Chapter 16 Job Order Costing

Estimate OH $100, Estimated DL hours 25, Actual OH incurred $90, Actual DL Hours 28. The predetermined OH rate is

$4 per DL hour

process cost system

A cost accounting system used when a company manufactures a large volume of similar products.

overapplied overhead

A credit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process exceeds the amount of overhead cost actually incurred during a period.

underapplied overhead

A debit balance in the Factory Overhead account that occurs when the amount of overhead cost actually incurred exceeds the amount of overhead cost applied to Work in Process during a period.

materials ledger

A ledger containing all records of materials.

Predetermined Overhead Rate

A rate used to charge manufacturing overhead cost to jobs that is established in advance for each period. It is computed by dividing the estimated total manufacturing overhead cost for the period by the estimated total amount of the allocation base for the period.

Entries to sell finished goods on account

DR AR, CR Sales

Entry to record the cost of the goods sold

DR COGS, DR Finished goods

journal entry to incurr FO (actual FO costs)

DR FO CR ANY FO ACTIVITY GIVEN

entry to dispose of overapplied overhead

DR FO, CR COGS

entry to record a completed job would be

DR Finished Goods, CR WIP

entry to apply overhead into WIP

DR WIP CR FO

journal entry to apply labor into production

DR WIP DR FO (Indirect) CR Wages payable

journal entry to apply materials (direct and indirect) into production

DR WIP, DR FO (Indirect), CR Materials

entry to dispose of underapplied overhead

Dr COGS, CR FO

receiving report

Form used to report that ordered goods are received and to describe their quantity and condition. Results in an increase to the materials ledger - and usually an increase to Account Payable

Job Order flow of manufacturing costs

Materials Inv - WIP (production process) - Finished Goods - Cost of Goods Sold

Estimate OH $100, Estimated DL hours 25, Actual OH incurred $90, Actual DL Hours 28. Based on these number is the job over or underapplied and by how much?

Overapplied by $22

formula to determine amount of overhead to apply

Predetermined rate * actual activity base

Job Order Costing

a cost system that assigns costs to specific production batches or jobs. Used by companies that produce unique or custom products, or groups of similar products in smaller batches

cost allocation / applied

assignment of indirect (FO )costs to a particular cost object.

factory overhead costs

consists of all manufacturing costs that are not direct materials or labor.

Pre-determined overhead rate formula

estimated total overhead costs divided by estimated activity base

This records the materials, labor, and manufacturing overhead costs charged to that job used by job order costing system

job cost sheet

cost accounting system

measure, record and report product costs (types: job order / process / activity base costing)

materials requisition

request for the transfer of raw materials to the production floor. Results in a decrease to the materials ledger and an increase to WIP.

finished goods

units of product that have been completed but not yet sold to customers

time tickets

used by employees to report how much time they spent on each job. DR WIP, CR wages payable