Chapter 15: Q7DQ (page 694)
Google uses a “time ticket” for some employees. How are time tickets used in job order costing?
The time ticket is generally considered for recording the time spent by each employee on their respective job.
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Match each of the terms/phrases numbered 1 through 5 with the best definition a through e.
1. Cost accounting system a. Production of products in response to
customer orders
2. Target cost b. Production activities for a customized product
3. Job lot c. A system that records manufacturing costs
4. Job d. The expected selling price of a job minus its
desired profit.
5. Job order production.e. Production of more than one unit of a custom
product.
Why must a company use predetermined overhead rates when using job order costing?
Starr Mfg.’s predetermined overhead rate is 200% of direct labor. Information on the company’s production activities during September 2017 follows.
a. Purchased raw materials on credit, \(125,000.
b. Materials requisitions record use of the following materials for the month.
Job 487 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \)30,000
Job 488 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Job 489 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Job 490 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000
Job 491 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Total direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Total materials used . . . . . . . . . . . . . . . . . . . . . . . . . . \(92,000
c. Paid \)11,000 cash for miscellaneous factory overhead costs.
d. Time tickets record use of the following labor for the month. These wages are paid in cash.
Job 487 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \( 8,000
Job 488 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000
Job 489 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Job 490 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000
Job 491 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Total direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,000
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \)84,000
e. Applied overhead to Jobs 487, 489, and 490.
f. Transferred Jobs 487, 489, and 490 to Finished Goods.
g. Sold Jobs 487 and 489 on credit for a total price of \(340,000.
h. The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).
Depreciation of factory building . . . . . . . . . . . . . . . . . . \)37,000
Depreciation of factory equipment . . . . . . . . . . . . . . . . 21,000
Expired factory insurance . . . . . . . . . . . . . . . . . . . . . . . 7,000
Accrued property taxes payable . . . . . . . . . . . . . . . . . . 31,000
Required
Job No. __________
Materials . . . . . . . . . . \(
Labor . . . . . . . . . . . . .
Overhead . . . . . . . . .
Total cost . . . . . . . . . \)
2. Prepare journal entries to record the events and transactions a through i.
3. Set up T-accounts for each of the following general ledger accounts, each of which started the month with a zero balance: Raw Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Factory Overhead, Cost of Goods Sold. Then post the journal entries to these T-accounts and determine the balance of each account.
4. Prepare a report showing the total cost of each job in process and prove that the sum of their costs equals the Work in Process Inventory account balance. Prepare similar reports for Finished Goods Inventory and Cost of Goods Sold.
Refer to the chapter opener regarding Neha Assar and her company, Neha Assar. All successful businesses track their costs, and it is especially important for start-up businesses to monitor and control costs.
Required
1. Assume that Neha Assar uses a job order costing system. For the basic cost category of direct materials, explain how Neha’s job cost sheet would differ from a job cost sheet for a manufacturing company.
2. For the basic cost categories of direct labor and overhead, provide examples of the types of costs that would fall into each category for Neha Assar.
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.
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