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Chapter 19: Job Order Cost Accounting
Terms in this set (53)
source document used to record the number of hours an employee works and to determine the total labor cost for each pay period.
Cost Accounting System
cost accounting system (also called product costing system or costing system) is a framework used by firms to estimate the cost of their products for profitability analysis, inventory valuation and cost control.
Finished Goods Inventory
Account that controls the finished goods files, which acts as a subsidiary ledger (of the inventory account) in which the costs of finished goods that r ready for sale r recorded.
General Accounting System
records manufacturing activities using a periodic system. Some companies use it, but its use is declining as competitive forces and customer demands have increased pressures on companies to better manage inventories.
Goods in Process Inventory
Account in which costs r accumulated for products that r in the process of being produced but r not yet complete; also called work in process inventory.
Production of a customized product or service. customize=alter, tailor, build, modify
Job Cost Sheet
Separate record maintained for each job. identifies the customer , job number, the product, and key dates. Costs incurred on the jobs r immediately recorded on this sheet. When the job is done, the supervisor enter the date of completion, records any remark and sign it.
Production of more than one unit of a customized product or service.
Job order cost Accounting system
Cost accounting system to determine the cost of producing each job or job lot.
Job Order Production
Production of special-order products; also customized production.
Materials Ledger Card
Perceptual record updated each time units r purchased or issued for production use.
Source document production managers use to request material for production; used to assign materials costs to specific jobs or overhead.
Amount by which the overhead applied to production in a period using the predetermined overhead rate exceeds the actual overhead incurred in a period.
Predetermined Overhead Rate
rate established prior to the beginning of a period that relates estimated overhead to another variable, such as estimated direct labor, and is used to assign overhead cost to production.
maximum allowable cost for a product or service; defined as expected selling price less the desired profit. allowable=amount
Source document used to report the time an employee spent working on a job or on overhead activities and then to determine the amount of direct labor to charge to the job or the amount of indirect labor to charge to overhead.
When less overhead is applied than is actually incurred, the remaining debit balance in the FO account is called Under-applied overhead.
The journal entry to record the allocation of factory overhead to good in process is:
Debit Good in Process and Credit Factory Overhead
The Factory overhead account ............ for applied for overhead costs.
When Factory Overhead is applied, it is credited to reduced it.
Allocate Overhead to Jobs
Credit Factory Overhead
Pay Factory Utilities
Debit Factory Overhead
Purchase Indirect Material
Debit Raw Materials Inventory
Use Indirect Materials
Credit Raw Materials Inventory
Incur Direct Labor
Credit Factory Payroll
Debit Factory Payroll
A company incurs factory overhead costs of 1,200 and applied 1,500. If the difference is considered immaterial, then:
* Factory Overhead Account has a credit balance of 300 before adjusting.
* Adjusting entry will require a credit to Cost of Goods sold.
List the following documents in the order in which they r used when Recording Indirect Labor Costs in Job order cost accounting:
1. Clock Cards
2. Factory Payroll Account
3. Time Tickets
4. Factory Overhead Ledger
The Journal Entry to record the use of Indirect Material in Production is to:
Debit Factory Overhead and Credit Raw Materials Inventory
Job order costing
is frequently used by manufacturers of custom products or providers of custom services.
Manufacturers that use job order costing typically base it on:
* Perpetual Inventory System
* Provide a continuos record of materials, goods in process, and finished goods inventories.
The two basic types of cost accounting system r:
* Job order cost accounting
* Process cost accounting
Another feature of job order production is the diversity.
Some jobs r priced on a cost-plus basis. The customer pays the manufacturer for costs incurred on the job plus a negotiated amount or rate of profit.
common overhead items r:
* Depreciation on factory building, equipment, factory supplies, supervision, maintenance, cleaning, and utilities.
which is a method of determining ways to reduce job cost until the target cost is met.
Factory overhead consists of costs (other than direct materials and direct labor that ensure the production activities r carried out.
Cost Flows: During Production
While a job is being produced, its accumulated costs r kept in Goods in process inventory. 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.
Cost Flows: Job Completion
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 later file acts as a subsidiary ledger controlled by the Finished Goods Inventory Account.
Cost Flows: Job Delivery
When a finished job is delivered to a customer, the job cost sheet is moved to a permanent file supporting the total cost of goods sold. This file contains current records and prior records. When the job is finished, the company also prepares a journal entry that credits Sales and debit cash ( or A/R).
Which of these products is likely to involve job order production?
Which of these statements is correct?
The collection of job cost sheet for unfinished jobs makes up a subsidiary ledger controlled by the goods in process inventory account.
What three costs r normally accumulated on job cost sheets?
Three costs normally accumulated on a job cost sheet r direct materials, direct labor, and factory overhead.
Requisitions r often accumulated and recorded in one entry. The frequency of entries depends on the job, the industry, and the management procedures.
In the accounting equation, we treat accounts such as factory payroll and factory overhead as temporary accounts, which hold various expenses until they r allocated to balance sheet or income statement account.
data on the number of hours worked is used at the end of each pay period to determine total labor cost.
Two other sources of overhead r:
1. vouchers authorizing payments for items such as supplies or utilities.
2. Adjusting entries for costs such as depreciation on factory assets.
Factory overhead is a temporary account that accumulates costs until they r allocated to jobs.
Companies also incur nonmanufacturing costs, such as advertising, salesperson's salaries, and depreciation on assets not used in production. These types of costs r not consider overhead, but instead r treated as period costs and charged directly to the income statement.
Overhead allocation bases
we generally allocate overhead by linking it to another factor used in production, such as direct labor or machine hours. The factor to which overhead costs r linked is known as the allocation base.
Overhead allocation rates
we cannot wait until the end of a period to allocate overhead to jobs because perpetual inventory records r part of the job order costing system (demanding-up-to-date costs). Instead, we must predict overhead in advance and assign it to jobs so that a job's total costs can be estimated prior to its completion.
In job order cost accounting, which account is debited in recording a raw materials requisitions?
Goods in process inventory if for a job
What r the four sources of information for recording costs in the FO account?
1. Material requisition
2. Time tickets
4. Adjusting entries
What events result in a debit to Factory Payroll? What events result in a credit?
Debits r recorded when wages and salaries of factory employees r paid or accrued. Credit r recorded when direct labor costs r assigned to jobs and when indirect labor costs r transferred to the FO account.
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