Question

Harley-Davidson manufactures 30 custom-made, luxury-model motorcycles. Does it account for these motorcycles as 30 individual jobs or as a job lot? Explain.

Short answer

The company will calculate per motorcycle cost as follows:

$\mathit{P}\mathit{e}\mathit{r}\mathit{m}\mathit{o}\mathit{t}\mathit{o}\mathit{r}\mathit{c}\mathit{y}\mathit{c}\mathit{l}\mathit{e}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{c}\mathbf{o}\mathbf{s}\mathbf{t}\mathbf{o}\mathbf{f}\mathbf{m}\mathbf{a}\mathbf{n}\mathbf{u}\mathbf{f}\mathbf{a}\mathbf{c}\mathbf{t}\mathbf{u}\mathbf{r}\mathbf{i}\mathbf{n}\mathbf{g}}{\mathbf{30}}$

Step-by-step solution

 Step 1: Definition of Job Order Costing

Job order costing can be defined as the cost accounting method in which all the jobs performed in the process are allocated with the cost to calculate the cost of each product.

Account for motorcycles

The manufacturer will account for the cost of using the job lot because all the motorcycles will have the same specifications. Therefore, the cost of manufacturing 30 motorcycles will be divided by 30.