# Chapter 4 Job Order Costing Cost object is a job or batch When is it

```Chapter 4
Job Order Costing
Cost object is a job or batch
When is it most appropriate?
Actual, Normal, and Standard Costing
How does ABC fit in with Job Order Costing?
Job cost sheet, materials requisitions, time tickets.
Actual versus Normal costing --- Overhead application
(POHR)
Example 1
Disposition of over- and under-applied overhead
Example 3
Service Industries
Operation costing
Example 2
Example 1
Powell Company uses a job costing system. During the month of May, Powell spent most of its
time on job A50, which was started late in April. Following information are cost for job A50,
other May costs, and relevant annual estimates.
Materials issued:
80% for Direct Use on job A50 and
20% for Indirect Use through May
Labor:
Direct Labor for job A50
(300 DLH @ \$20 per DLH)
Indirect Labor for May
Other May Costs:
Depreciation (70% Factory and 30% Administrative)
Other (70% Factory and 30% Administrative)
Overhead Cost Driver: Direct Labor Hours (DLH)
Estimated Annual DLH
Markup -- as a percent of cost
\$ 5,000
6,000
310
1,000
700
21,000
3,000
40%
Required:
(1) What is the overhead to be applied for May to job A50 upon completion on May 15?
(2) What are total manufacturing costs for May for job A50?
(3) Assuming that the May 1 work-in-process inventory for job A50 was \$400, how much
would finished goods inventory increase as a result of the completion of this job on May 15?
(4) What is the profit on job A50 when it is sold on May 15?
(5) Calculate the under- or over-applied overhead for May.
Example 2
Riverside Company manufactures two sizes of T-shirts, medium and large. Both sizes go through
cutting, assembling and finishing departments. The company uses operation costing.
Riverside Company's conversion costs applied to products for June were: Cutting
Department \$60,000, Assembling Department \$60,000, and Finishing Department \$30,000. June
had no beginning or ending work-in-process inventory.
The quantities and direct materials costs for June follow:
Job No.
601
602
Size
Medium
Large
Quantity
10,000
20,000
Direct Materials
\$50,000
110,000
Each T-shirt, regardless of size, required the same cutting, assembling and finishing
operations.
Required:
(1) Compute both unit cost and total cost for each shirt sizes produced in June.
Example 3
The Zaf Radiator Company uses a normal-costing system with a single manufacturing
overhead cost pool and machine-hours as the cost-allocation base. The following data are
for 2001:
Budgeted machine-hours
Actual machine-hours
\$4,800,000
Machine-hours
80,000
\$4,900,000
75,000
Machine-hours data and the ending balances (before proration of under- or overallocated
Cost of goods sold
Finished goods
Work in process
Actual
Machine-Hours
60,000
11,000
4,000
End of Year 2001
Balance
\$8,000,000
1,250,000
750,000
a. Compute the budgeted manufacturing overhead rate for 2001. (5 points)
b. Compute the under- or overallocated manufacturing overhead of Zaf Radiator in 2001
and determine how much should be allocated to Cost of Goods Sold, Finished Goods,
and Work in process if the allocation is prorated on the ending balances (before
proration) in the three accounts
```