Management Accounting
Fundamentals
Module 2
Job-order costing
Lectures and handouts by:
Shirley Mauger, HB Comm, CGA
Module 2 - Table of Contents
Part
1
2
3
4
N/A
5
6
7
8
Content
2.1 Job-order costing – an overview
2.2 Job-order costing – the flow of costs
2.3 Using predetermined overhead rates
2.4 Complications of overhead application
2.5 Job-order costing in service companies
2.6 Scrap and rework
2.7 Computer illustration – cost schedules (not covered)
Review questions: cost of jobs and inventory balances
Review questions: T-accounts, financial stmts., overhead
Review questions: manufacturing overhead
Review questions: multiple choice
2
MA1 – MODULE 2
Part 1
Job-order costing – an
overview
Topic 2.1
3
Part 1 – Job-order costing – an overview (Topic 2.1)
Compute predetermined overhead rates and explain why
estimated overhead costs (rather than actual overhead
costs) are used in the costing process. (Level 1)
Process
costing
•Masses of identical
or similar units of a
product or service
Job-order
costing
•Distinct units of a
product or service
4
Part 1 – Job-order costing – an overview (Topic 2.1)
Compute predetermined overhead rates and explain why
estimated overhead costs (rather than actual overhead
costs) are used in the costing process. (Level 1)
Process
costing
•Masses of identical
or similar units of a
product or service
Accumulate all
product costs and
apply based on
number of units
produced for the period
(Module 3)
5
Part 1 – Job-order costing – an overview (Topic 2.1)
Compute predetermined overhead rates and explain why
estimated overhead costs (rather than actual overhead
costs) are used in the costing process. (Level 1)
Direct materials
Job-order
costing
•Distinct units of a
product or service
Direct labour
Manufacturing
overhead
6
Part 1 – Job-order costing – an overview (Topic 2.1)
Compute predetermined overhead rates and explain why
estimated overhead costs (rather than actual overhead
costs) are used in the costing process. (Level 1)
Direct materials
Print
shop
Invitations
Direct labour
Manufacturing
overhead
Menus
7
Part 1 – Job-order costing – an overview (Topic 2.1)
Compute predetermined overhead rates and explain why
estimated overhead costs (rather than actual overhead
costs) are used in the costing process. (Level 1)
Costs traced
directly to the job
Direct materials
Print
shop
Invitations
Direct labour
Manufacturing
overhead
Menus
8
Part 1 – Job-order costing – an overview (Topic 2.1)
Compute predetermined overhead rates and explain why
estimated overhead costs (rather than actual overhead
costs) are used in the costing process. (Level 1)
Direct materials
Direct labour
Manufacturing
overhead
How are overhead
costs applied?
Print
shop
Invitations
Menus
9
Part 1 – Job-order costing – an overview (Topic 2.1)
Applying
overhead costs
Direct materials
Apply actual overhead
costs?
• Actual overhead is usually
unknown until after products are
produced and sold
Direct labour
Manufacturing
overhead
Apply actual overhead costs
at year end?
•Unable to adequately price jobs
sold during the year
10
Part 1 – Job-order costing – an overview (Topic 2.1)
Applying
overhead costs
Direct materials
Direct labour
Manufacturing
overhead
SOLUTION:
Apply ESTIMATED overhead
costs
•Use a predetermined overhead
application rate
•Apply using an allocation base
• Direct labour hours
• Direct labour cost
• Machine time
This is called a NORMAL
cost system
11
Part 1 – Job-order costing – an overview (Topic 2.1)
Applying
overhead costs
Applying overhead based on
direct labour hours
Direct materials
Direct labour
Manufacturing
overhead
Estimated manufacturing
overhead for the year
• Indirect materials
$2,000
• Indirect labour
1,400
• Factory heat
500
• Machine depreciation
300
• Factory insurance
100
TOTAL
$4,300
Estimated direct
labour hours
1,000 hours
What is the overhead
application rate?
12
Part 1 – Job-order costing – an overview (Topic 2.1)
Applying
overhead costs
Estimated total
manufacturing
overhead cost
=
Predetermined
overhead rate
Estimated total
units in the
allocation base
13
Part 1 – Job-order costing – an overview (Topic 2.1)
Applying
overhead costs
Estimated total
manufacturing
overhead cost
Estimated total
units in the
allocation base
$4,300
=
Predetermined
overhead rate
$4.30
1,000
per direct
labour hour
direct
labour hours
14
Part 1 – Job-order costing – an overview (Topic 2.1)
It took 5 direct labour hours
to print the invitations and 4
direct labour hours to print
the menus.
Print
shop
Direct materials
Direct labour
5
Manufacturing
overhead
x
$4
.3
0
4 x $4.30
=
$2
1.
50
Invitations
Overhead allocated
= $17.20
Menus
15
MA1 – MODULE 2
Part 2
Job-order costing – the flow
of costs
Topic 2.2
16
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Prepare journal entries to record the flow of direct
materials cost, direct labour cost, and manufacturing
overhead cost in a job-order costing system. (Level 1)
Manufacturing related documents:
• Bill of materials:
• list of parts needed to manufacture the product
•Materials requisition form (exhibit 3-1 p.85):
•identifies parts to be taken from inventory and the job to
which the cost of the parts will be allocated
•Job cost sheet (exhibit 3-2 p.86):
•used to record the direct materials, direct labour and
overhead to a job
17
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
PearCo Job Cost Sheet
Job Number A - 143
Date Initiated 3-4-07
Date Completed
Units Completed
Department B3
Item Wooden cargo crate
Direct Materials
Req. No. Amount
Ticket
Direct Labor
Hours Amount
Cost Summary
Direct Materials
Direct Labor
Manufacturing Overhead
Total Cost
Unit Product Cost
Manufacturing Overhead
Hours
Rate
Amount
Date
Units Shipped
Number Balance
Garrison, Noreen, Chesley, Carroll, Managerial Accounting, 6 th Canadian edition, 2004
18
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
PearCo Job Cost Sheet
Job Number A - 143
Date Initiated 3-4-07
Date Completed
Units Completed
Department B3
Item Wooden cargo crate
Direct Materials
Req. No. Amount
Ticket
Direct Labor
Hours Amount
Cost Summary
Direct Materials
Direct Labor
Manufacturing Overhead
Total Cost
Unit Product Cost
Manufacturing Overhead
Hours
Rate
Amount
Date
Units Shipped
Number Balance
Garrison, Noreen, Chesley, Carroll, Managerial Accounting, 6 th Canadian edition, 2004
19
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
PearCo Job Cost Sheet
Job Number A - 143
Date Initiated 3-4-07
Date Completed
Units Completed
Department B3
Item Wooden cargo crate
Direct Materials
Req. No. Amount
Ticket
Direct Labor
Hours Amount
The total cost is
recorded in work in
Cost Summary
process
Direct
Materials
Manufacturing Overhead
Hours
Rate
Amount
Date
Units Shipped
Number Balance
Direct Labor
Manufacturing Overhead
Total Cost
Unit Product Cost
Garrison, Noreen, Chesley, Carroll, Managerial Accounting, 6 th Canadian edition, 2004
20
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Raw materials
Raw
materials are
released to
production
Document
flow
Form is
sent to
inventory
A materials requisition
form is completed
21
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Raw materials
Document
flow
Direct labour
Direct labour is
recorded to job
Time
ticket
completed
by
employee
22
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Raw materials
Document
flow
Direct labour
Mfg. overhead
Applied to job
based on the
application rate
23
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Raw materials
Direct labour
Work in process
Mfg.
costs
Mfg. overhead
24
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Raw materials
Finished goods
COGS
Direct labour
Work in process
Mfg.
costs
COGM
Mfg. overhead
Cost of goods
sold
25
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Job-order costing
Flow of costs tutorial
Pages 1 – 4 of
the handout
Stop the audio and download the handout
(ma1_mod2_handout1.doc)
26
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Flow of costs tutorial
Raw Materials
Jan.1 18,000
Wages payable
Work in process
Jan.1 30,000
Mfg. overhead
Typical
manufacturing
accounts.
(Handout page 4)
27
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Flow of costs tutorial
1) $276,000 of raw materials were purchased
during the year
What is the journal entry
to record purchases?
DR
CR
28
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Flow of costs tutorial
1) $276,000 of raw materials were purchased
during the year
Record the entry in the
T accounts
DR
CR
Raw Materials
Accounts Payable
276,000
276,000
29
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Raw Materials
Jan.1 18,000
276,000
Wages payable
Raw materials are
recorded in the asset
account as they are
purchased.
Work in process
Jan.1 30,000
Mfg. overhead
Accounts payable
276,000
30
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Flow of costs tutorial
2) Materials requisitions totaled $269,000
for the year. $10,000 of the raw
materials was recorded as
manufacturing overhead (indirect
materials).
What is the journal entry?
31
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Flow of costs tutorial
2) Materials requisitions totaled $269,000
for the year. $10,000 of the raw
materials was recorded as
manufacturing overhead (indirect
materials).
Record the entry in the
T accounts
DR
DR
CR
Work in process
Manufacturing overhead
Raw materials
259,000
10,000
269,000
32
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Flow of costs tutorial
Raw Materials
Jan.1 18,000
276,000 269,000
Wages payable
Work in process
Jan.1 30,000
259,000
Direct materials
Mfg. overhead
10,000
Indirect materials
33
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Flow of costs tutorial
3) Paid factory workers $540,000 during
the year of which $110,000 was for
indirect labour
What is the journal entry?
34
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Flow of costs tutorial
3) Paid factory workers $540,000 during
the year of which $110,000 was for
indirect labour
Record the entry in
the T-accounts
DR
DR
CR
Work in process
Manufacturing overhead
Wages payable
430,000
110,000
540,000
35
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Flow of costs tutorial
Raw Materials
Jan.1 18,000
276,000 269,000
Wages payable
540,000
Work in process
Jan.1 30,000
Direct labour
259,000
430,000
Mfg. overhead
10,000
110,000
Indirect labour
36
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Flow of costs tutorial
4) Additional factory overhead incurred for
the period was $100,000
What is the journal entry?
37
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Flow of costs tutorial
4) Additional factory overhead incurred for
the period was $100,000
Record the entry in
the T-accounts
DR
CR
Manufacturing overhead
Accounts payable
100,000
100,000
38
Part 2 – Job-order costing – the flow of costs (Topic 2.2)
Flow of costs tutorial
Raw Materials
Jan.1 18,000
276,000 269,000
Wages payable
540,000
Work in process
Jan.1 30,000
259,000
As manufacturing
430,000
overhead is incurred
it is accumulated in
the overhead account
Mfg. overhead
10,000
110,000
100,000
Accounts payable
100,000
39
MA1 – MODULE 2
Part 3
Using predetermined overhead
rates
Complications with overhead
Topics 2.3-2.4
40
Part 3 – Using predetermined overhead rates (Topic 2.3)
Flow of costs tutorial
Raw Materials
Jan.1 18,000
276,000 269,000
Wages payable
540,000
Work in process
Jan.1 30,000
259,000
Flow of costs tutorial.
430,000
Continued from part 2
Mfg. overhead
10,000
110,000
100,000
Pages 1-4 of the module
2 handout
41
Part 3 – Using predetermined overhead rates (Topic 2.3)
Apply overhead cost to work in process by use of a
predetermined overhead rate. (Level 1)
• Manufacturing overhead costs incurred
•
Are not recorded directly in work in process
•
Are recorded in manufacturing overhead
•
Are applied to work in process using a
predetermined rate
Mfg. overhead
Actual
overhead costs
incurred
Applied to
work in
process
42
Part 3 – Using predetermined overhead rates (Topic 2.3)
Flow of costs tutorial (cont.)
• When setting the budgets at the beginning
of the year it was estimated that total
manufacturing overhead for the year would
be $225,000
• It was also estimated that direct labour cost
for the year was going to be $450,000
• Overhead was applied to the jobs based
on direct labour cost
43
Part 3 – Using predetermined overhead rates (Topic 2.3)
Applying
overhead costs
Estimated total
manufacturing cost
Predetermined
overhead rate
=
Estimated total units in
the allocation base
$225,000
$450,000
=
50% of direct
labour cost
44
Part 3 – Using predetermined overhead rates (Topic 2.3)
Flow of costs tutorial (cont.)
5) Applied factory overhead to the jobs
(50% of direct labour cost)
Mfg. overhead
10,000
110,000
100,000
Work in process
Jan.1 30,000
259,000
430,000
What is the
journal entry?
220,000
Direct labour
45
Part 3 – Using predetermined overhead rates (Topic 2.3)
Flow of costs tutorial (cont.)
5) Applied factory overhead to the jobs
(50% of direct labour cost)
Mfg. overhead
10,000
110,000
100,000
Work in process
Jan.1 30,000
259,000
430,000
220,000
Record the
entry in the
T-accounts
50% of 430,000
DR
CR
Work in process
Manufacturing
overhead
215,000
215,000
46
Part 3 – Using predetermined overhead rates (Topic 2.3)
Flow of costs tutorial
$215,000 is taken from
Raw Materials
Jan.1 18,000
276,000 269,000
Wages payable
540,000
manufacturing overhead and
applied to work in process
Work in process
Jan.1 30,000
Also applied to
259,000
individual jobs
430,000
215,000
Mfg. overhead
10,000 215,000
110,000
100,000
47
Part 3 – Complications of overhead application (Topic 2.4)
Compute any balance of under- or overapplied overhead
cost for a period and prepare the journal entry needed to
close the balance into the appropriate accounts. (Level 1)
Overhead manufacturing costs
•
Are applied at a predetermined rate based on
estimates
•
Estimates are rarely ever the same as actual costs
This results in:
•
•
Overapplied overhead
Mfg. overhead
if there is a credit
Actual overhead Applied to work
balance
costs incurred in process
Underapplied overhead
if there is a debit balance Underapplied Overapplied
48
Part 3 – Complications of overhead application (Topic 2.4)
Compute any balance of under- or overapplied overhead
cost for a period and prepare the journal entry needed to
close the balance into the appropriate accounts. (Level 1)
How can over- or underapplied overhead be
explained?
•
Actual overhead costs are not equal to the
budgeted amounts.
•
Actual cost driver activity level is not equal to
budgeted activity level
Mfg. overhead
Actual overhead Applied to work
costs incurred in process
Underapplied
Overapplied
49
Part 3 – Complications of overhead application (Topic 2.4)
Compute any balance of under- or overapplied overhead
cost for a period and prepare the journal entry needed to
close the balance into the appropriate accounts. (Level 1)
How is over- or underapplied overhead handled?
•
Close off to cost of goods sold (if immaterial)
•
Allocate among accounts
(work in process, finished goods, cost of goods sold)
•
Carry forward to the
next period (not likely)
Mfg. overhead
Actual overhead Applied to work
costs incurred in process
Underapplied
Overapplied
50
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
6) End of the accounting period:
Ending inventories
Dec. 31
Raw materials
$25,000
Work in process
34,000
Finished goods
93,000
• Record the ending balances in the
T-accounts
• Calculate:
• Cost of goods manufactured
• Cost of goods sold
51
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
Raw Materials
Finished goods
Jan.1 18,000
276,000 269,000
Jan 1 100,000
Work in process
Jan.1 30,000
259,000
430,000
215,000
25,000
Mfg. overhead
34,000
93,000
Cost of goods sold
10,000 215,000
110,000
100,000
52
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
Raw Materials
Finished goods
Jan.1 18,000
276,000 269,000
Jan 1 100,000
Work in process
Jan.1 30,000
259,000
430,000 900,000
215,000
25,000
Mfg. overhead
34,000
900,000
93,000
Cost of goods sold
10,000 215,000
110,000
100,000
Cost of goods manufactured = $900,000
30,000+259,000+430,000+215,000-34,000
Beg.inv+Direct Mat.+Direct Lab.+Overhead-End.inv.
53
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
Raw Materials
Finished goods
Jan.1 18,000
276,000 269,000
Jan 1 100,000
Work in process
Jan.1 30,000
259,000
430,000 900,000
215,000
25,000
Mfg. overhead
34,000
10,000 215,000
110,000
100,000
900,000 907,000
93,000
Cost of goods sold
907,000
Cost of goods sold = $907,000
100,000+900,000-93,000
Beg.inv + COGM - End.inv.
54
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
7) Journal entries to record cost of goods
manufactured and cost of goods sold
DR
CR
Finished goods inventory
Work in process
900,000
DR
CR
Cost of goods sold
Finished goods inventory
907,000
900,000
907,000
55
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
8) Calculate the ending balance in the
manufacturing overhead account
Mfg. overhead
10,000 215,000
110,000
100,000
5,000
Is manufacturing overhead
under or overapplied?
56
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
8) Calculate the ending balance in the
manufacturing overhead account
Mfg. overhead
10,000 215,000
110,000
100,000
5,000
Is manufacturing overhead
under or overapplied?
Underapplied
$220,000 of overhead
was incurred and only
$215,000 was applied
to work in process
57
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
9) a. Close the manufacturing overhead. Allocate
underapplied overhead to cost of goods sold
Mfg. overhead
10,000 215,000
110,000
100,000
What is the journal entry?
5,000
58
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
9) a. Close the manufacturing overhead account.
Allocate underapplied overhead to cost of goods sold
Mfg. overhead
10,000 215,000
110,000
100,000
Record the entry in
the T-accounts
5,000
DR
CR
Cost of goods sold
Manufacturing overhead
5,000
5,000
59
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
Raw Materials
Finished goods
Jan.1 18,000
276,000 269,000
Jan 1 100,000
900,000 907,000
Work in process
Jan.1 30,000
93,000
259,000
The underapplied
overhead
430,000 900,000
increases the215,000
cost of goods sold
25,000
Mfg. overhead
34,000
10,000 215,000
110,000
5,000
100,000
0
Cost of goods sold
907,000
5,000
912,000
60
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
9) b. Close the manufacturing overhead account.
Allocate underapplied overhead to work in process,
finished goods and cost of goods sold
Mfg. overhead
10,000 215,000
110,000
100,000
Prorate the amount based
on the ending balance in
each account
5,000
61
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
9) b. Close the manufacturing overhead account.
Allocate underapplied overhead
to work
process,
Balance
to in
apply
to
finished goods and cost of goodseach
soldaccount
Mfg. overhead
10,000 215,000
110,000
100,000
5,000
Account
balance
% of
total
Prorated
34,000
3%
150
93,000
9%
450
907,000
88%
4,400
$1,034,000
100%
5,000
Work in
process
Finished
goods
Cost of goods
sold
TOTAL
62
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
9) b. Close the manufacturing overhead. Allocate
underapplied overhead to work in process,
finished goods and cost of goods sold
DR
DR
DR
CR
Work in process
Finished goods
Cost of goods sold
Manufacturing overhead
150
450
4400
5000
63
Part 3 – Complications of overhead application (Topic 2.4)
Flow of costs tutorial (cont.)
Raw Materials
Finished goods
The underapplied overhead
Jan.1
18,000 work in process, finished
Jan 1 100,000
increases
276,000 269,000
900,000 907,000
goods and cost of goods sold
Work in process
25,000
450
Jan.1 30,000
93,450
259,000
430,000 900,000
215,000
150
Mfg. overhead
Cost of goods sold
34,150
10,000 215,000
907,000
110,000
5,000
4,400
100,000
911,400
0
64
Part 3 – Complications of overhead application (Topic 2.4)
Plantwide overhead rate
• Single rate
• Common practice in smaller companies
Multiple predetermined overhead rate
• More than one application rate
• Used where there are complex processes
e.g. – assembly department applies overhead based on
direct labour hours, machining department applies
overhead based on machine hours
Information technology
• Enterprise resource planning systems (ERP)
automate many of these processes
• Electronic communication of orders from
customers and suppliers
65
MA1 – MODULE 2
Part 4
Job-order costing in service
companies
Scrap and rework
Topics 2.5-2.6
66
Part 4 – Job-order costing in service companies (Topic 2.5)
Explain the role of job-order costing in service
companies. (Level 1)
Costing in a service firm:
•
•
Similar to a manufacturing firm
Focus is on direct labour and overhead
67
Part 4 – Scrap and rework (Topic 2.6)
Prepare journal entries to deal with scrap and rework of
unacceptable production. (Level 1)
Scrap and rework
• No recovery of units (scrap)
1. Charge cost of units to good units in the job
2. Charge cost of units to overhead
•
Units recovered
1. With no rework costs
a. Work in process is reduced by cash received
b. Manufacturing overhead is reduced by cash
received
2. With rework costs
a. Charge rework costs to work in process
b. Charge rework costs to manufacturing overhead
68
Part 4 – Scrap and rework (Topic 2.6)
Example: Cal Printing produced 1,500 booklets for a client.
During the last 200 copies of the run, the equipment
malfunctioned and the copies were not properly glued.
The total cost for the job was $3,000. ($2 per copy)
•
No recovery of units
1. Charge cost of units to good units in the job
Cost per good copy is now $3,000/1,300 copies = $2.31
(no journal entry)
2. Charge cost of spoiled units to overhead
DR
CR
Manufacturing overhead
Work in process
$2 per copy X 200 spoiled
copies
400
400
69
Part 4 – Scrap and rework (Topic 2.6)
Example: Cal Printing produced 1,500 booklets for a client.
During the last 200 copies of the run, the equipment
malfunctioned and the copies were not properly glued.
The total cost for the job was $3,000. ($2 per copy)
•
Units recovered
1. With no rework costs
a. Work in process is reduced by cash received
Scrap paper was sold for $50
Cash
50
DR
CR
Work in process
50
b. Manufacturing overhead is reduced by cash received
Cash
50
DR
CR
Manufacturing overhead
50
70
Part 4 – Scrap and rework (Topic 2.6)
Example: Cal Printing produced 1,500 booklets for a client.
During the last 200 copies of the run, the equipment
malfunctioned and the copies were not properly glued.
The total cost for the job was $3,000. ($2 per copy)
•
Units recovered
2. With rework costs
a. Charge rework costs to work in process
Using $100 of labour and $20 of glue the spoiled
booklets were glued manually
DR
Work in process
120
CR
Wages payable
100
CR
Raw materials
20
71
Part 4 – Scrap and rework (Topic 2.6)
Example: Cal Printing produced 1,500 booklets for a client.
During the last 200 copies of the run, the equipment
malfunctioned and the copies were not properly glued.
The total cost for the job was $3,000. ($2 per copy)
•
Units recovered
2. With rework costs
a. Charge rework costs to work in process
Using $100 of labour and $20 of glue the spoiled
booklets were glued manually
b. Charge rework costs to manufacturing overhead
DR
Manufacturing overhead
CR
Wages payable
120
100
CR
Raw materials
20
72
MA1 – MODULE 2
Part 5
Review question:
Costs of jobs
Inventory balances
(download the additional questions handout:
ma1_mod2_handout1.pdf)
73
Part 5 – Review questions: Costs of jobs, inventory
balances
Question 2 June 2002
Handout pages 5 thru 6
•
Calculate costs of completed jobs 02-101 and 02111
•
Calculate inventory account balances in direct
materials, work in process and finished goods as
of July 31
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
74
Part 5 – Review questions: Costs of jobs, inventory
balances
Question 2 June 2002
Handout pages 5 thru 6
•
Calculate costs of completed jobs 02-101 and 02111
•
Calculate inventory account balances in direct
materials, work in process and finished goods as
of July 31
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
75
Part 5 – Review questions: Costs of jobs, inventory
balances
Question 2 June 2002
Handout pages 5 thru 6
•
Calculate costs of completed jobs 02-101 and 02111
•
Calculate inventory account balances in direct
materials, work in process and finished goods as
of July 31
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
76
MA1 – MODULE 2
Part 6
Review question:
Job-cost T-accounts
Manufacturing financial statements
Manufacturing overhead
(download the additional questions handout:
ma1_mod2_handout1.pdf)
77
Part 6 – Review questions: T-accounts, financial
statements, manufacturing overhead
Problem 3-26 pages 134-135
Handout pages 7 thru 9
1.
2.
3.
4.
5.
Enter the company’s transactions for the year
directly into T-accounts
Prepare a schedule of cost of goods manufactured
Prepare a journal entry to close manufacturing
overhead to cost of goods sold; prepare a cost of
goods sold schedule
Prepare an income statement for the year
Calculate selling price
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
78
Part 6 – Review questions: T-accounts, financial
statements, manufacturing overhead
Problem 3-26 pages 134-135
Handout pages 7 thru 9
1.
2.
3.
4.
5.
Enter the company’s transactions for the year
directly into T-accounts
Prepare a schedule of cost of goods manufactured
Prepare a journal entry to close manufacturing
overhead to cost of goods sold; prepare a cost of
goods sold schedule
Prepare an income statement for the year
Calculate selling price
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
79
Part 6 – Review questions: T-accounts, financial
statements, manufacturing overhead
Problem 3-26 pages 134-135
Handout pages 7 thru 9
1.
2.
3.
4.
5.
Enter the company’s transactions for the year
directly into T-accounts
Prepare a schedule of cost of goods manufactured
Prepare a journal entry to close manufacturing
overhead to cost of goods sold; prepare a cost of
goods sold schedule
Prepare an income statement for the year
Calculate selling price
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
80
Part 6 – Review questions: T-accounts, financial
statements, manufacturing overhead
Problem 3-26 pages 134-135
Handout pages 7 thru 9
1.
2.
3.
4.
5.
Enter the company’s transactions for the year
directly into T-accounts
Prepare a schedule of cost of goods manufactured
Prepare a journal entry to close manufacturing
overhead to cost of goods sold; prepare a cost of
goods sold schedule
Prepare an income statement for the year
Calculate selling price
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
81
Part 6 – Review questions: T-accounts, financial
statements, manufacturing overhead
Problem 3-26 pages 134-135
Handout pages 7 thru 9
1.
2.
3.
4.
5.
Enter the company’s transactions for the year
directly into T-accounts
Prepare a schedule of cost of goods manufactured
Prepare a journal entry to close manufacturing
overhead to cost of goods sold; prepare a cost of
goods sold schedule
Prepare an income statement for the year
Calculate selling price
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
82
Part 6 – Review questions: T-accounts, financial
statements, manufacturing overhead
Problem 3-26 pages 134-135
Handout pages 7 thru 9
1.
2.
3.
4.
5.
Enter the company’s transactions for the year
directly into T-accounts
Prepare a schedule of cost of goods manufactured
Prepare a journal entry to close manufacturing
overhead to cost of goods sold; prepare a cost of
goods sold schedule
Prepare an income statement for the year
Calculate selling price
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
83
MA1 – MODULE 2
Part 7
Review question:
Manufacturing overhead
(download the additional questions handout:
ma1_mod2_handout1.pdf)
84
Part 7 – Review questions: Manufacturing overhead
Exercise 3-7 pages 120-121
Handout page 10
1.
2.
3.
Identify the reasons for entries (a) through (d)
Prepare the journal entry to close the
manufacturing overhead account to cost of goods
sold
Prepare the journal entry to allocate the
manufacturing overhead to work in process,
finished goods and cost of goods sold.
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
85
Part 7 – Review questions: Manufacturing overhead
Exercise 3-7 pages 120-121
Handout page 10
1.
2.
3.
Identify the reasons for entries (a) through (d)
Prepare the journal entry to close the
manufacturing overhead account to cost of goods
sold
Prepare the journal entry to allocate the
manufacturing overhead to work in process,
finished goods and cost of goods sold.
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
86
MA1 – MODULE 2
Part 8
Review questions:
Multiple Choice Questions
(download the additional questions handout:
ma1_mod2_handout1.pdf)
87
Part 8 – Review questions: Multiple choice
Multiple choice questions
Handout pages 11 thru 15
Now working on….
December 1999 exam
Page 11 of handout
Q1
a. Cost of raw materials purchased
b. Predetermined overhead rate
c. Cost of goods manufactured
d. Cost of goods sold
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
88
Part 8 – Review questions: Multiple choice
Multiple choice questions
Handout pages 11 thru 15
Now working on….
Page 12 of handout
Q2 Balance in work in process
Q3 Manufacturing accounts
Q4 Overhead application rate
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
89
Part 8 – Review questions: Multiple choice
Multiple choice questions
Handout pages 11 thru 15
Now working on….
Page 13 of handout
Q5 June 2001 exam
–
Cost of goods sold
–
Direct materials, direct labour and manufacturing
overhead for 2001
Q6 Using normal costing in a service company
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
90
Part 8 – Review questions: Multiple choice
Multiple choice questions
Handout pages 11 thru 15
Now working on….
Page 14 of handout
Q7 Raw materials inventory
Q8 Cost of goods manufactured
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
91
Part 8 – Review questions: Multiple choice
Multiple choice questions
Handout pages 11 thru 15
Now working on….
Page 15 of handout
Q9 Manufacturing overhead application rate
Q10 Cost of goods sold balance
Stop the audio, read and attempt the
question in the handout then come back to
listen to the solution.
92