ACCT 204 Module 3 (Job Costing)

PearCo estimates that it will require 160,000 direct labor-hours to meet the coming period's estimated production level. In addition, the company estimates total fixed manufacturing overhead at $200,000, and variable manufacturing overhead costs of $2.75 per direct labor-hour. Calculate the predetermined overhead rate

($200,000 + $2.75 * 160,000) / 160,000 hours = $4 per direct labor hour

Total Job Cost

= DL + DM + ESTIMATED (APPLIED) OH

Predetermined Overhead Rate (POHR)

= ESTIMATED TOTAL OH COST / ESTIMATED TOTAL UNITS IN THE ALLOCATION BASE

Manufacturing Overhead, including indirect materials and indirect labor

Are ALLOCATEd to all jobs rather than directly traced to each job

Job Costing

Best suited to those situations where goods and services are produced upon receipt of a customer order, according to specifications, or in separate batches UNIQUE Ex. A ship builder would likely accumulate costs for each ship produced

Who would use Job-Order Costing?

Boeing (Aircraft manufacturing) Bechtel International (Large-Scale construction) Walt Disney Studios (Movie production)

Which of the following manufacturers would most likely use job-order costing?

Custom-furniture manufacturers

Job WR53 at NW Fab, Inc. required $200 of direct materials and 10 direct labor-hours at $15 per hour. Estimated total overhead for the year was $760,000 and estimated direct labor-hours were 20,000. What would be recorded as the cost of job WR53?

DL = $150 DM = $200 Applied OH = $760,000 / 20,000 = $38 per direct labor hour * 10 hours = $38- DL + DM + Applied OH = $730

Materials Requisition

Direct materials are tracked on a materials requisition form showing what material is put into production on various jobs

The amount of overhead applied to a particular job equals the actual amount of overhead caused by the job

FALSE

Job cost sheets contain entries for actual direct material, actual direct labor, and actual manufacturing overhead cost incurred in completing a job

FALSE Should be Actual DM and Actual DL but Estimated/Applied OH

As soon as products are completed, their product costs are transferred from Raw Materials Inventory to Finished-Goods Inventory

FALSE Should be from WIP to Finished Goods

A custom-home builder would likely utilize

Job-Order Costing

Daily Time Sheet

Labor cost is tracked on a report documenting time spent on each job and other tasks

Job-Order costing methods are used in a variety of service industry firms and nonprofit organizations

TRUE

Manufacturing overhead is a pool of indirect production costs that must somehow be attached to each unit manufactured

TRUE

Charge direct material and direct labor costs

To each job as work is performed