Chapter 2: Job Order Costing Flashcards

1
Q

Prepare the entries for manufacturing/service jobs

  1. completed and
  2. sold
A

1. When Job is completed:

Finished Goods Inventory

Work in Process Inventory

2. When sold:

Acc. Receivable

Sales Revenue

COGS

Finished Goods Inventory

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2
Q

Höhe der Activity Base wird entnommen aus ???

  • Direct labor cost
  • Direct material cost
A
  • Direct material Cost: Material requisition slip
  • Direct labor Cost: Time Tickets

Achtung:

  • Enthält auch Overhead Cost (diese sind nicht mit einzubeziehen)
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3
Q

Manufacturing Overhead Rate and

Predetermined Overhead Rate

A

Issue with Manufacturing Overhead Cost:

  • Cannot be assigned to a specific job based on actual costs incurred

Solution:

  • Companies assign them to Work in Process and to specific jobs on an estimate basis through the use of a Predetermined Overhead Rate
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4
Q

Job Order Cost Flow:

Raw Materials

A

The physical flow of the materials as they are converted into finished goods

  • Manufacturing Costs are assigned to Work in Process (WIP) Inventory account
  • Cost of completed jobs is transferred to the Finishied Goods Inventory account
  • When units are sold, the cost ist transferred to the Cost of Goods Sold account
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5
Q

Accumulating Manufacturing Cost

Factory Labor Cost

A

Consists of three costs:

  1. Gross earnings of factory workers
  2. Employer payroll taxes on these earnings
  3. Fringe benefits
    • sick pay
    • pensions

Assigend to jobs on the basis of a time ticket

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6
Q

Job Cost Sheet

A
  • Used to record costs chargeables to specific jobs
  • Summarizes the cost of jobs completed and not completed at the end of the accounting period
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7
Q

Predetermined Overhead Rate

Large Companys vs. Small Companies

A
  1. Large Companies:
  • use a diffrent rate for each department
  • each department may even have a diffrent Activty Base
  1. Small Companies:
    * often use a single, company-wide predetermined rate
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8
Q

Process Cost System

A
  • Costs are accumulated for a time period (week or month)
  • Costs are assigned to departmens or processes for a specific period of time
  • Used when a large volume of similar products are manufactured (Müsli, Eis,…)
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9
Q

Raw Matieral Cost

Direct Materials and Indirect Materials

A
  • Assigned to a Job, hence for to WiP or Manufacturing Overhead, when materials are issued in response of a request via the Materials requisition slip
  • Direct Materials are charged to WiP
  • Indirect Materials are charged to Manufacturing Overhead
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10
Q

Job Cost Sheet and WiP relationship

A

Each entry to WiP MUST be accompanied by a corresponding posting to one or more job cost sheets

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11
Q

Work in Process Account under Job Order Costing

A
  • Only ONE WiP Account under Job Order Costing
  • NO distinction between Jobs! Every Job is recorded to WiP
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12
Q

Predetermined Overhead Rate:

A
  • Based on the relationship between estimated annual overhead costs and expected annual operation activity
  • Expressed in terms of an ACTIVY BASE such as:
    • Direct labor costs
    • Direct labor hours
    • Machine hours
  • Formula:
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13
Q

Under- or Overapplied in Manufacturing Overhead

A
  • Debit Balance in Manufacturing overhead means that overhead is UNDERAPPLIED
  • Credit Balance… is OVERAPPLIED

Any year-end Balance in manufacturing overhead is eliminated by adjusting COGS:

  • UNDERAPPLIED Overhead is debited to COGS
  • OVERAPPLIED Overhead is credited to COGS
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14
Q

Job Order Cost System

A
  • Products have a UNIQUE CHARATERISTIC
  • Costs are assigned to EACH JOB/BATCH
  • Objective is to compute the cost per job
  • Measures costs for each job completed (NOT for a set of time periods !!!!)

Important feature:

  • Each Job/Batch has its own distinguishing characteristics
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15
Q

Advantages and Disadvantages of Job Order Costing compared to Process Costing

A

Advantge:

  • More precise in assignment of costs to projects than process costing
  • Provides more useful information for determining the profitability of particular projects and for estimating costs when bids on future jobs

Disadvantage:

  • Requires a significant amount of data entry
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16
Q

Raw Material Costs

A
  • Assigned to a job when materials are issued -> by using a Material requisition slip

Material requisition slip:

  • Direct Materials:
    • Directly issued to use on a job
    • Charged to Work in Process Inventory
  • Indirect Materials:
    • Charged to Manufacturing Overhead

Buchungsatz:

WiP Inventory XXX Manufactoring Overhead YYY

Raw Materials ZZZ

17
Q

Accumulating Manufacturing Cost

Manufactoring Overhead

A
  • Ex: Propertay taxes, depreciation, insurance,…
  • Cost UNRELATED to manufactoring process are expensed
  • Costs RELATED to manufactoring process are accumlated in Manufactoring Overhead account

-> Manufactoring Overhead subsequently assignd to work in process

18
Q
  1. Einbuchung der Manufacturing Overhead
  2. Assigning manufacturing cost to work in process
A

1. Einbuchung: -> DEBIT eingebucht

(Dr.) Manufacturing Overhead

(Cr.) Utilie Payable

Prepaid Insurane etc.

2. Assigning: -> CREDIT ausgebucht

(Dr.) Work in Process

(Cr.) Manufacturing Overhead

19
Q

Factory Labor Costs

A
  • Assigned to jobs on the basis of time tickets
    • ​Buchung auf Basis des Time Tickets durchführen für Factory Labor
    • Achtung: Enthält auch Manufactoring Overhead Cost

Buchung:

Wip Inventory

Manufactoring Overhead

Factory Labor