Chapter_19_lecture

Chapter_19_lecture - Chapter19: 1 customservices. . manufac

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Chapter 19: Job Order Cost Accounting 1
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Job order costing is typically used by manufacturers of custom products or providers of custom services. The jobs must be large enough in scope and value to justify the accounting effort to trace costs to the jobs. Job order production can apply to both manufacturing and service companies. 2
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Here you see some examples where job order costing is used. Another example familiar to many of us is an automobile repair shop. When you take your car in for an inexpensive job like an oil change, you expect to be charged the cost of an oil change instead of an expensive engine repair. The shop’s accounting system must be able to handle multiple jobs with differing amounts of materials and labor costs that are incurred each day. 3
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The initial event in a job order system is receipt of a customer order. A less common case is to begin work on a job before the company has a signed contract. This is referred to as jobs produced on speculation. The sales price of the job may be a cost plus, such as with a government contract, or may be determined by market factors. The company may then decide whether the price will provide a reasonable profit. The job is then scheduled, necessary materials are obtained, and the work is begun. 4
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Direct materials and direct labor are traced directly to jobs in the goods in process inventory account. Indirect materials and indirect labor flow through the factory overhead account into goods in process. Completed jobs are transferred from the goods in process inventory account to the finished goods inventory account. When the finished jobs are delivered to customers, the cost of these jobs becomes an expense on the income statement called cost of goods sold. 5
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A job cost sheet is a separate record maintained for each job that is used to account for material, labor, and factory overhead costs for each job. The job cost sheet may be a paper record, but most likely it is a computerized file. 6
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Here’s an example of a job cost sheet showing customer identification, job number, relevant dates, along with materials, labor, and overhead expenditures for the job. 7
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Materials cost entered on the job cost sheet may be summarized from a materials requisition form. 8
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When materials are need for a job, the production manager, C. Luther, prepares a materials requisition and sends it to the materials manager. The materials manager, M. Bateman, will not release materials from the materials storage facility without this authorization. 9
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number of the job where the material is to be used is noted on the requisition. 10
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This note was uploaded on 06/16/2011 for the course ACCT 201 taught by Professor Smith during the Spring '11 term at Yale.

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Chapter_19_lecture - Chapter19: 1 customservices. . manufac

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