Job Costing

Question 1

Job-costing system

Answer 1

Cost object is a unit or multiple units of a distinct and unique product or service

Each job uses different amounts of resources

Question 2

Process-costing system

Answer 2

Cost object is masses of identical or similar units of a product or service

Question 3

Per Unit Cost

Answer 3

(Total cost of production) / (number of units produced)

Question 4

Seven Step Job Costing Approach

Answer 4

1. Identify the cost object (job)
2. Identify direct costs of the job
3. Select a cost-allocation base(s)
4. Identify indirect costs
5. Compute and overhead rate(s) using the selected cost allocation base(s)
6. Compute the total indirect costs of the job
7. Compute the total (direct + indirect) cost of the job

Question 5

Overhead Rate

Answer 5

(Total Annual Overhead Cost) / (Annual Quantity of the Cost Driver)

Question 6

Normal Costing

Answer 6

Indirect costs based on budgeted indirect-cost rates times the actual activity consumption

Question 7

Actual Costing

Answer 7

Indirect costs based on actual indirect-cost rates times actual activity consumption

Question 8

Flow of costs in job costing

Answer 8

Purchase materials and other manufacturing inputs
Conversion into work in process inventory
Conversion into finished goods inventory
Sale of finished goods

Question 9

Journal Entries

Answer 9

Every job/product is unique, so journal entries are made at each step of the process

Supposed to reflect the actual state of business, its inventories, and its production process

All product costs are accumulated in the work-in-process account (DM used, DL incurred, Factory overhead allocated)

Actual indirect costs (overhead) are accumulated in the manufacturing overhead account

Actual overhead never posted in WIP