CHAPTER 19
JOB ORDER COSTING
DISCUSSION QUESTIONS
1. a. Job order cost system and process cost system.
b. The job order cost system provides a separate record of each quantity of product that
passes through the factory.
c. Process cost systems accumulate costs for each department or process within a factory.
2. Job order costing is used by firms that sell custom goods and services to customers. The job
order system is frequently associated with firms that will produce a product or service
specifically to a customer order.
3. Work in process
4. a. Purchase invoice or receiving report
b. Materials requisition
5. A job cost sheet is the subsidiary ledger to the work in process control account. The cost of
materials, labor, and overhead are listed on each separate job cost sheet for each job. A summary
of all the job cost sheets during an accounting period is the basis for journal entries to the control
accounts.
6. The clock card is a means of recording the hours spent by employees in the factory. The
time ticket is a means of recording the time the employee spends on a specific job.
7. The predetermined overhead rate is computed using estimated amounts at the beginning of the
period. This is because managers need timely information on the product costs of each job. If
a company waited until all overhead costs were known at the end of the period, the allocated
factory overhead would be accurate, but not timely. Only through timely reporting can managers
adjust manufacturing methods or product pricing.
8. a. The predetermined factory overhead rate is determined by dividing the estimated total factory
overhead costs for the forthcoming year by an estimated activity base, one that reflects the
consumption or use of factory overhead costs.
b. Direct labor cost, direct labor hours, and machine hours.
9. a. (1) If the amount of factory overhead applied is greater than the actual factory overhead
incurred, factory overhead is overapplied.
(2) If the amount of actual factory overhead is greater than the amount applied, factory
overhead incurred is underapplied.
b. Underapplied
c. Deferred credit
19-1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 19 Job Order Costing
DISCUSSION QUESTIONS (Continued)
10. Job order cost accumulation would be most appropriate for professional service firms that
provide extended, project-type services for clients. Examples would be architectural,
consulting, advertising, or legal services. Job cost sheets would accumulate all direct costs of
servicing the client. Such costs would include labor, materials, travel, and subcontracted
services. In addition, overhead would be applied using a predetermined overhead rate. The
costs accumulated by the job cost sheet would be treated as work in process (a current asset)
until the service is completed. Once completed, the cost would be transferred to the cost of
services on the income statement.
19-2
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 19 Job Order Costing
PRACTICE EXERCISES
PE 19–1A
Feb. 8 Materials 576,000
Accounts Payable 576,000
$576,000 = 72,000 × $8.
19 Work in Process* 520,000
Materials 520,000
* Job 60 $224,000 = 32,000 × $7
Job 61 296,000 = 37,000 × $8
Total $520,000
PE 19–1B
Aug. 4 Materials 168,000
Accounts Payable 168,000
$168,000 = 12,000 × $14.
24 Work in Process* 126,800
Materials 126,800
* Job 40 $ 40,000 = 5,000 × $8
Job 42 86,800 = 6,200 × $14
Total $126,800
PE 19–2A
Work in Process* 837,000
Wages Payable 837,000
* Job 60 $360,000 = 15,000 hours × $24.00
Job 61 477,000 = 18,000 hours × $26.50
Total $837,000
PE 19–2B
Work in Process* 186,200
Wages Payable 186,200
* Job 40 $ 87,500 = 3,500 hours × $25
Job 42 98,700 = 4,200 hours × $23.50
Total $186,200
19-3
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 19 Job Order Costing
PE 19–3A
Factory Overhead 186,000
Materials 34,000
Wages Payable 81,000
Utilities Payable 10,000
Accumulated Depreciation—Factory 61,000
PE 19–3B
Factory Overhead 66,600
Materials 17,500
Wages Payable 22,000
Utilities Payable 9,600
Accumulated Depreciation—Factory 17,500
PE 19–4A
a. $5.50 per direct labor hour = $2,200,000 ÷ 400,000 direct labor hours
b. Job 60 $ 82,500 = 15,000 hours × $5.50 per hour
Job 61 99,000 = 18,000 hours × $5.50 per hour
$181,500
c. Work in Process 181,500
Factory Overhead 181,500
PE 19–4B
a. $9.00 per direct labor hour = $810,000 ÷ 90,000 direct labor hours
b. Job 40 $31,500 = 3,500 hours × $9.00 per hour
Job 42 37,800 = 4,200 hours × $9.00 per hour
$69,300
c. Work in Process 69,300
Factory Overhead 69,300
19-4
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
JOB ORDER COSTING
DISCUSSION QUESTIONS
1. a. Job order cost system and process cost system.
b. The job order cost system provides a separate record of each quantity of product that
passes through the factory.
c. Process cost systems accumulate costs for each department or process within a factory.
2. Job order costing is used by firms that sell custom goods and services to customers. The job
order system is frequently associated with firms that will produce a product or service
specifically to a customer order.
3. Work in process
4. a. Purchase invoice or receiving report
b. Materials requisition
5. A job cost sheet is the subsidiary ledger to the work in process control account. The cost of
materials, labor, and overhead are listed on each separate job cost sheet for each job. A summary
of all the job cost sheets during an accounting period is the basis for journal entries to the control
accounts.
6. The clock card is a means of recording the hours spent by employees in the factory. The
time ticket is a means of recording the time the employee spends on a specific job.
7. The predetermined overhead rate is computed using estimated amounts at the beginning of the
period. This is because managers need timely information on the product costs of each job. If
a company waited until all overhead costs were known at the end of the period, the allocated
factory overhead would be accurate, but not timely. Only through timely reporting can managers
adjust manufacturing methods or product pricing.
8. a. The predetermined factory overhead rate is determined by dividing the estimated total factory
overhead costs for the forthcoming year by an estimated activity base, one that reflects the
consumption or use of factory overhead costs.
b. Direct labor cost, direct labor hours, and machine hours.
9. a. (1) If the amount of factory overhead applied is greater than the actual factory overhead
incurred, factory overhead is overapplied.
(2) If the amount of actual factory overhead is greater than the amount applied, factory
overhead incurred is underapplied.
b. Underapplied
c. Deferred credit
19-1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 19 Job Order Costing
DISCUSSION QUESTIONS (Continued)
10. Job order cost accumulation would be most appropriate for professional service firms that
provide extended, project-type services for clients. Examples would be architectural,
consulting, advertising, or legal services. Job cost sheets would accumulate all direct costs of
servicing the client. Such costs would include labor, materials, travel, and subcontracted
services. In addition, overhead would be applied using a predetermined overhead rate. The
costs accumulated by the job cost sheet would be treated as work in process (a current asset)
until the service is completed. Once completed, the cost would be transferred to the cost of
services on the income statement.
19-2
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 19 Job Order Costing
PRACTICE EXERCISES
PE 19–1A
Feb. 8 Materials 576,000
Accounts Payable 576,000
$576,000 = 72,000 × $8.
19 Work in Process* 520,000
Materials 520,000
* Job 60 $224,000 = 32,000 × $7
Job 61 296,000 = 37,000 × $8
Total $520,000
PE 19–1B
Aug. 4 Materials 168,000
Accounts Payable 168,000
$168,000 = 12,000 × $14.
24 Work in Process* 126,800
Materials 126,800
* Job 40 $ 40,000 = 5,000 × $8
Job 42 86,800 = 6,200 × $14
Total $126,800
PE 19–2A
Work in Process* 837,000
Wages Payable 837,000
* Job 60 $360,000 = 15,000 hours × $24.00
Job 61 477,000 = 18,000 hours × $26.50
Total $837,000
PE 19–2B
Work in Process* 186,200
Wages Payable 186,200
* Job 40 $ 87,500 = 3,500 hours × $25
Job 42 98,700 = 4,200 hours × $23.50
Total $186,200
19-3
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 19 Job Order Costing
PE 19–3A
Factory Overhead 186,000
Materials 34,000
Wages Payable 81,000
Utilities Payable 10,000
Accumulated Depreciation—Factory 61,000
PE 19–3B
Factory Overhead 66,600
Materials 17,500
Wages Payable 22,000
Utilities Payable 9,600
Accumulated Depreciation—Factory 17,500
PE 19–4A
a. $5.50 per direct labor hour = $2,200,000 ÷ 400,000 direct labor hours
b. Job 60 $ 82,500 = 15,000 hours × $5.50 per hour
Job 61 99,000 = 18,000 hours × $5.50 per hour
$181,500
c. Work in Process 181,500
Factory Overhead 181,500
PE 19–4B
a. $9.00 per direct labor hour = $810,000 ÷ 90,000 direct labor hours
b. Job 40 $31,500 = 3,500 hours × $9.00 per hour
Job 42 37,800 = 4,200 hours × $9.00 per hour
$69,300
c. Work in Process 69,300
Factory Overhead 69,300
19-4
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
