Professional Documents
Culture Documents
Case Requirement:
1. What product or service did you choose? Why is job order costing appropriate for
this setting?
target heading of which they are to sell the specific drone. Thus, they manufacture
this product to fill specific customer/clients need per market category. And in this
2. Why does the company that makes the product or service need a cost system?
precise expenses needed for things like labor, materials, and overhead before you
costs can help you evaluate profitability and determine whether or not you should
Management then need to decide what type of cost system to use in each
3. List two direct costs of making the product or service. Describe how the company
drone will depend on the quality of the camera, video transmitter and ground
4. List three indirect costs of making the product or service. Describe how the
company would assign these costs to specific jobs, projects, or customers? What
administration, electricity and security costs which are not directly related to
production. These cost are often allocated using the Activity-based indirect cost
record each activity needed in the production. Activities then are categorized as
incurring direct or indirect costs. At the end of reporting period, such as at month's
end, records are reviewed, indirect cost rates are calculated and the appropriate
1. What would the major cost of your business be? Try to classify the costs into the
may be bright for me. It is ultimately the goal of the to offer a one-stop facility for
all auto servicing needs, including brakes, transmission, wheel alignment, etc. In
this way the company can offer greater perceived value for the customer than
that may be needed in the services that we provide. Direct labors would be the
salaries of the workers directly involved in the repairs and servicing of the
customers. Overhead cost will be the indirect factory-related cost that will be
incurred in the shop. These includes but are not limited to electricity, depreciation
equipment and building, shop supplies and shop personnel (other than direct
labor). The SG&A will be the general company overhead which cannot be traced
to the sale of services. These cost includes expenses incurred for accounting,
2. Why would you need to determine the cost of providing your product or service to
individual customers? In other words, what types of decisions would you expect to
properly allocate the costs and make informed decisions regarding costing and
3. In general, would you expect you companys indirect (overhead) costs to be less
or more than the direct costs (direct labor and materials)? What allocation base do
you think you would use to charge overhead costs to individual customers? How
customer, overhead cost charge to individual customer will be on a per job order
basis. Meaning, depending on the complexity, the time and effort required to
complete its job will be the allocation basis. Since it will just be an average size
shop, I expect that my direct overhead cost will be more than the indirect cost.
4. Create a job cost sheet for a hypothetical average customer that includes
estimates of the major costs of serving that customer. How much do you think you
would need to charge to cover all of the costs plus provide a reasonable profit for
yourself?
regular wheel alignment. It is very important to ensure tires would not wear
Change Oil
Under-Chassis repair
Aircon
Etc..
Labor 180.00
Required:
Answer: $30.00
Answer: $15,000.00
3. Compute the total cost of Jobs 102 and 103 at the end of the period. Where
would the cost of each of these jobs appear on the year-end balance sheet?
4. Prepare journal entries to record the January transactions and post the entries
192,000.00 192,000.00
5. Calculate the amount of Over or Underapplied Overhead.
Answer: $7,000.00
6. Prepare the journal entry to dispose the overhead balance assuming that it
had been a year-end balance instead of a month-end balance. Post the effect
General Ledger:
62,000.00 62,000.00
Sampson Company
Less:
DM used 7,000.00
Sampson Company
Income Statement