Produce Job Costing Information PDF

Training, Teaching and Learning Materials (TTLM)
ADMAS UNIVERSITY
The Ethiopian TVET-System

ACCOUNTS AND BUDGET SERVICE LEVEL IV
Learning Guide
Unit of Competence Produce Job Costing Information
Module Title Producing Job Costing Information
LG Code: EIS ABS4 10 0812
TTLM Code: EIS ABS4M 10 0812
TTLM Development Manual Date: September ,2017

Compiled by: Business & Finance Department
INTRODUCTION
Welcome to the module “Produce Job Costing Information”. This

learner’s guide was prepared to help you achieve the required competence in
“Accounts and Budget Support Level IV”. This will be the source of information
for you to acquire knowledge attitude and skills in this particular occupation with
minimum supervision or help from your trainer.
Summary of Learning Outcomes
After completing this learning guide, you should be able to:

Lo1:- . Gather and record operating and cost data
Lo2:- . Produce cost reports
How to Use this TTLM
o Read through the Learning Guide carefully. It is divided into sections that
cover all the knowledge, skills and attitude that you need.
o Read Information Sheets and complete the Self-Check at the end of each
section to check your progress
o Read and make sure to Practice the activities in the Operation Sheets. Ask your
trainer to show you the correct way to do things or talk to more experienced
person for guidance.
o When you are ready, ask your trainer for institutional assessment and provide
you with feedback from your performance.

Lo1:- . Gather and record operating and cost data

Key Terms and Concepts to Know
Job-Order Costing vs. Process Costing
Job-order costing is used for companies that produce different

products each
period. Costs are accumulated for each job.
Process costing is used for companies that produce many identical units of a
single product for long periods of time. Costs are accumulated by
manufacturing department.
Key Job-Order Costing Documents

Material requisitions request materials for production and support
direct materials
costs charged to each job.
Time cards or time tickets record direct labor hours used in
production and
support direct labor costs charged to each job.
Job cost sheets are the most important job costing document. They
summarize
all of the key information about the job and accumulate total direct
materials
costs, total direct labor costs and overhead costs applied to the job
to determine
the total costs for the job.
Actual Manufacturing Overhead vs. Manufacturing Overhead Applied

Actual manufacturing overhead costs are the indirect manufacturing
costs incurred
in the production process.
Manufacturing overhead applied are the overhead costs added or
applied to each
job during the production process. These costs are added to work-
in-process to

become part of total manufacturing costs along with direct materials
and direct
labor.
Choosing a Cost System

Job-order costing is used by companies with multiple unique products
which generally
have a low to moderate annual production volume.
Example #1
Which method for assigning costs to products would be more appropriate
in each of the following cases?
a) Cruise ship builder

b) Cornflakes factory
c) Law firm
d) Dentists office
e) Beverage bottling company
Solution #1
a) Job-order costing (every ship is a separate job)
b) Process
costing (every case is a separate job)
c) Job-order (every patient visit is a separate job)
costing
d) Job-order
costing
e) Process
costing

Applying Manufacturing Overhead
Manufacturing overhead is applied or added to each job while it is in process.
There are three kinds of overhead costs consider:

o Estimated overhead cost which is determined from the annual budget
prepared before the year begins and is used only in the pre-determined
overhead rate calculation
o Actual overhead cost which is incurred periodically throughout the year and
debited to the manufacturing overhead
overhead rateaccount
X baount of allocation s
o Applied overhead cost which is added to jobs in the work-in-process
inventory account throughout the year and credited to the manufacturing
overhead account
The manufacturing overhead account is a holding account for the actual overhead
costs (debits) and applied over costs (credits).
o Actual overhead costs flow into the account as they are incurred
o Applied overhead costs flow out of the account as the jobs flow through the
production process.
o The account balance may be either debit (underapplied) or credit
(overapplied).
o Underapplied overhead represents an expense which must be transferred to
cost of goods sold.
o Overapplied overhead represents a reduction of expense charged to jobs
which must be transferred to cost of goods sold.
Manufacturing overhead is applied to jobs in work-in-process using the following
formula:
Overhead applied = Pre-determined
e incurred by the job
The predetermined overhead rate is computed before the period begins:
Estimated annual overhead cost

Pre-determined overhead rate =
Estimated amount of the allocation
base (denominator activity)

Example #2
ABC Company uses job-order costing. It incurred the following costs for job M301: 20
pounds of raw materials (all direct) were issued to be used for job M301 at a cost of $7
per pound. Three people were assigned to work on Job M301 at a rate of $12 per hour.
Records show that a total of 25 direct labor-hours were worked on Job M301.
Manufacturing overhead is applied based on direct labor-hours. At the beginning of the
year, estimated total manufacturing overhead was $450,000 and the total direct
laborhours incurred would be 50,000.
Required: Determine the cost assigned to Job M301.
Solution #2
$450,000
Pre-determined overhead rate = $9.00 =
50,000 direct labor hours
Direct materials 20 pounds X $7.00 = $140

Direct labor 25 hours X $12.00 = $300
Manufacturing overhead 25 hours X $9.00 = $225
$665

Flow of Costs Through Inventory Accounts
Raw Materials Work in Process Finished Goods Cost of Goods Sold

Beginning Beginning Beginning Beginning
Balance Balance Balance Balance
-DM  +DM
Usage Usage
+Purchases +DL -COGM  +COGM -COGS  +COGS

Usage
+MOH
Applied
=Ending =Ending =Ending =Ending
Balance Balance Balance Balance
Manufacturing
Overhead
Beginning
Balance
+Actual -MOH
overhead applied
costs
incurred
=Under- = Over-
applied applied
With the exception of overhead, this is the same process described in Chapter 1.
Actual overhead costs incurred are now flow through the Manufacturing Overhead
account instead of directly into the work-in-process inventory.
The balance in the manufacturing overhead account may be a debit or credit,
depending on whether:
o Debit if the overhead applied is less than the actual overhead costs incurred
(underapplied)
o Credit if overhead applied is more than the actual overhead costs incurred
(overapplied).
Some companies may use departmental predetermined overhead rates rather

than the single plant-wide predetermined overhead rate shown here in an effort to
make the overhead application process more accurate.

In Chapter 8 terms, the balance in the overhead account is:

o A favorable variance if it is overapplied
o An unfavorable variance if it is underapplied
The basic journal entries to record the flow of costs through the inventory
accounts are:
Purchase of raw materials
Raw material inventory xxx

Accounts payable xxx
Issue raw materials
Work-in-process inventory (direct) xxx

Manufacturing overhead (indirect) xxx
Raw materials inventory xxx
Labor costs incurred
Work-in-process inventory (direct) xxx

Manufacturing overhead (indirect) xxx
Wages and salaries payable xxx
Manufacturing overhead costs incurred
Manufacturing overhead xxx
Accounts payable or cash xxx

Accumulated depreciation xxx

Prepaid expenses xxx

Accrued expenses xxx
Manufacturing overhead applied
Work-in-process inventory xxx
Goods are completed

Finished goods inventory xxx

Work-in-process inventory xxx
Page 5 of 24

Finished goods are sold
Cash or accounts receivable xxx

Sales xxx
Cost of goods sold Xxx
Finished goods inventory xxx
Close balance in overhead account

Underapplied
Cost of goods sold xxx
Overapplied
Cost of goods sold xxx
Summary of Manufacturing Overhead Accounting
At the beginning of the period
Estimated amount of MOH / Estimated amount of allocation base = Predetermined

overhead rate
During the period

Predetermined overhead rate x Actual amount of allocation base incurred = Total
manufacturing overhead applied
At the end of the period

Actual manufacturing overhead cost - Total manufacturing overhead applied =
Underapplied (overapplied) overhead
Underapplied (overapplied) overhead is closed to Cost of Goods Sold.


Example #3
ABC uses job-order costing. It applies overhead cost to jobs on the basis of direct
labor-hours. For the current year the company estimates that it will work 20,000
direct labor-hours and will incur $650,000 of manufacturing overhead. The following
transactions took place during the year:
a) $300,000 of raw materials were purchased on account
b) Raw materials were issued into production, $90,000 direct materials and
$40,000 indirect materials
c) Labor costs incurred: $40,000 direct, $130,000 indirect, sales commissions
$50,000, administrative salaries $100,000
d) Utility costs for the factory were $60,000
e) Depreciation recorded was $300,000 (70% related to factory; 30% related
to administrative offices)
f) Manufacturing overhead was applied to production. Actual direct labor-
hours incurred were 22,000.
g) Units costing $300,000 were completed and transferred into the finished
goods inventory.
h) Goods with a cost of $150,000 were sold on account for $200,000.
i) Closed the under/overapplied overhead for the year.
Solution #3
a) Raw materials 300,000
Accounts payable 300,000
b) Work in process 90,000

Manufacturing overhead 40,000
Raw materials 130,000
c) Work in process 40,000

Sales commission expense 50,000
Administrative salaries expense 100,000
Salaries and wage payable 320,000
d) Manufacturing overhead 60,000

Accounts payable 60,000
e) Manufacturing overhead 210,000

Depreciation expense 90,000
Accumulated depreciation 300,000

Revised Fall 2012
f) Work in process 715,000

Manufacturing overhead (1) 715,000
g) Finished goods 300,000

Work in process 300,000
h) Accounts receivable 200,000

Sales 200,000
Cost of goods sold 150,000

Finished goods 150,000
i) Manufacturing overhead 275,000

Predetermined $650,000
= $32.50 per DLH
overhead rate = 20,000 DLH
Overhead applied = $32.50 X 22,000 DLH = $715,000
Manufacturing Overhead
actual applied
40,000
130,000 715,000
60,000
210,000
275,000 overapplied


Revised Fall 2012
Practice Problems
Practice Problem #1
Company XYZ makes custom motor boats. It incurred the following costs for the just-
completed job B011. 500 pounds of direct materials were used at a cost per pound of
$25. The job cost sheet indicates that a total of 90 direct labor-hours incurred on job
B011. The workers were paid at a rate of $18 per hour. The company applies overhead
based on machine hours. At the beginning of the year, it was estimated that the total
amount of overhead would be $180,000 and a total of 30,000 machine hours would be
incurred. Job B011 required 150 machine hours.
Required: Determine the total cost assigned to Job B011.
Practice Problem #2
X company uses job-order costing. It applies overhead cost to jobs on the basis of direct
labor cost. For the current year, the company estimates that it will incur $25,000 in
direct labor cost and $550,000 of manufacturing overhead. During the year, $30,000 of
direct labor costs were incurred. Actual overhead costs incurred were:
Indirect materials expense $100,000
Insurance expense 10,000
Depreciation expense 75,000
Indirect labor expense 150,000
Utilities expense 25,000
Rent expense 200,000
Required:
a) Compute the company’s predetermined overhead rate.
b) Compute the amount of over or under applied overhead.
c) Prepare the necessary journal entry to close the over or under applied
overhead.


Practice Problem #3
Theodore’s Cookies had 3 cookie orders in production at June 30: chocolate chip,
oatmeal raisin and peanut butter. Material costs for chocolate chip and peanut butter
were $500 and $350. Direct labor costs per batch were $200 and $250 for chocolate
chip and oatmeal raisin, respectively and $600 in total. Overhead is applied at the rate
of 50% of direct materials costs. Total costs for the oatmeal raisin batch were $1,150.
Required: What was the balance in work-in-process at June 30?
Practice Problem #4
Buckman Corporation, which began operations on January 1 of the current year,
reported the following information:
Estimated manufacturing overhead $600,000

Actual manufacturing overhead 639,000
Estimated direct labor cost 480,000
Actual direct labor cost 500,000
Total debits in the Work-In-Process account 1,880,000
Total credits in the Work-In-Process account 920,000
Buckman uses a normal cost system and applies manufacturing overhead to jobs on the
basis of direct labor cost. A 60% markup is added to the cost of completed production
when finished goods are sold. On December 31, job no. 18 was the only job that
remained in production. That job had direct-material and direct-labor charges of $16,500
and $36,000, respectively.
Required:
a) Determine the company's predetermined overhead rate.
b) Determine the amount of under- or overapplied overhead. Be sure
to label your answer.
c) Compute the amount of direct materials used in production.
d) Calculate the balance the company would report as ending work-
in-process inventory.
e) Prepare the journal entry(ies) needed to record Buckman's sales,
which are all made on account.

Page 10 of 24

Practice Problem #5
Kei Products uses a predetermined overhead application rate of $18 per labor hour. A
review of the company's accounting records revealed budgeted manufacturing overhead for
the period of $621,000, applied manufacturing overhead of $590,400, and
overapplied overhead of $11,900.
Required:
a) Determine Kei's actual labor hours, budgeted labor hours, and
actual manufacturing overhead.
b) Prepare the year-end journal entry to adjust the overapplied
overhead.
Practice Problem #6
Rock Star, Inc., which uses a job-costing system, began business on January 1, 20x3
and applies manufacturing overhead on the basis of direct-labor cost. The following
information relates to 20x3:
Budgeted direct labor and manufacturing overhead were anticipated to be
$200,000 and $250,000, respectively.
Job nos. 1, 2, and 3 were begun during the year and had the following charges
for direct material and direct labor:
Job # Direct Materials Direct Labor
1 $145,000 $35,000
2 320,000 65,000
3 55,000 80,000
Job nos. 1 and 2 were completed and sold on account to customers at a profit of
60% of cost. Job no. 3 remained in production.
Actual manufacturing overhead by year-end totaled $233,000. Rock Star adjusts
all under- and overapplied overhead to cost of goods sold.
Required:
a) Compute the company's predetermined overhead application rate.
b) Compute Rock Star's ending work-in-process inventory.
c) Determine Rock Star's sales revenue.
d) Was manufacturing overhead under- or overapplied during 20x3?
By how much?
e) Present the necessary journal entry to handle under- or
overapplied manufacturing overhead at year-end.

f) Does the presence of under- or overapplied overhead at year-end
indicate that Rock Star's accountants made a serious error? Briefly
explain.

Sample True / False Questions
1. When raw materials are issued into production the Raw Materials account is
debited.
True False
2. Manufacturing overhead account is debited for the actual overhead costs

incurred.
True False
3. Job cost sheets are used in a process costing system.

True False
4. Process costing is appropriate when a large number of identical products are

produced.
True False
5. In a normal costing system manufacturing overhead is applied by multiplying

the predetermined overhead rate by actual amount of the allocation base.
True False
6. The predetermined overhead rate is computed using actual amount of

overhead.
True False
7. Underapplied overhead means that the actual overhead was less than the
applied overhead.
True False
8. In the journal entry to close overapplied overhead Cost of Goods Sold is

credited.
True False
9. Finished Goods inventory account is credited for the amount of cost of goods
manufactured during a period.
True False

10. When direct labor costs are incurred, Work in Process is debited.
True False

11. Factory rent should be assigned equally between manufacturing overhead and
selling and administrative expenses.
True False
12. Selling expenses are applied to production using a predetermined overhead

rate.
True False
13. The predetermined overhead rate is computed based on estimates.

True False
14. Indirect materials are part of manufacturing overhead.

True False
15. Work in Process is a control account that contains a summary of all individual
job cost sheets for all jobs in process at a point of time.
True False
16. When goods are sold, the Work in Process account is credited.
True False
17. Manufacturing overhead account is debited for the amount of overhead applied
to Work in Process.
True False
18. The predetermined overhead rate for the year is computed at the end of the
year.
True False
19. A company that produces cornflakes will most likely use a job-order cost
system.
True False
20. Indirect materials issued into production should be debited to Work in Process.
True False


Sample Multiple Choice Questions

1. A cost driver is:
a) Factor that causes overhead costs
b) Part of direct materials
c) Cost of goods sold
d) Expected to be offset in future months
2. Which of the following statements is false?

a) The manufacturing overhead account is credited when manufacturing
overhead is applied to Work in Process
b) Cost of Goods Sold is debited for the amount of over applied overhead
c) Work in Process inventory account is credited when products are transferred
to Finished Goods
d) Manufacturing overhead is applied to Work in Process using a
predetermined overhead rate
3. XYZ Company applies overhead on the basis of direct labor-hours. The

following data are available:
Estimated annual overhead cost $450,000
Actual annual overhead cost 580,000
Estimated direct labor-hours 25,000
Actual direct labor-hours 20,000
Compute the amount of overhead applied during the period and the amount of
under or over applied overhead (if any).
a) $450,000 applied and $130,000 under applied
b) $360,000 applied and $220,000 under applied
c) $580,000 applied and no under or over applied overhead
d) $360,000 applied and $220,000 over applied
4. Over applied overhead means that:

a) Actual overhead is more than overhead applied
b) Actual overhead is equal to overhead applied
c) Overhead applied is less than actual overhead
d) Actual overhead is less than overhead applied


5. ABC Company applies overhead on the basis of direct labor costs. The
estimated amount of direct labor costs for the year was $35,000. The
predetermined overhead rate for the year is 150% and manufacturing
overhead applied was $45,000. What is the amount of actual direct labor costs
incurred during the year?
a) $67,500
b) $52,500
c) $30,000
d) $53,000
6. During the year X Company estimated that it will incur the following costs for
Job 090: $400,000 direct materials; $40,000 direct labor; $120,000
manufacturing overhead. Overhead is applied based on direct labor costs. Job
090 was completed during the period and it incurred the following actual costs:
$350,000 direct materials; $43,000 direct labor; manufacturing overhead
$135,000. The amount of under or over applied overhead was:
a) $6,000 over applied
b) $15,000 under applied
c) $15,000 over applied
d) $6,000 under applied
7. If the manufacturing overhead account has a credit balance at the end of the
year, it means that:
a) Overhead was over applied
b) Overhead was under applied
c) Overhead was not applied
d) The amount of actual and applied overhead was the same
8. A company applies overhead based on machine hours. The predetermined

overhead rate for the year was $25 per machine hour. Actual machine hours
were 8,000. The amount of under applied overhead was $4,000. What was the
amount of actual overhead costs incurred?
a) $200,000
b) $196,000
c) $204,000
d) $150,000

Page 15 of 24

9. XYZ company had the following data for the current year:
Work in Process, beginning balance $420,000
Direct materials used in production 30,000
Direct labor 55,000
Actual overhead 70,000
Overhead applied 65,000
Work in Process, ending balance 40,000
Determine the amount of cost of goods manufactured during the year.
a) $155,000
b) $530,000
c) $535,000
d) $520,000
10. ABC company had the following data for the current year:
Work in Process, beginning balance $110,000
Direct materials used in production 45,000
Actual overhead 60,000
Work in Process, ending balance 30,000
Cost of goods manufactured 235,000
Determine the amount of direct labor cost incurred during the year.
a) $50,000
b) $45,000
c) $40,000
d) $35,000
11. The beginning balance of Raw Materials inventory was $10,000. During the
year purchases of raw materials for $125,000 were made, but only $75,000
were paid. The balance of Raw Materials at the end of the year was $30,000.
What was the amount of raw materials used in production?
a) $55,000
b) $95,000
c) $45,000
d) 105,000

Page 16 of 24

Questions 12 through 15 refer to the following information.

Z Company uses a job-order costing system and applies overhead based on
direct materials used in production. For the recent year it estimated that
$150,000 of manufacturing overhead will be incurred and $100,000 of direct
materials will be used. The following data were taken from the company’s
books:
Beginning Ending
Raw Materials (all direct) $30,000 $10,000
Work in Process $45,000 $35,000
Finished Goods $20,000 $25,000
Costs incurred during the year:

Purchases of raw materials (direct) $90,000
Direct Labor $40,000
Actual overhead $150,000
12. The amount of manufacturing overhead applied to Work in Process is:

a) $165,000
b) $135,000
c) $180,000
d) $160,000
13. The amount of cost of goods manufactured during the year is:
a) $315,000
b) $325,000
c) $360,000
d) $340,000
14. The under or overapplied overhead is:

a) $10,000 overapplied
b) $15,000 overapplied
c) $15,000 underapplied
d) $10,000 underapplied
15. The cost of goods sold (including any under or overapplied overhead) is:
a) $310,000
b) $320,000
c) $300,000

d) $305,000
Page 17 of 24

Lo2:- . Produce cost reports

16. Finished Goods inventory account is credited when:
a) Goods are purchased on account
b) Raw materials are purchased
c) Goods are sold
d) Under applied overhead is closed
17. Nonmanufacturing costs are:

a) Included in manufacturing overhead
b) Not part of the product cost
c) Deducted from Work in Process
d) Added directly to cost of goods sold
18. The predetermined overhead rate is computed:

a) Using a weighted-average method.
b) Using actual activity as an allocation base.
c) At the beginning of the year, using estimates
d) After all actual costs have been incurred
19. Total manufacturing costs for the period consist of:

a) Direct materials, direct labor and manufacturing overhead applied
b) Manufacturing overhead applied and selling expenses
c) All expenses incurred, including selling and administrative
d) Cost of goods sold plus ending Finished Goods inventory
20. Cost of Goods Sold is derived from:

a) Job-cost sheets
b) Raw Materials inventory account
c) Finished Goods inventory account
d) Estimates for the expected level of sales

Page 18 of 24

Practice Problem #1
Direct materials used: 500 pounds X $25.00 = $12,500
Direct labor cost: 90 DLH X $18.00 = $1,620
$180,000
Predetermined overhead rate: = $6.00 per MH
Overhead applied to job B011: 30,000 MH
= $900
Total job cost: $6.00 X 150 MH
$12,500 + $1,620 + $900 = $15,020
Practice Problem #2 $550,000
Predetermined overhead rate: $25,000 = $22.00 per DL$
Overhead applied: $22.00 X $30,000

= $660,000
Manufacturing Overhead
actual applied
100,000
10,000 660,000
75,000
150,000
25,000
200,000
100,000 overapplied
To close the balance in the manufacturing overhead account:


Page 19 of 24

Practice Problem #3
Chocolate Oatmeal Peanut Work in

Chip Raisin Butter Process
Direct Materials $500 (3) $600 $350 (6) $1,450
Direct Labor $200 $250 (7) $150 $600
Overhead (1) $250 (4) $300 (5) $175 (9) $725
Total Job Costs (2) $950 $1,150 (8) $675 (10) $2,775
(1) $500 X 50% = $250

(2) $500 + $200 + $250 = $950
(3) $1,150 - $250 = $900 direct materials and overhead
$900 = 150% X direct materials
Direct materials = $600
(4) $1,150 - $600 - $250 = $300
(5) $350 X 50% = $175
(6) $500 + $600 + $350 = $1,450
(7) $600 - $200 - $250 = $150
(8) $350 + $150 + $175 = $675
(9) $250 + $300 + $175 = $725
(10 $950 + $1,150 + 675 = $2,775 or $1,450 + $600 + $725 = $2,775
Practice Problem #4
a)
Predetermined Estimated overhead costs $600,000 = 125% of
overhead rate = Estimated direct labor cost $480,000 direct labor cost
b)
Actual manufacturing overhead $639,000
Applied manufacturing overhead 625,000
Under-applied overhead $14,000
c)
Debits to Work-In-Process $1,880,000
Direct labor 500,000

Direct materials used $755,000
Page 20 of 24

d)
Job #18
Direct materials used $16,500
Direct labor 36,000
Applied overhead at 125% of direct labor 45,000
Total cost $97,000
e)
Accounts receivable 1,472,000
Sales 1,472,000

Finished goods 920,000
Practice Problem #5
Actual labor hours: $590,000

= 32,800 hours
$18.00 per hour
Budgeted labor hours $621,000
$18.00 per hour
Page 21 of 24
Actual overhead: $590,000 - $11,900
Manufacturing overhead
Cost of goods sold

= 34,500 hours
= $578,500
920,000
920,000

Practice Problem #6
a) Estimated Overhead cost $250,000 = 125% of
Estimated direct labor cost $200,000 direct labor
b) Job #3:
Direct materials $55,000
Direct labor 80,000
$235,000
c) Jobs #1 and #2:

Direct materials $465,000
Direct labor 100,000
$690,000
Revenue $690,000 x 160% = $1,104,000
d) Actual manufacturing overhead $233,000

Under-applied overhead 8,000
e) Cost of goods sold 8,000

f) No. Companies use a predetermined application rate for several reasons

including the fact that manufacturing overhead is not easily traced to
jobs and products. The predetermined rate is based on estimates of
both overhead and an appropriate cost driver, and these estimated
rarely equal actual overhead incurred or the actual cost driver activity.
Under- or overapplied overhead typically arises at year-end.

Page 22 of 24

1. False because the raw materials account is credited when raw materials are
issued.
2. True
3. False because cost sheets are used in a job-order system.
4. True
5. True
6. False because the pre-determined rate is computed using estimated overhead.
7. False because underapplied means that the applied overhead is less than the
actual overhead incurred.
8. True
9. False because finished goods is debited for the cost of goods manufactured.
10. True
11. False because factory rent is part of manufacturing overhead.
12. False because selling expenses are expensed as incurred as a period cost.
13. True
14. True
15. True
16. False because work-in-process is not part of the journal entries to record a
sale; finished goods is credited for the cost of the goods sold.
17. False because overhead is credited when overhead is applied.
18. False because the pre-determined overhead rate is computed at the beginning
of the year (hence the prefix “pre”).
19. False because process costing is appropriate when all the products (the
cornflakes) are essentially the same.
20. False because indirect materials issued should be debited to Manufacturing
Overhead.

Page 23 of 24

1. A
2. B
3. B
4. D
5. C
6. D
7. A
8. C
9. B
10. C
11. D
12. A
13. B
14. B
15. D
16. C
17. B
18. C
19. A
20. C


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Training, Teaching and Learning Materials (TTLM)

The Ethiopian TVET-System

TTLM Code: EIS ABS4M 10 0812

TTLM Development Manual Date: September ,2017

Welcome to the module “Produce Job Costing Information”. This

Summary of Learning Outcomes

After completing this learning guide, you should be able to:

TTLM Development Manual Date: September ,2017

Lo1:- . Gather and record operating and cost data

Job-order costing is used for companies that produce different

Key Job-Order Costing Documents

Actual Manufacturing Overhead vs. Manufacturing Overhead Applied

TTLM Development Manual Date: September ,2017

Choosing a Cost System

a) Cruise ship builder

TTLM Development Manual Date: September ,2017

Applying Manufacturing Overhead

Manufacturing overhead is applied or added to each job while it is in process.

There are three kinds of overhead costs consider:

Estimated annual overhead cost

Estimated amount of the allocation

base (denominator activity)

TTLM Development Manual Date: September ,2017

Required: Determine the cost assigned to Job M301.

Direct materials 20 pounds X $7.00 = $140

TTLM Development Manual Date: September ,2017

Flow of Costs Through Inventory Accounts

Raw Materials Work in Process Finished Goods Cost of Goods Sold

+Purchases +DL -COGM  +COGM -COGS  +COGS

TTLM Development Manual Date: September ,2017

TTLM Development Manual Date: September ,2017

In Chapter 8 terms, the balance in the overhead account is:

Purchase of raw materials

Raw material inventory xxx

Work-in-process inventory (direct) xxx

Work-in-process inventory (direct) xxx

Manufacturing overhead xxx

Manufacturing overhead xxx

Manufacturing overhead xxx

Goods are completed

TTLM Development Manual Date: September ,2017

Finished goods inventory xxx

TTLM Development Manual Date: September ,2017

Finished goods are sold

Cash or accounts receivable xxx

Close balance in overhead account

Summary of Manufacturing Overhead Accounting

At the beginning of the period

Estimated amount of MOH / Estimated amount of allocation base = Predetermined

During the period

At the end of the period

TTLM Development Manual Date: September ,2017

TTLM Development Manual Date: September ,2017

b) Work in process 90,000

c) Work in process 40,000

d) Manufacturing overhead 60,000

e) Manufacturing overhead 210,000

TTLM Development Manual Date: September ,2017

Revised Fall 2012

f) Work in process 715,000

g) Finished goods 300,000

h) Accounts receivable 200,000

Cost of goods sold 150,000