Chapter 3

Question 1

What are the 6 Job-Order Cost Accounting?

Answer 1

1. Cost Accounting Systems
2. Job-Order Cost Flow
3. Assigning Manufacturing Costs to WIP
4. MOH costs
5. Accounting for jobs completed and Sold
6. Reporting Job Cost Data

Question 2

What is the Costs Accounting Systems?

Answer 2

Cost accounting involves: The measuring,recording, and reporting of product costs.

Consists of the various manufacturing costs that are fully integrated into the general ledger system

(use of a perpetual inventory system to provide immediate, up-to-date information on the cost of a product)

1. Job-Order cost system:

• Costs are assigned to each job or batch
• A job may be for a specific order or inventory
• A key feature: Each job or batch has its own distinguishing characteristics
• The objective: to calculate the cost per job
• Measures costs for each job completed not for set time periods

2. Process Cost Systems:

• Used when a large volume of similar products are manufactured
• Cereal,Automobiles,Compact Discs,Paint
• Cost are accumulated for a specific time period (a week or a month)
• Costs are assigned to departments or processes for a set period of time

Question 3

Explain Job-Order Cost Flow?

Answer 3

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

a. Manufacturing costs are assigned to Work in Process
b. Cost of completed jobs is transferred to Finished Goods Inventory
c. When units are sold, the cost is transferred to Cost of Goods Sold.

1.Accumulate the manufacturing costs

•Raw materials: debited to Raw Materials Inventory when purchased, At this point, the cost of materials is not assigned to specific jobs or order

•Factory Labour: Consists of gross earnings of factory workers, employer payroll taxes on such earnings, fringe benefits incurred by the employer. Debited to Factory Labour when incurred.

•Manufacturing Overhead: May be recognized daily.For ex: machinery repairs , indirect materials, and indirect labour. May also be recorded periodically through adjusting entries. For exa: property taxes, amortization, and insurance.

• Manufacturing overhead is a Control Account.

2.Assigning Manufacturing Costs to Work in Process

• Manufacturing costs are assigned to work in process
with Debits to Work in Process Inventory & Credits to:

• Raw Materials Inventory
• Factory Labour
• Manufacturing Overhead
• Entries assigning costs to work in process are usually made monthly

• Job cost sheet:

• Used to record the costs of a specific job
• Used to determine the total and unit costs of a completed job
• Postings to job cost sheets are made daily

Raw Materials: