Case 3-61 1.

A job order costing is appropriate to use when there are multiple products or services involved and the cost incurred can be identified to each product. Job Order Costing Unique / multiple products and Type of product service, cost incurred can be identified to each product Manufacturing approach Cost accumulation Major cost report 2. Customized to the needs of the customer or client Costs accumulated by job or customer Job cost sheet for each unique unit, customer or job

WIP Inventory as of December 31 (Units): CC723 Nov 30 WIP (Units) Addition during December Quantity available Quantity completed (transfer out to FG inventory) Dec 31 WIP (Units) 20,000 20,000 (20,000) CH291 15,000 15,000 (15,000) PS812 DS444 25,000 25,000 25,000 5,000 5,000 (5,000) -

= By the end of December, Job PS812 - Printer Stand is the only remaining Job in WIP inventory. Overhead applied for JOB PS812 - Printer Stand Budgeted Manufacturing Overhead Budgeted Machine Hours POHR: 4,500,000.00 900,000.00 $ 5/MH 19,500 MH $ 4,500,000.00 900,000 MH

POHR:

Machine Hours used during December production for Job PS812 - Printer Stand: Overhead applied: Overhead applied: $5/MH x 19,500MH 97,500.00

WIP Inventory as of December 31 (Cost): Nov 30 WIP (Cost) Addition during December Direct Material Direct Labour OH Applied 250,000.00

(124,000+87,000)

211,000.00 200,500.00 97,500.00 509,000.00

Dec 31 WIP (Cost) 3. Finished Goods Inventory as of December 31 (Units):

759,000.00

Nov 30 FG (Units) Quantity completed (transfer from WIP) Quantity available Quantity shipped Dec 31 FG (Units)

CH291 19,400 15,000 34,400 (21,000) 13,400

Finished Goods Inventory as of December 31 (Cost): FIFO method determined that the beginning balances of the inventory are going to be used first before using the current addition. In this Case, the quantity shipped is 21,000 units, consisting 19,400 units (all of November balances) and 1,600 units (December production) The cost for remaining balances in Finished Goods inventory as at December 31 is from December production. OH applied Machine Hours used during December production for Job CH291 - Chair Overhead applied: Overhead applied: Production cost for quantity completed during Dec Nov WIP (Cost) Addition during December Direct Material Direct Labour OH Applied 431,000.00 $5/MH x 19,500MH 22,000.00 4,400 MH

(3,000+10,800)

13,800.00 43,200.00 22,000.00 79,000.00

Production cost for quantity completed during Dec Production cost Quantity completed Cost per units: 510,000.00 15,000 $ 34.00 /unit $ 510,000.00 15,000 units

510,000.00

Cost per units:

Cost of Finished Goods Inventory at December 31 December 31 Finished Good Inventory (Unit) Cost per Unit Cost of Finished Good Inventory at December 31 13,400 units 34.00 455,600.00

x $

4.

Actual manufacturing overhead up to November 30 Actual manufacturing overhead for December Actual manufacturing ovehead for the year

+ $

4,140,000.00 252,000.00 4,392,000.00

Machine hours used up to November 30 Machine hours used for December Total Machine hours used for the year x POHR OH applied for the year

+ x $

830,000 49,900 879,900 5.00 4,399,500.00

MH MH MH /MH

Actual manufacturing ovehead for the year OH applied for the year Overapplied manufacturing overhead

$ $ $

4,392,000.00 4,399,500.00 7,500.00

5.

The two accounting treatment for overapplied and underapplied overhead:

1.

Disposing of the balance in Manufacturing Overhead to make a direct adjustment to Cost of Goods Sold. The effect of disposing of the Manufacturing Overhead balance to theCost of Goods Sold account is as follows: Overapplied Manufacturing Overhead (credit balance) Underapplied Manufacturing Overhead (debit balance) Decrease Cost of Goods Sold

Increase Cost of Goods Sold

2.

write off by allocation of under or overapplied overhead between work in process (WIP),finished goods and cost of goods sold (COGS)

To choose which one to be use is based on the significicant of the amount. If the amount is insignificant, it should be disposed against Cost of Good Sold (treated as period cost). If the amount is significantly high, it should be prorate againts WIP inventory, finished goods inventory & Cost of goods sold (adding the product cost)