1. a.Job order cost system and process cost system.

• a.Job order cost system and process cost system.

b.The job order cost system provides a separate record of each quantity of product that passes through the factory.c.Process cost systems accumulate costs for each department or process within a factory.

2.Job order costing is used by firms that sell custom goods and services to customers. The job order system is frequently associated with firms that will produce a product or service specifically to a customer order.

3.Work in process

• 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 materials, labor, and overhead are listed on each separate job cost sheet for each job. A summary of all the job cost sheets during an accounting period is the basis for journal entries to the control accounts.

6.The clock card is a means of recording the hours spent by employees in the factory. The time ticket is a means of recording the time the employee spends on a specific job.

7.The predetermined overhead rate is computed using estimated amounts at the beginning of the period. This is because managers need timely information on the product costs of each job. If a company waited until all overhead costs were known at the end of the period, the allocated factory overhead would be accurate, but not timely. Only through timely reporting can managers adjust manufacturing methods or product pricing.

• a.The predetermined factory overhead rate is determined by dividing the estimated total factory

overhead costs for the forthcoming year by an estimated activity base, one that reflects the consumption or use of factory overhead costs.b.Direct labor cost, direct labor hours, and machine hours.

• (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 overhead incurred is underapplied.b.Underapplie d c.Deferred credit

CHAPTER 17 (FINMAN); CHAPTER 2 (MAN)

JOB ORDER COSTING

DISCUSSION QUESTIONS

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DISCUSSION QUESTIONS (Continued) 10.Job order cost accumulation would be most appropriate for professional service firms that provide extended, project-type services for clients. Examples would be architectural, consulting, advertising, or legal services. Job cost sheets would accumulate all direct costs of servicing the client. Such costs would include labor, materials, travel, and subcontracted services. In addition, overhead would be applied using a predetermined overhead rate. The costs accumulated by the job cost sheet would be treated as work in process (a current asset) until the service is completed. Once completed, the cost would be transferred to the cost of services on the income statement.17-2 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

PE 17–1A (FIN MAN); PE 2–1A (MAN)

• Materials 576,000

Accounts Payable 576,000

$576,000 = 72,000 × $8.

19 Work in Process* 520,000 Materials 520,000 * Job 60 $224,000 = 32,000 × $7 Job 61 296,000

= 37,000 × $8

Total $520,000

PE 17–1B (FIN MAN); PE 2–1B (MAN)

• Materials 168,000

Accounts Payable 168,000

$168,000 = 12,000 × $14.

24 Work in Process* 126,800 Materials 126,800 * Job 40 $ 40,000 = 5,000 × $8 Job 42 86,800

= 6,200 × $14

Total $126,800

PE 17–2A (FIN MAN); PE 2–2A (MAN)

Work in Process* 837,000 Wages Payable 837,000 * Job 60 $360,000 = 15,000 hours × $24.00 Job 61 477,000 = 18,000 hours × $26.50 Total $837,000

PE 17–2B (FIN MAN); PE 2–2B (MAN)

Work in Process* 186,200 Wages Payable 186,200 * Job 40 $ 87,500 = 3,500 hours × $25 Job 42 98,700 = 4,200 hours × $23.50 Total $186,200 Aug.

PRACTICE EXERCISES

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PE 17–3A (FIN MAN); PE 2–3A (MAN)

Factory Overhead 186,000 Materials34,000 Wages Payable 81,000 Utilities Payable 10,000 Accumulated Depreciation—Factory 61,000

PE 17–3B (FIN MAN); PE 2–3B (MAN)

Factory Overhead 66,600 Materials17,500 Wages Payable 22,000 Utilities Payable 9,600 Accumulated Depreciation—Factory 17,500

PE 17–4A (FIN MAN); PE 2–4A (MAN)

• $5.50 per direct labor hour = $2,200,000 ÷ 400,000 direct labor hours
• $ 82,500= 15,000 hours × $5.50 per hour

99,000

= 18,000 hours × $5.50 per hour

$181,500

• Work in Process 181,500

Factory Overhead 181,500

PE 17–4B (FIN MAN); PE 2–4B (MAN)

• $9.00 per direct labor hour = $810,000 ÷ 90,000 direct labor hours
• $31,500= 3,500 hours × $9.00 per hour

37,800= 4,200 hours × $9.00 per hour

$69,300

• Work in Process 69,300

Factory Overhead 69,300 Job 60 Job 61 Job 40 Job 42 17-4 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.