60 Chapter 2 Job Order Costing Discussion Questions 1. a. Name two principal types of cost accounting 7. Discuss how the predetermined factory overhead rate can be used in job order cost accounting to assist management in pricing jobs. systems. Which system provides for a separate record of each particular quantity of product that passes 8. a. How is a predetermined factory overhead rate through the factory? b. calculated? c. Which system accumulat es the costs for each b. Name three common bases used in calculating department or process within the factory? the rate. 2. What kind of firm would use a job order cost 9. a. What is () overapplied factory overhead and system? (2) underapplied factory overhead? b. If the factory overhead account has a debit balance, was factory overhead underapplied or 3. Which account is used in the job order cost sys- tem to accumulate direct materials, direct labor, and factory overhead applied to production costs for individual jobs? overapplied? If the factory overhead account has a credit bal- ance at the end of the first month of the fiscal year, where will the amount of this balance be c. 4. What document is the source for (a) debiting the accounts in the materials ledger and (b) crediting the accounts in the materials ledger? reported on the interim balance sheet? 5. What is a job cost sheet? 6. What is the difference between a clock card and 10. Describe how a job order cost system can be used for professional service businesses. time ticket?
1a. The two principle types of cost accounting systems are – job order costing and process costing. In the job order costing system manufacturing costs are accumulated on a separate basis for each job. This type of system is more suitable for organization that manufactures unique products or which undertakes special orders. The second system is process costing in which manufacturing costs are accumulated separately for each process. This system is apt for those products where the production process consists of different departments and the flow of costs is from one department to another department.
b. The answer is job order cost system. In a job order cost system there is a separate record of the costs of each particular quantity of product that passes through the factory. Per unit cost is computed using the formula: per unit cost = total cost applicable to a job/number of units in the job.
c. The answer is process costing. Costs are accumulated for each department as costs associated with individual units cannot be differentiated at all. Costs can be accumulated and allocated using weighted average costs, standard costs or first in first out concept.
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