Accounting 203 – Management Accounting
Chapter 3: Job-Order Costing
Job: Build three boxes
Steps:

Kitting: - INVENTORY DEPARTMENT In production box, place the following “Raw Materials”:
Start time:
Stop time:
Total time: o 18 cards o 1 Mailing Label o Job Order

Assembly 1 – TAPING DEPARTMENT,
Start time:
Stop time:
Total time: o Equipment: Roll of Tape o Pencil or Pen o Labor: 3 employees o ___________ Step #1: Review Job Order, verify all previous steps signed off o ___________Step #2: Tape 4 cards together on the short side, make a box shape. Use 4 pieces of tape.

Assembly 2 – CUTTING DEPARTMENT
Start time:
Stop time: o ___________Step #3: Tape 2 cards to bottom of box. Use 1 piece of tape.
Total Time: o Equipment: Pair of scissors o Labor: 3 employees o ___________ Step #1: Review Job Order, verify all previous steps signed off o ___________ Step #2: Cut bottom of box to fit. Discard scrap. o ___________ Step #3: Return box to Taping


Assembly 3 – TAPING DEPARTMENT, o Equipment: Roll of Tape o Pencil or Pen o Labor: 3 employees o ___________ Step #1: Review Job Order, verify all previous steps signed off
Start time: o ___________ Step #2: Tape cut side of bottom to box. Use 1 piece of tape.
Stop time:
Total Time:

Shipping – SHIPPING DEPARTMENT o Equipment: Stapler o Pencil or Pen o Labor: 3 employees o Place 3 boxes in a lunch bag, staple o Prepare mailing label (put a full address on mailing label)and affix to lunch bag. Ship
Start time:
Stop time:
Total time:
Total time for this job:
REQUIREMENT: Submit an essay to me on __________. Identify the Bottlenecks.
Recommend Process Reengineering ideas. Length: 2-3 pages. Be creative, use drawings/flowcharts, etc. THINK OUTSIDE “THE BOX.” Use clear language, organize your thoughts. Use the C-O-E rubric.
Content: Make a clear conclusion and support it with evidence
Organize: Organize your thoughts clearly and concisely.
Editing: Avoid typos, spelling, grammatical errors.

Accounting 203 – Management Accounting
Chapter 3: Job-Order Costing
Elements of a Job Order
Job Cost Sheet
Direct Material (DM)
Direct Labor (DL)
What is possible cost drivers?
Manufacturing Overhead (MOH)
Define
Calculating Predetermined
Manufacturing Overhead Rate
(MOH rate) --Use y = mx + b
NOTE: ALL are ESTIMATES!
Allocation base (labor hours, machine hours, direct materials
$, etc…)
Total fixed costs and variable costs per unit
Total manufacturing overhead costs
Calculate MOH rate
Why do we use a POHR???? (Predetermined Overhead Rate)
A comprehensive example…with T accounts
Example

Comprehensive Example: The Rand Company
The Rand Company produces Gold and Silver commemorative medallions.
Post the following transactions to the attached T-Accts. Post the relevant transactions to Job Orders A &
B below.
Beginning Balances:
Raw Materials
Work in Process
Finished Goods 10,000
$7,000
30,000
Rand company has only two jobs in process during April: Job A & Job B . Job B was begun in April.
Job A was in process. Hence, Job A’s beginning balance was the entire $30,000. a) 4/1--Rand company purchased $60,000 in raw materials, on account. b) During the month--$52,000 were requisitioned from the storeroom for use in production. These included $50,000 direct and $2,000 indirect materials. $28,000 were charged directly to Job A; $22,000 were charged directly to Job B. c) During the month--$60,000 was recorded for direct labor and $15,000 for indirect labor. $40,000 were charged directly to Job A; $20,000 were charged directly to Job B. d) During the month--$40,000 of indirect costs were incurred and charged to overhead (factory utilities, factory rent, miscellaneous factory costs). e) During the month--$20,000 was accrued for property taxed ($13,000) and prepaid insurance ($7,000). f) During the month—Rand recognized $18,000 in depreciation on factory equipment. g) Overhead application: Rand applies overhead using a predetermined overhead rate. Rand uses machine-hours to apply overhead at a rate of $6/hour. Rand used 10,000 machine-hours on Job A and
5,000 machine-hours on Job B.
Non-manufacturing costs…. h) During the month—Rand incurred $30,000 in selling and administrative salary costs. i) During the month—Office equipment depreciation was $7,000. j)Other expenses were $50,000. (Advertising: $42,000 and Other Selling and Administrative: $8,000).
Finally…. k) Job A was completed during April and moved from the manufacturing area to finished goods for shipping, cost = $________. Job B stayed in manufacturing, as it was not completed. l) During the month—Rand company shipped 750 of the 1,000 medals produced in Job A. Rand charged the customer $225,000. Cost = $________________.
Job Cost Sheet – Job A Job Cost Sheet – Job B beg bal: $0 beg bal: $30,000

Required: a) Input beginning balances for T accounts. b) Post to the attached T Accounts for each of the items above (a through j).
You can assume that all the transactions with employees, customers, and
suppliers were conducted in cash . c) The pre-determined overhead rate is provided, but do you know hot to calculate? d) Post WIP activity to the individual Job Orders. e) Create and post above a journal entry to adjust under or overapplied overhead from the Overhead account to COGS. Use reference "h":
Dr
Cr. f) Calculate Cost of Goods Sold (show here):
$
$

Ch 3 - RAND CORPORATION
Accts Receivable Prepaid Insurance
XX
Raw Materials
XX
Work in Progress
Accum. Deprec
Salaries Payable
xx
COGS
xx
Other S& A Exp
Finished Goods
bal
ADJ:
bal
Manufacturing OH
xx
Prop Tax Payable
ADJ:
bal
Accounts Payable
xx
SALES!
Salaries & Advert Expenses Deprec. Expense

Never give up, never surrender!
1.
Calculate a Predetermined Overhead Rate based on Budget Data a.
Budgeted overhead costs (indirect manufacturing costs only) b.
Budget labor hours (or whichever cost driver you are using) c.
Divide a/b = Predetermined Overhead rate.
2.
Charge Actual Overhead to the Overhead account based on ACTUAL data for indirect manufacturing costs ONLY, not budget.
Manufacturing Overhead
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3.
Calculate the applied amount of Overhead: The Actual Labor hours (or machine hours, etc. ) worked times the Predetermined Overhead rate
_______________ x ________________ = _____________
4.
Post applied Overhead to the Manufacturing Overhead account (above) and WIP
Work In Process
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5.
Balance in Overhead account is equal to Over/Under Applied overhead
Debit balance means: __________________applied
Credit balance means: _________________ applied
6.
Transfer ending balance in Manufacturing Overhead out, leaving a ZERO balance in
Manufacturing Overhead a.
Charge directly to COGS b.
Allocate to WIP, FG, COGS

OVERHEAD DRILL. . . .
Budgeted Costs direct mtls direct labor
Sales commissions
Salary of production supervisors
Salary of purchasing dept. indirect materials advertising expense training for production employees on new system training for accounting employees on new system rent (factory uses 75% of floorspace) utilities budgeted total MOH costs budgeted total units of cost driver rate per unit cost driver
Actual Costs direct mtls direct labor
Sales commissions
Salary of production supervisors
Salary of purchasing dept. indirect materials advertising expense training for production employees on new system training for accounting employees on new system rent (factory uses 75% of floorspace) utilities
actual $$$ total MOH costs
actual total units cost driver
standard overhead rate
actual $$$ overhead applied
$ 1,500,000
$ 380,000
$ 650,000
$ 350,000
$ 300,000
$ 50,500
$ 75,000
$ 62,000
$ 20,000
$ 510,000
$ 100,000
$ 1,490,000
$ 364,000
$ 650,000
$ 350,000
$ 300,000
$ 50,000
$ 75,000
$ 60,000
$ 20,000
$ 500,000
$ 104,000

Drill: Simmons Company
Simmons Company has the following estimated costs at the beginning of the year:
Direct Material
Direct Labor
Sales commissions
Salary of production
$60,000
220,000
300,000
140,000 supervisor
Indirect materials
Advertising expense
Rent on Factory equipment
Calculations:
20,000
44,000
64,000
Simmons estimates that 40,000 direct labor and 64,000 machine hours will be worked during the year.
IF overhead is applied on the basis of machine hours, what will be the overhead rate per hour? Show your calculations:
Overhead rate per hour:
At the end of the year, these were Simmons Company’s ACTUAL costs
Actual machine hours worked
Actual labor hours worked
Direct Material
60,000 hours
39,000 hours
$65,000
Direct Labor
Sales commissions
Salary of production
218,000
280,000
145,000 supervisor
Indirect materials
Advertising expense
Rent on Factory equipment
19,000
42,000
70,000
Was overhead under or over applied (circle one)? By how much? $__________________. Show your calculations on two T-Accounts, one for Manufacturing Overhead and one for Work in Process:

Ch 3 – Practice CORPORATION
Accts Receivable Prepaid Insurance
XX
Raw Materials
XX
Work in Progress
Accum. Deprec
Salaries Payable
xx
COGS
xx
Other S& A Exp
Finished Goods
bal
ADJ:
bal
Manufacturing OH
xx
Prop Tax Payable
ADJ:
bal
Accounts Payable
xx
SALES!
Salaries & Advert Expenses Deprec. Expense

Ch 3 – Practice CORPORATION
Accts Receivable Prepaid Insurance
XX
Raw Materials
XX
Work in Progress
Accum. Deprec
Salaries Payable
xx
COGS
xx
Other S& A Exp
Finished Goods
bal
ADJ:
bal
Manufacturing OH
xx
Prop Tax Payable
ADJ:
bal
Accounts Payable
xx
SALES!
Salaries & Advert Expenses Deprec. Expense