Job-Order Costing-The Flow of Costs

Job-Order Costing-The Flow of Costs - 9/11/09 7:21 PM...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 9/11/09 7:21 PM McGraw-Hill's Connect - Ebook Page 1 of 12 http://connect.mcgraw-hill.com/connect/hmEBook.do?setTab=sectionTabs Managerial Accounting EBook 13/e Content Chapter3: Systems Design: Job-Order Costing Job-Order Costing-The Flow of Costs We are now ready to take a more detailed look at the flow of costs through the company's general ledger. To illustrate, we will consider a single month's activity at Ruger Corporation, a producer of gold and silver commemorative medallions. Ruger Corporation has two jobs in process during April, the first month of its fiscal year. Job A, a special minting of 1,000 gold medallions commemorating the invention of motion pictures, was started during March. By the end of March, $30,000 in manufacturing costs had been recorded for the job. Job B, an order for 10,000 silver medallions commemorating the fall of the Berlin Wall, was started in April. Learning Objective 4 Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. The Purchase and Issue of Materials On April 1, Ruger Corporation had $7,000 in raw materials on hand. During the month, the company purchased on account an additional $60,000 in raw materials. The purchase is recorded in journal entry (1) below: As explained in the previous chapter, Raw Materials is an asset account. Thus, when raw materials are purchased, they are initially recorded as an assetnot as an expense. 9/11/09 7:21 PM McGraw-Hill's Connect - Ebook Page 2 of 12 http://connect.mcgraw-hill.com/connect/hmEBook.do?setTab=sectionTabs Issue of Direct and Indirect Materials During April, $52,000 in raw materials were requisitioned from the storeroom for use in production. These raw materials included $50,000 of direct and $2,000 of indirect materials. Entry (2) records issuing the materials to the production departments. The materials charged to Work in Process represent direct materials for specific jobs. These costs are also recorded on the appropriate job cost sheets. This point is illustrated in Exhibit 3-6 , where $28,000 of the $50,000 in direct materials is charged to Job A's cost sheet and the remaining $22,000 is charged to Job B's cost sheet. (In this example, all data are presented in summary form and the job cost sheet is abbreviated.) EXHIBIT 36 Raw Materials Cost Flows The $2,000 charged to Manufacturing Overhead in entry (2) represents indirect materials. Observe that the Manufacturing Overhead account is separate from the Work in Process account. The purpose of the Manufacturing Overhead account is to accumulate all manufacturing overhead costs as they are incurred during a period. Before leaving Exhibit 3-6 we need to point out one additional thing. Notice from the exhibit that the job cost sheet for Job A contains a beginning balance of $30,000. We stated earlier that this balance represents the cost of work done during March that has been carried forward to April. Also note that the Work in Process account contains the same $30,000 balance. Thus, the Work in Process accountWork in Process account contains the same $30,000 balance....
View Full Document

Page1 / 12

Job-Order Costing-The Flow of Costs - 9/11/09 7:21 PM...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online