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Job Order Cost Accounting

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  1. Chapter 29 Job OrderCost Accounting Section 1: Cost Accounting Section Objectives • Explain how a job order cost accounting system operates.

  2. Types of Cost Accounting Systems • Job Order Cost Accounting • Process Cost Accounting • Standard Cost Accounting Standard cost accounting may be used with either the job order cost system or the process cost system.

  3. Types of Cost Accounting Systems A job order cost accounting system is used by businesses that produce special orders or produce more than one product in batches. A process cost accounting system is used when standard products are manufactured using a continuous process. A standard cost accounting system, in which standard costs of production are measured, can be used with a job order or a process cost system.

  4. Objective 1. Explain How A Job Order Cost Accounting System Operates.

  5. Cost Flows in a Job Order Cost System Procurement Production Warehousing Selling

  6. Flow of Costs through a Job Order Cost Accounting System Procurement Production Warehousing Selling Raw MaterialsInventory Work in Process Inventory Finished Goods Inventory Cost of Goods Sold Purchases Materials Labor Overhead Issued Transferred out Transferred in Transferred out Transferred in WagesPayable Charged to Work in Process Manufacturing Overhead Applied to Work in Process Indirect Materials Indirect Labor Other

  7. Perpetual Inventory System • The perpetual inventory system tracks inventories on hand at all times. • The following accounts are involved in a perpetual inventory system: • Raw Materials Inventory • Wages Payable • Manufacturing Overhead • Work in Process Inventory • Finished Goods Inventory • Cost of Goods Sold

  8. QUESTION: How is the balance of the Raw Materials Inventory account computed? Raw Materials Inventory Beg. inventory ofraw materials xx Add purchases during period xx Total available foruse xx Deduct materials used during year xx Ending inventory of raw materials xx

  9. Ending inventory of work in process xx Computing the Balance of the Work in Process Inventory Beginning inventory of work in process xx Add direct materials, direct labor, and manufacturing overhead charged to production xx xx Deduct cost of goods completed xx Reflects the cost of partially completed units

  10. Ending inventory of finished goods xx Computing the Balance of Finished Goods Inventory Beginning inventory of finished goods xx Add cost of goods manufactured xxxx Deduct cost of goods sold xx Represents the cost of finished goods on hand.

  11. Just-in-Time Inventory Systems • Used by companies who wish to eliminate raw materials inventory. • Raw materials ordered to arrive just in time to be placed into production. • Costs of arriving materials placed immediately into Work in Process Inventory. • Reduces amount of capital tied up in inventory. • Reduces inventory storage space. • Reduces costs for storeroom personnel, insurance, and recordkeeping.

  12. Risks of Just-in-Time Inventory Systems • Supply Dependability: Unless the supply sources are dependable, manufacturing operations are at risk. • Interruption in Production: Late deliveries or damaged materials cause a halt in production.

  13. R E V I E W SECTION Complete the following sentences: Businesses that produce products in batches are most likely to use a ________ cost accounting system. job order process cost A ___________ accounting system is used when standard products are manufactured using a continuous process. standard A ________ cost accounting system can be used with either a job order or a process cost system.

  14. R E V I E W SECTION Complete the following sentences: perpetual A ________ inventory system tracks inventory on hand at all times. In a job order cost system, costs flow from procurement to production, warehousing, and ______. selling just-in-time A __________ inventory system reduces the amount of working capital tied up in inventory.

  15. Thank You for using College Accounting, 11th Edition Price • Haddock • Brock