Chapter 19: Job Order Cost Accounting Flashcards
What is a cost accounting system?
Records manufacturing activities using a perpetual inventory system, which continuously updates records for costs of materials, goods in process, and finished goods inventories.
What does a cost accounting system provide?
Timely information about inventories and manufacturing costs per unit of product.
What is a general accounting system?
Records manufacturing activities using a periodic inventory system.
What is a job order production (job order manufacturing?)
When each customized product is manufactured separately, which is the production of products in response to special orders.
What is a job lot?
When a job involves producing more than one unit of a custom product.
What are examples of job lots?
Benches for a church, imprinted T-shirts for a 10K race or company picnic, or advertising signs for a chain of stores. The volume of production is typically low, such as 50 benches, 200 T-shirts, or 100 signs.
What are the steps for jobs produced on speculation?
- Predict the cost to complete the job. This cost depends on the product design prepared by either the customer or the producer.
- Negotiate price and decide whether to pursue the job. Other than for government or other cost-plus contracts, the selling rice is determined by market factors. Producers evaluate the market price, compare it to cost, and determine whether the profit on the job is reasonable. If the profit is not reasonable, the producer would determine a design target cost.
- Schedule production of the job. This must meet the customer’s needs and fit within the company’s own production constraints. Preparation of this work schedule should consider work-place facilities including equipment, personnel, and supplies. Once this schedule is complete, the producer can place orders for raw materials. Production occurs as materials and labor are applied to the job.
What is job order cost accounting system?
To determine the cost of producing each job or job lot. In the case of a job lot, the system must include separate records for each job to accomplish this and it must capture information about costs incurred and charge these costs to each job.
What is a job cost sheet?
A separate record maintained for each job. It identifies the customer, the job number assigned, the product, and key dates. Costs incurred on the jobs are immediately recorded on this sheet. When each job is complete, the supervisor enters the date of completion, records any remarks, and signs the sheet.
What are Goods in Process Inventory?
Where accumulated costs are kept while a job is being produced. The collection of job cost sheets for all jobs in process makes up a subsidiary ledger controlled by the Goods in Process Inventory account in the general ledger. Managers use job cost sheets to monitor costs incurred to date and to predict and control costs for each job.
What is finished goods inventory?
When a job is finished, its job cost sheet is completed and moved from the jobs in process file to the finished jobs file. This latter file acts as a subsidiary ledger controlled by the finished goods inventory account.
What does an employee do when materials are first received from suppliers?
They count and inspect them and record the items’ quantity and cost on a receiving report. The receiving report serves as the source document for recording materials received in both a materials ledger card and in the general ledger.
What are materials ledger cards (or files)?
A job order cost systems which are perpetual records that are updated each time units are purchased and each time units are issued for use in production.
Road Warriors acquired $450 of wiring and related materials. How is this recorded?
Raw Materials Inventory (Debit) $450
Accounts Payable (Credit) $450
The use of alarm system wiring on Job B15 yields the following entry. How is this recorded?
Goods in Process Inventory (Debit) $225
Raw Materials Inventory (Credit) $225
What is the flow of labor costs?
Using clock cards and the Factory Payroll account to subsidiary records of the job order cost accounting system.
What’s the purpose of costs in subsidiary records?
Gives detailed information needed to manage and control operations.
What are clock cards?
Employees commonly use these cards to record the number of hours worked, and they service as source documents for entries to record labor costs.
According to a clock card data, workers earned $1,500 for the week ended. How is this recorded?
Factory Payroll (Debited) $1,500
Cash (Credited) $1,500
When is a cost recorded as direct labor?
When time tickets report labor used on a specific job.
How do you record data from a time ticket?
Goods in Process Inventory (Debit) $60
Factory Payroll (Credit) $60
If factory overhead is over applied, then the adjusting journal entry to close the factory overhead account includes:
Factory Overhead (Debit) COGS (Credit)
