................
Cost of goods sold.................................................................
Gross profit.............................................................................
Operating expenses...............................................................
Net income..............................................................................
$178,000
(115,900)
62,100
(54,000)
$ 8,100
MEAD BAY COMPANY

Balance Sheet
December 31, 2009
Assets
Cash.........................................................................
Accounts receivable..............................................
Inventories
Raw materials inventory.......................................
Goods in process inventory.................................
Finished goods inventory.....................................
Prepaid rent............................................................
Total assets.............................................................
Liabilities and Equity
Accounts payable...................................................
Notes payable.........................................................
Total liabilities........................................................
$ 40,000
34,000
$ 8,400
53,700
12,000
74,100
4,000
$152,100
$
8,500
11,500
20,000
Common stock.......................................................
Retained earnings ($84,000 + $8,100).....................
Total stockholders' equity.....................................
40,000
92,100
132,100
Total liabilities and equity.....................................
$152,100
Part 5
This $2,400 error would cause the costs for Job 404 to be understated. Since Job
404 is in process at the end of the period, goods in process inventory and total
assets would both be understated on the balance sheet. In addition, the over- or
underapplied overhead would change by $2,400. That is, if overhead is
underapplied by, say, $3,900, this amount would decrease by $2,400 when the
error is corrected. Since underapplied overhead is charged directly to cost of
goods sold, then cost of goods sold would decrease by $2,400 and net income
23
would increase by $2,400yielding a $2,400 increase in retained earnings on the

balance sheet.

24

Part 1
JOB COST SHEETS
Job No. 136
Materials
Labor
Overhead
Total cost
Job No. 137
Materials
Labor
Overhead
Total cost
$ 50,000
12,100
24,200
$ 86,300
Job No. 138

Materials
Labor
Overhead
Total cost
$ 19,800
37,500
75,000
$132,300
$ 33,000
10,800
21,600
$ 65,400
Job No. 139

Materials
Labor
Overhead
Total cost
$ 22,600
39,400
78,800
$140,800
Job No. 140

Materials
Labor
Overhead
Total cost
$ 6,800
3,200
6,400
$ 16,400
Part 2
a.

Accounts Payable...........................................
200,000
200,000
b.
Factory Payroll......................................................
Cash.................................................................
130,000
130,000
c.
Cash.................................................................
16,000
16,000
d.

132,200
20,000
152,200
To record direct & indirect materials.

25

e.
[continued from prior page]

Factory Payroll................................................
103,000
27,000
130,000
To record direct & indirect labor.
f.

178,000
178,000
To apply overhead to jobs

[($12,100 + $37,500 + $39,400) x 200%].
g.
Finished Goods Inventory....................................

Goods in Process Inventory..........................
359,400
359,400
To record completion of jobs

($86,300 + $132,300 + $140,800).
h.
Accounts Receivable............................................
Sales.................................................................
................................................................................
550,000
550,000
To record sales on account.
Cost of Goods Sold...............................................

Finished Goods Inventory..............................
218,600
218,600
To record cost of sales ($86,300 + $132,300).
i.
Accum. DepreciationFactory Building......
Accum. DepreciationFactory Equipment. .
Prepaid Insurance...........................................
Property Taxes Payable.................................
152,000
68,500
37,500
11,000
35,000
j.

28,000
28,000
To apply overhead to jobs

[($10,800 + $3,200) x 200%].

26

Part 3
GENERAL LEDGER ACCOUNTS
Raw Materials Inventory
(a)
200,000 (d)
152,200
Bal.
47,800
(b)
Bal.
Factory Payroll
130,000 (e)
0
Goods in Process Inventory

(d)
132,200 (g)
359,400
(e)
103,000
(f)
178,000
(j)
28,000
Bal.
81,800
(c)
(d)
(e)
(i)
Bal.
Factory Overhead
16,000 (f)
178,000
20,000 (j)
28,000
27,000
152,000
9,000
(h)
Bal.
Cost of Goods Sold

218,600
218,600
Finished Goods Inventory

(g)
359,400 (h)
218,600
Bal.
140,800
130,000
Part 4
Reports of Job Costs*
Job 137................................
$ 65,400
Job 140................................
16,400
Balance................................
$ 81,800
Job 139................................
Balance................................
$140,800
$140,800
Cost of Goods Sold

Job 136................................
Job 138................................
Balance................................
$ 86,300
132,300
$218,600
*Individual totals reconcile with account balances in part 3.

27

Part 1
a. Predetermined overhead rate
Estimated overhead costs
Estimated direct labor cost
$1,800,000
= [50 x 2,000 x $30] =
$1,800,000
$3,000,000 = 60%
b. Overhead costs charged to jobs

Direct
Labor
Applied
Overhead (60%)
201................................................................
$ 604,000
$ 362,400
202................................................................
573,000
343,800
203................................................................
318,000
190,800
204................................................................
726,000
435,600
205................................................................
324,000
194,400
206................................................................
27,000
16,200
Total..............................................................
$2,572,000
$1,543,200
Job No.
c. Overapplied or underapplied overhead determination

Actual overhead cost..................................
Less applied overhead cost.......................
Underapplied overhead..............................
$1,554,900
1,543,200
$ 11,700
Part 2
Dec. 31
Cost of Goods Sold..............................................

Factory Overhead...........................................
11,700
11,700
To assign underapplied overhead.

28
JOB COST SHEET

Customer's Name
Global Company
Direct Materials
Date
Requisition
Number
#35
#36
Amount
16,875
6,480
Job No.
Direct Labor
Time
Ticket
Number
Amount
#1-10
45,000
102
Overhead Costs Applied

Date
Rate
May ---
80%
Amount
36,000
SUMMARY OF COSTS
Dir. Materials.........
23,355
Dir. Labor..............
45,000
Overhead..............
36,000
Total cost of Job. .
104,355
Total
23,355
Total
45,000
FI
N I S H E D
JOB COST SHEET

Customer's Name
Kaddo Company
Direct Materials
Date
Requisition
Number
#37
#38
Amount
8,750
3,420
Job No.
Direct Labor
Time
Ticket
Number
Amount
#11-30
32,500
103
Overhead Costs Applied

Date
Rate
May ---
80%
Amount
26,000
SUMMARY OF COSTS
Dir. Materials.........
Dir. Labor..............
Overhead..............
______
Total cost of Job. .
.
Total
Total

29
MATERIALS LEDGER CARD

Item
Material M
Received
Date
Receiving
Report
Units
Issued
Unit
Price
Total
Price
Requisition
Balance
Unit
Price
Units
Total
Price
May
1
#426
250
125
31,25
0
#35
135
125
#37
70
125
16,87
5
8,750
Units
Unit
Price
Total
Price
200
125
25,000
450
125
56,250
315
125
39,375
245
125
30,625
Total Price
Units
Unit
Price
95
90
8,550
185
113
75
90
90
90
16,650
10,170
6,750

Item
Material R
Received
Date
Receiving
Report
Units
Issued
Unit
Price
Total
Price
Requisition
Balance
Unit
Price
Units
Total
Price
May
1
#427
90
90
8,100
#36
#38
72
38
90
90
6,480
3,420

Item
Paint
Received
Date
Receiving
Report
Units
Issued
Unit
Price
Total
Price
Requisition
Units
Balance
Unit
Price
Total
Price
May
1
#39
15
40
600
Units
Unit
Price
Total
Price
55
40
2,200
40
40
1,600

30

GENERAL JOURNAL
a.
Raw Materials Inventory........................................

Accounts Payable............................................
39,350
39,350
To record materials purchases ($31,250 + $8,100).
d.
Factory Payroll.......................................................
Cash...................................................................
87,125
87,125
Factory Overhead...................................................
Cash...................................................................
51,000
51,000
e.
Finished Goods Inventory.....................................

Goods in Process.............................................
104,355
104,355
To record completion of job.
f.
Accounts Receivable.............................................
Sales..................................................................
200,000
200,000
To record sales on account.
Cost of Goods Sold................................................

Finished Goods Inventory...............................
104,355
104,355
To record cost of sales.
h.
Goods in Process Inventory*................................

Raw Materials Inventory..................................
35,525
600
36,125
To record direct & indirect materials.

*($16,875 + $6,480 + $8,750 + $3,420)
i.
Goods in Process Inventory*................................

Factory Payroll.................................................
77,500
9,625
87,125
To record direct & indirect labor.

*($45,000 + 32,500)
j.
Goods in Process Inventory..................................

Factory Overhead.............................................
62,000
62,000
To apply overhead ($36,000 + 26,000).

31

GENERAL LEDGER
Cash
Accounts Receivable
(d)
(d)
87,125
51,000
138,125
(f)
Sales
(f)
200,000
(f)

(e)
104,355 (f)
104,355
0
Raw Materials Inventory
Bal.
35,750 (h)
36,125
(a)
39,350
38,975
(d)
(h)
(i)
Factory Overhead
51,000 (j)
62,000
600
9,625
775
200,000
Cost of Goods Sold

104,355
Accounts Payable
(a)
(h)
(i)
(j)
(d)
39,350

35,525 (e)
104,355
77,500
62,000
70,670
Factory Payroll
87,125 (i)
0
87,125
Factory Overhead Subsidiary Ledger

Indirect Materials
(b)
600
Indirect Labor
(c)
9,625
Miscellaneous Overhead
(d)
51,000

32

Computation notes
1. Balance in Raw Materials Inventory
Material M...........................................
Material R...........................................
Paint ..................................................
Total raw materials............................
$ 30,625
6,750
1,600
$ 38,975
2. Balance in Goods in Process Inventory

Materials............................................. $ 12,170
Labor..................................................
32,500
Overhead............................................
26,000
Total goods in process..................... $ 70,670
3. Factory Overhead
Actual Factory Overhead
Miscellaneous overhead................
Indirect materials............................
Indirect labor..................................
Total actual factory overhead........
Factory overhead applied.................
Overapplied overhead.......................
$ 51,000
600
9,625
61,225
62,000
$ 775

33

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Chapter 19

Job Order Cost Accounting

McGraw-Hill Companies, 2009

McGraw-Hill Companies, 2009

Fundamental Accounting Principles, 19th Edition

Manufactured as a job lot:

Quick Study 19-2 (15 minutes)

Quick Study 19-3 (15 minutes)

To record raw material purchases.

To record raw materials used in production.

Goods in Process Inventory................................

To record raw materials used in production.

McGraw-Hill Companies, 2009

Quick Study 19-4 (10 minutes)

To record factory payroll.

Goods in Process Inventory................................

To record direct and indirect labor.

Quick Study 19-5 (10 minutes)

2. Factory overhead, $58,500 / Direct materials, $292,000 = 20%

Quick Study 19-6 (10 minutes)

To apply overhead to job lot [($350,000$90,000) x 90%].

Quick Study 19-7 (15 minutes)

To assign underapplied overhead.

McGraw-Hill Companies, 2009

Fundamental Accounting Principles, 19th Edition

Exercise 19-2 (25 minutes)

McGraw-Hill Companies, 2009

Exercise 19-2 (Continued)

Exercise 19-3 (15 minutes)

Estimated overhead costs

Exercise 19-4 (20 minutes)

2. Total cost of job in process (given).......................................

McGraw-Hill Companies, 2009

Fundamental Accounting Principles, 19th Edition

Exercise 19-5 (30 minutes)

Cost of direct materials used

McGraw-Hill Companies, 2009

Exercise 19-6 (30 minutes)

Raw Materials Inventory.............................

To record materials purchases.

Goods in Process Inventory......................

To assign direct materials to jobs.

To record indirect materials.

To record factory payroll.

Goods in Process Inventory......................

To assign direct labor to jobs.

To record indirect labor.

To record other factory overhead.

Goods in Process Inventory......................

To apply overhead to jobs.

Finished Goods Inventory..........................

To record completion of jobs.

Cost of Goods Sold....................................

To record cost of sales of jobs.

McGraw-Hill Companies, 2009

Fundamental Accounting Principles, 19th Edition

To allocate (close) overapplied overhead to

McGraw-Hill Companies, 2009

Exercise 19-7 (25 minutes)

Predetermined overhead rate

Estimated direct labor costs...........................................

Rate ($1,700,000 / $500,000)............................................