Group 4 Job Order Costing

JOB
ORDER
COSTING
BENEDICT JOHN M. ARELLANO
REPORTER
LEARNING OBJECTIVES
✓ Describe the building-block concepts of costing
systems
✓ Understand the cost of flow in cost accounting
✓ Distinguish job costing from process costing
✓ Distinguish the different costing approaches
✓ Identify the major source documents for job order
costing
✓ Outline the seven-step approach to normal costing
01
Building-Block
Concepts of
Costing Systems
01 02 03
COST OBJECT DIRECT COSTS INDIRECT COSTS

OF A OF A
COST OBJECT COST OBJECT
anything for which a can be conveniently cannot be conveniently

measurement of and economically or economically traced
costs is desired traced to a cost object to a cost object
04 05
COST POOL COST-ALLOCATION

BASE
A cost pool is a is a systematic way to
grouping of individual link an indirect cost or
indirect cost items group of indirect costs
to cost objects
For example, if indirect costs of operating metal-cutting machines is
$500,000 based on running these machines for 10,000 hours, the cost
allocation rate is $500,000 ÷ 10,000 hours = $50 per machine-hour.
02
Flow of
Cost
COST FLOW – MANUFACTURING FIRMS
Cost Incurrence Expense Category
Direct Materials
Work in Cost of
Direct Labor Finished
Factory Overhead Process Goods
Goods
Sold
Selling
and Operating
Administrative Expenses
COST FLOW – MERCHANDISING FIRM
Finished Cost of
Goods Goods
Sold
Selling
and Operating
COST FLOW – SERVICE FIRM
Direct Materials
Direct Labor Cost of
Factory Overhead services
Selling
and Operating
03
Costing
Systems
❑ The cost object is a
unit or multiple units
of a distinct product
JOB ORDER
or service called a job. COSTING
❑ Each job generally
uses different
amounts of resources.
❑ The cost object is
masses of identical
or similar units of a PROCESS
product or service. COSTING
❑ One unit of product is
indistinguishable
from other units of
product.
EXAMPLES
• Construction project, • Oil refining,
• aircraft, • orange juice,
• advertising • soda pop
Quick Check
Which of the following companies would be
likely to use job-order costing rather than
process costing?
a) Scott Paper Company for Kleenex

b) Architects
c) Heinz for Ketchup
d) Caterer for a wedding reception
e) Builder of commercial fishing vessels
Quick Check
likely to use job-order costing rather than
process costing?
a) Scott Paper Company for Kleenex

b) Architects
c) Heinz for Ketchup
d) Caterer for a wedding reception
e) Builder of commercial fishing vessels
Quick Check
likely to use process costing rather than job
order costing?
a) Cruise ship builder

b) Cornflake's factory
c) Law firm
d) Dentists' office
e) Beverage bottling company
Quick Check
likely to use process costing rather than job
order costing?
a) Cruise ship builder

b) Cornflake's factory
c) Law firm
d) Dentists' office
e) Beverage bottling company
04
Costing
Approaches
COSTING APPROACHES
1 Actual Costing System
2 Standard Costing System
3 Normal Costing System

COSTING APPROACHES
1 Actual Costing System
Uses actual costs

incurred for all product
cost including direct
materials, direct labor
and factory overhead.
COSTING APPROACHES
2 Standard Costing System
Uses standard costs and quantities for all three types
of manufacturing costs: direct materials and direct
labor and factory overhead.
Standard costs - which are the budgeted or estimated
costs deemed to be necessary to manufacture a single
unit of product or perform a single service.
COSTING APPROACHES
3 Normal Costing System
Uses actual costs

for direct materials
and direct labor and
standard cost for
factory overhead.
05
Source
Documents
Job Order
Cost Sheet
❑ A document used to record
manufacturing costs and is
prepared by companies that use
job-order costing system to
compute and allocate costs to
products and services.
JOB-COST RECORD
JOB NO: WPP 298 CUSTOMER: Western Pulp and Paper

Date Started: Feb. 07, 2021 Date Completed: Feb. 08, 2021
DIRECT MATERIALS
Date Naterials Part No. Quantity Unit Total

Received Requisition No. Used Cost Costs
Feb. 07, 2021 2021: 198 MB 468-A 8 $14 $112
Feb. 07, 2021 2021: 199 TB 267-F 12 $63 $756
*
*
Total $4,606
DIRECT LABOR
Period Labor Time Employee Hours Hourly Total

Covered Record No. No. Used Rate Costs
Feb. 07-13, 2021 LT 232 551-87-3075 25 $18 $450
Feb. 07-13, 2021 LT 247 287-31-4670 5 $19 $95
*
*
Total 1,579
MANUFACTURING OVERHEAD
Date Cost Pool Allocation-Base Allocation-Base Allocation-Base Total

Category Quantity Used Rate Costs
Dec. 31, 2021 Manufacturing Direct 88 Hours $40 $3,520
Labor-Hours
*
*
Total $3,520
TOTAL MANUFACTURING COST OF JOB $9,705

Materials
Requisition
❑ A basic source document
informing the cost accounting
department that material has
been issue.
❑ No material should be issued

from the storeroom unless a
material requisition is
processed.
Clock cards/Time
Records
❑ A document showing the
time spent by one worker
on a specific job order
(direct labor) or on any
other task (indirect labor)
Factory Overhead
Control Cost Record
❑ These records accumulate
detailed manufacturing
overhead costs by
department.
06
General Approach
to Job Costing
Seven-step Job Costing
Sample Problem
Robinson Company is a company that manufactures
and installs specialized machinery for the paper-
making industry. In 2021, Robinson performed the
manufacturing and installation of a new paper-making
machine for the Western Pulp and Paper Company
(WPP).
JOB-COST RECORD

DIRECT MATERIALS
Date Materials Part No. Quantity Unit Total

Feb. 07, 2021 2021: 198 MB 468-A 8 $14 $112
Feb. 07, 2021 2021: 199 TB 267-F 12 $63 $756
*
*
Total $4,606
DIRECT LABOR

Feb. 07-13, 2021 LT 232 551-87-3075 25 $18 $450
Feb. 07-13, 2021 LT 247 287-31-4670 5 $19 $95
*
*
Total 1,579

Labor-Hours
*
*
Total $3,520
TOTAL MANUFACTURING COST OF JOB $9,705

Step 1:
Identify the Job that is the
Chosen Cost Object
The cost object in the Robinson Company
example is Job WPP 298, manufacturing a
paper-making machine for Western Pulp
and Paper (WPP) in 2021.
JOB-COST RECORD

Step 2:
Identify the Direct Costs of the Job
DIRECT MATERIALS
Date Materials Part No. Quantity Unit Total

Feb. 07, 2021 2021: 198 MB 468-A 8 $14 $112
Feb. 07, 2021 2021: 199 TB 267-F 12 $63 $756
*
*
Total $4,606
Step 2:
Identify the Direct Costs of the Job
DIRECT LABOR

Feb. 07-13, 2021 LT 232 551-87-3075 25 $18 $450
Feb. 07-13, 2021 LT 247 287-31-4670 5 $19 $95
*
*
Total 1,579
Step 3:
Select the Cost-Allocation Bases to Use
for Allocating Indirect Costs to the Job
Examples of Cost-Allocation basis used for

manufacturing overhead:
Direct Material cost Direct Labor

Machine Hours Units of production
Step 3:
Select the Cost-Allocation Bases to Use
for Allocating Indirect Costs to the Job
❑ Robinson chooses direct manufacturing labor-

hours as the sole allocation base for linking all
indirect manufacturing costs to jobs.
❑ In 2021, Robinson budgets 28,000 direct

manufacturing labor-hours.
Step 4:
Identify the Indirect Costs Associated
with Each Cost-Allocation Base
❑ Robinson creates a single cost pool called
manufacturing overhead costs.
❑ In 2021, budgeted manufacturing overhead costs
total $1,120,000.
Step 5:
Compute the Rate per Unit of Each Cost-Allocation
Base Used to Allocate Indirect Costs to the Job
Step 3: Step 4:
Cost-allocation base – Cost pool -
28,000 direct manufacturing $1,120,000 manufacturing
labor-hours. overhead costs total.
Step 6:
Compute the Indirect Costs
Allocated to the Job
Robinson uses 88 direct manufacturing labor-
hours on the WPP 298 job.

Labor-Hours
*
*
Total $3,520
Step 7:
Compute the Total Cost of the Job by
Adding All Direct and Indirect Costs
Assigned to the Job
How would the cost of Job WPP 298 change
if Robinson had used actual costing rather
than normal costing?
Practice Problem #1
Company XYZ makes custom motorboats. 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

Company XYZ makes custom motorboats. 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
Answer #1 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.
Practice Problem #2
Forge Machine Works collects its cost data by the job order cost
accumulation procedure. For Job 642, the following data are
available:
Direct Materials Direct Labor

9/14 Issued $ 1,200 Week of Sep. 20 180 hrs @ $6.20/hr
9/20 Issued 662 Week of Sep. 26 140 hrs @ $7.30/hr
9/22 Issued 480
Factory overhead applied at the rate of $3.50 per direct labor hour.
Required:
1. The appropriate information on a job cost sheet.
2. The sales price of the job, assuming that it was contracted with a markup of 40% of cost.
Required #1 Required #2
FORGE MACHINE WORKS
Sales Price of job 642, contracted
JOB ORDER COST SHEET- JOB 642
with a markup of 40% of cost:
DIRECT MATRIALS
DATE AMOUNT Direct materials $ 2,342

ISSUED
9/14 $ 1,200 Direct labor 2,138
9/20 662
9/22 480 Applied factory overhead 1,120
TOTAL $ 2,342
DIRECT LABOR
Total factory cost $ 5,600
DATE HOURS RATE COST
(WEEK OF) Markup 40% of cost
9/20 180 $ 6.20 $ 1,116
9/26 140 7.30 1,022 (5,600 x 40%) 2,240
TOTAL $ 2,138
Sales Price of job 642 $ 7,840
FACTORY OVERHEAD
DATE HOURS RATE COST

(WEEK OF)
9/20 180 $ 3.50 $ 630
9/26 140 3.50 490
TOTAL $ 1,120
TOTAL MANUFACTURING COST $ 5,600

JOB-ORDER
COSTING SYSTEM
PREPARED BY: RONNIE M. DELOS REYES JR.
LEARNING OBJECTIVES:
At the end of this presentation, you should be able to…
❖ Define job-order costing
❖ Understand the flow of cost together with documents
under job-order costing system
❖ Understand the elements of product cost
❖ Identify and prepare the eight basic cost accounting
entries involved in job order costing
❖ Apply the accounting procedures using job-order
costing
DEFINITION
❑ Job order costing is a system that takes place when
customers order small, unique batches of products. This
system determines the price of each individual product and
ensures that the cost for each product is reasonable
enough for a customer to purchase it while still allowing the
company to make a profit.
❑ An accountant will use these resources to gather the data
and calculate or track it using a job cost sheet. They may
also use a job order database to track each product using a
specific identifying number for each product.
DEFINITION
❑ Each item tracked in the job order costing system should
have a job cost record that lists the materials used to
create that item, the number of people that worked to make
that item, how long it took to make the item and the
manufacturing overhead amount for that product. This
helps an accountant keep better track of the money spent
on each item and the current inventory to prevent
unexpected losses from occurring.
WHEN APPLICABLE?
Law firms and accounting businesses
Since lawyers and accountants work with different clients on
unique accounts, many will use a job order costing system to
track how much time and resources were used for each
customer.
Medical services
Hospitals and clinics use job order costing to determine how
much to charge each patient. If a patient arrives at the clinic
needing a checkup, they obviously require less care than
someone who needs complex surgery that requires a multiple
night stay.
FLOW OF COST
Job 101
Direct materials Cost of

Direct labor Job 102 Finished goods
goods sold
Factory overhead
Job 103
WORK FLOW UNDER JOB-ORDER
PROCUREMENT PRODUCTION WAREHOUSING SELLING
Materials and supplies Customers are found.

Finished goods are
Materials are transferred Merchandise is shipped
needed for moved from the factory to
from the storeroom to the from the warehouse.
manufacturing are the warehouse to be held
factory. Labor tools, Sales to customers are
orders, received, and until they are sold.
machines, power, and recorded.
stored. Direct materials
other costs are applied to
and indirect factory labor
complete the product.
and services are
obtained.
WORK FLOW UNDER JOB-ORDER
PROCUREMENT PRODUCTION WAREHOUSING SELLING
MATERIALS WORK IN PROCESS FINISHED GOODS COST OF GOODS SOLD

IN OUT IN OUT IN OUT IN OUT
FACTORY PAYROLL
IN OUT
FACTORY OVERHEAD
(CONTROL)
IN OUT
Account
Raw
s
Materia
receivab
ls
les/cash
Work in
Sales progre
ss
Finishe
d
goods
ACCOUNTING FOR MATERIALS
ACCOUNTING FOR LABOR
ACCOUNTING FOR FACTORY OVERHEAD
ACCOUNTING FOR JOBS COMPLETED

AND PRODUCTS SOLDS
ACCOUNTING FOR
MATERIALS
Material Requisition DON’T BLAME ME Co.
Slip is a written order to Material Requisition Record No.: 2022:198 Date: 02/03/2022
the storekeeper to Job No.: WPP 298
deliver materials and

Part No. Part Description Quantity Unit cost Total
supplies to the place MB 468-A Metal Brackets 8 ₱ 14.00 ₱ 112.00
designation or to issue ILY 143-R Screw 16 ₱ 3.00 ₱ 48.00
the materials to the
TOTAL COST: ₱160.00
person presenting a Issued by: C. Dion Date: 02/03/2022
properly executed Received by: J. Bieber Date: 02/03/2022
requisition.
ACCOUNTING FOR
MATERIALS
Materials credit slips are the source document used by the
accounting department to give credit to the department returning
the material.
ACCOUNTING FOR
MATERIALS
Raw materials inventory system
❑ Periodic inventory system
✓ Purchases
✓ Physical count
❑ Perpetual inventory system

✓ Raw materials inventory account
✓ Stock cards
MATERIALS PURCHASED
Raw materials inventory XXX
Cash (Accounts payable) XXX
to record purchase of materials
RETURN OF MATERIALS TO VENDOR

Cash (Accounts payable) XXX
to record the return of materials to supplier
ISSUANCE OF MATERIALS
A) Work in Process XXX
to record the requisition of direct materials
B) Factory overhead control XXX

to record the requisition of indirect materials
MATERIAL CREDIT SLIPS

Work in process XXX
to record the return of materials to the storeroom
CLOCK CARDS/TIME
RECORDS - A document DON’T BLAME ME Co.
Labor-Time Record No.: LT 232
showing the time spent by Employee Name: Taylor Swift Employee No.: 551-234-123
one worker on a specific Employee Classification Code: Mechanist
job order (direct labor) or Hourly Rate: P18
Week Start: 02/03/2022 Week End: 02/07/2022
on any other task (indirect
Job No. M T W Th F Total
labor) WPP 298 8 4 5 0 7 24
JL 256 0 2 1 6 6 15
Maintenance 0 2 0 4 0 6
Supervisor: S. Gomez Date: 02/10/2022

FACTORY WAGES EARNED
Payroll XXX
Withholding tax payable XXX
SSS Premium Payable XXX
PhilHealth Contribution Payable XXX
Accrued factory payable XXX
to record payroll and incurrence of liability
Work in Process (if for direct labor) XXX

Factory overhead control (if for indirect labor) XXX
Payroll XXX
to record distribution of payroll
Accrued factory payroll XXX

Cash XXX
to record payment of payroll
ACCOUNTING FOR FACTORY
OVERHEAD
Two Accounts Used:
1. Factory Overhead Control
• used to accumulate actual overhead incurred, such as indirect
materials, indirect labor, and payroll taxes, and they are debited
to Factory Overhead Control as they are incurred. Other
overhead costs, such as depreciation and expired insurance are
debited to Factory Overhead Control when adjusting entries are
recorded.
2. Factory Overhead Applied
• used to accumulate estimated factory overhead applied to
production
OVERHEAD
PREDETERMINED OVERHEAD RATE
• Is the ratio of estimated total overhead to the estimated total of the
overhead allocation base.
• Overhead allocation base, or simply base, is an activity that appears
to drive most of factory overhead.
The base can be a:
1. Unit of production
2. Direct material cost
3. Direct labor hours
4. Direct labor cost
5. Machine hours
OVERHEAD
PREDETERMINED OVERHEAD RATE
✓ The predetermined rate is computed as follows:
𝑬𝒔𝒕𝒊𝒎𝒂𝒕𝒆𝒅 𝒇𝒂𝒄𝒕𝒐𝒓𝒚 𝒐𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝒇𝒐𝒓 𝒕𝒉𝒆 𝒑𝒆𝒓𝒊𝒐𝒅
𝑬𝒔𝒕𝒊𝒎𝒂𝒕𝒆𝒅 𝒂𝒄𝒕𝒊𝒗𝒊𝒕𝒚 𝒐𝒇 𝒂𝒍𝒍𝒐𝒄𝒂𝒕𝒊𝒐𝒏 𝒃𝒂𝒔𝒆 𝒇𝒐𝒓 𝒕𝒉𝒆 𝒑𝒆𝒓𝒊𝒐𝒅
✓ To apply overhead, use this formula:

𝑨𝒄𝒕𝒖𝒂𝒍 𝒂𝒎𝒐𝒖𝒏𝒕 𝒐𝒇 𝒂𝒍𝒍𝒐𝒄𝒂𝒕𝒊𝒐𝒏 𝒃𝒂𝒔𝒆 × 𝐏𝐎𝐇𝐑 = 𝐀𝐩𝐩𝐥𝐢𝐞𝐝 𝐎𝐇
OVERHEAD
The difference between the actual overhead incurred and the applied
(estimated) overhead: [Actual OH – Applied OH]
• Overapplied overhead (Applied>Actual)
• Underapplied overhead (Actual<Applied)
Treatment: UNDER/OVER Applied overhead

1. Generally adjusted to cost of goods sold.
2. Prorated to ending balances of the ff.:
➢ work in process inventory,
➢ finished goods and
➢ cost of goods sold accounts.
FACTORY OVERHEAD
Factory overhead control XXX
Accounts payable XXX
Prepaid expense XXX
Accumulated depreciation XXX
to record the incurrence of various actual factory overhead
FACTORY OVERHEAD APPLIED

Work in process inventory XXX
Factory overhead applied XXX
to record the applied overhead
UNDER-/OVERAPPLIED OVERHEAD
Cost of goods sold XXX
Factory overhead XXX
to transfer underapplied overhead to cost of goods sold
Factory overhead XXX

Cost of goods sold XXX
to reduce cost of goods sold for the overapplied overhead
JOB COST SHEET DON’T BLAME ME Co.
JOB COST SHEET
Job No.: WPP 298 Customer: Luzon Pulp and Paper
Date Started: Feb. 10,2022 Date Completed: Feb. 28, 2022
DIRECT MATERIALS
Material
Requisition Quantity
Date Received No. Part No. Used Unit cost Total cost
02/03/2022 2022:198 MB 468-A 8 ₱ 14.00 ₱ 112.00
02/03/2022 2022:198 ILY 143-R 16 ₱ 3.00 ₱ 48.00
02/04/2022 2022:199 TB 267-F 12 ₱ 64.00 ₱ 768.00
Total: ₱ 928.00
DIRECT LABOR
Labor Time
Period cover Record No. Employee No. Hours Used Hourly Rate Total cost
02/03-09/2022 LT 232 551-234-123 24 ₱ 18.00 ₱ 432.00
02/03-09/2022 LT 248 341-542-321 23 ₱ 19.00 ₱ 437.00
Total: ₱ 869.00
FACTORY OVERHEAD
Allocation Allocation
Cost Pool Base Direct Base Unit Allocation
Date Category Manufacturin Used Base Rate Total cost
12/31/2022 Manufacturing Labor-hours 88 hours ₱ 45.00 ₱ 3,960.00
Total: ₱ 3,960.00
JOB COST: ₱ 5,757.00
OVERHEAD
Paper rings, a company that manufactures custom, high-end, had two
jobs during the period: Job 123 and 143. The accountant applied
P100,000 of manufacturing overhead to Job 123 and P150,000 of
manufacturing overhead to Job 143. Job 143 was completed and
transferred to Finished Goods. One quarter of the units produced in
Job 143 were then transferred to COGS because a customer
purchased them. The entirety of Job 123 was still in Work in Process
Inventory at the end of the period. The actual manufacturing overhead
for the period turned out to be P240,000. The company disposes of
ever- or under-applied overhead balances by prorating them among
accounts.
Paper rings, a company that manufactures
custom, high-end, had two jobs during the JOB 123 JOB 143
period: Job 123 and 143. The accountant Work in Process Work in Process
applied P100,000 of manufacturing overhead 100,000 150,000 150,000
to Job 123 and P150,000 of manufacturing 100,000 -
overhead to Job 143. Job 143 was completed
and transferred to Finished Goods. One Finished Goods Finished Goods
quarter of the units produced in Job 143 were 150,000 37,500
then transferred to COGS because a customer - 112,500
purchased them. The entirety of Job 123 was
still in Work in Process Inventory at the end of Cost of goods sold Cost of goods sold
the period. The actual manufacturing overhead 37,500
for the period turned out to be P240,000. The - 37,500
company disposes of ever- or under-applied
overhead balances by prorating them among
accounts.
OVERHEAD
custom, high-end, had two jobs during the Work in Process 100,000 100/250 20,000
period: Job 123 and 143. The accountant Finished goods 112,500 112.5/250 22,500
applied P100,000 of manufacturing overhead COGS 37,500 37.5/250 7,500
to Job 123 and P150,000 of manufacturing 250,000 50,000
and transferred to Finished Goods. One
Factory overhead 50,000
quarter of the units produced in Job 143 were
Work in process 20,000
then transferred to COGS because a customer
Finished goods 22,500
still in Work in Process Inventory at the end of COGS 7,500
the period. The actual manufacturing overhead
for the period turned out to be P200,000. The
accounts.
OVERHEAD
custom, high-end, had two jobs during the Work in Process 100,000 100/250 40,000
period: Job 123 and 143. The accountant Finished goods 112,500 112.5/250 45,000
applied P100,000 of manufacturing overhead COGS 37,500 37.5/250 15,000
to Job 123 and P150,000 of manufacturing 250,000 100,000
and transferred to Finished Goods. One
Work in process 40,000
quarter of the units produced in Job 143 were
Finished goods 45,000
then transferred to COGS because a customer
COGS 15,000
still in Work in Process Inventory at the end of Factory overhead 100,000
the period. The actual manufacturing overhead
for the period turned out to be P350,000. The
accounts.
ACCOUNTING FOR JOBS COMPLETED AND
PRODUCTS SOLD
Direct material used:
Beginning inventory, January 1 XXX
Net purchases XXX
Cost of material available for use XXX
Ending inventory, December 31 (XXX) XXX
Direct labor XXX
Applied manufacturing overhead XXX
Manufacturing costs XXX
Add: Beginning work in process, January 1 XXX
Total cost of work in process XXX
Less: Ending work in process, Decmeber 31 (XXX)
Cost of goods manufactured XXX
ACCOUNTING FOR JOBS COMPLETED AND
PRODUCTS SOLD
Beginning finished goods inventory XXX
Cost of goods manufactured XXX
Cost of goods available for sale XXX
Less: Ending finished goods inventory (XXX)
Cost of goods sold at normal costing XXX
Underapplied (Overapplied) overhead XXX/(XXX)
Cost of goods sold at actual costing XXX
ILLUSTRATIVE PROBLEM 1:
Enchanted Co., is using job-order costing system. On Jan. 1, the beginning of its fiscal year, the
company’s inventory balances were as follows:
Raw Materials inventory 200,000
Work in Process inventory 150,000
Finished goods inventory 300,000
The company applies overhead cost to jobs on the basis of machine-hours worked. For the current year,
the company estimated that it would work 750,000 machine-hours and incur P 4,500,000 in factory
overhead cost.
Requirements:
I. Prepare journal entries to record the transactions
Ii. Post the beginning balances inventory accounts and the RELEVANT entries in Requirement (i) above to
the RELEVANT general ledger (t-accounts)
Iii. Compute if factory overhead is underapplied or overapplied for the year? Prepare a journal entry to
close any balance in the factory overhead applied account to cost of goods sold.
Iv. Prepare Income Statement.
Enchanted Co., is using job-order costing a. Raw materials purchased on account, P 4,100,000.
system. On Jan. 1, the beginning of its Raw materials inventory 4,100,000
fiscal year, the company’s inventory
balances were as follows:
Accounts payable 4,100,000
Work in Process inventory 150,000 Raw Materials
Finished goods inventory 300,000 BB 200,000
(a) 4,100,000
The company applies overhead cost to
jobs on the basis of machine-hours Accounts Payable
worked. For the current year, the company a) 4,100,000
estimated that it would work 750,000
machine-hours and incur P 4,500,000 in
factory overhead cost.
Enchanted Co., is using job-order costing b. Raw materials inventory requisitioned and issued for use in
system. On Jan. 1, the beginning of its production, P3,800,000 (P3,600,000 direct and P200,000 indirect
fiscal year, the company’s inventory materials).
Work in process inventory 3,600,000
Work in Process inventory 150,000 Factory OH control 200,000
Finished goods inventory 300,000 Materials 3,800,000
Work in Process
The company applies overhead cost to BB 150,000
jobs on the basis of machine-hours b) 3,600,000
worked. For the current year, the company
estimated that it would work 750,000 Factory overhead control
machine-hours and incur P 4,500,000 in b) 200,000
factory overhead cost. Raw Materials
BB 200,000 b) 3,800,000
(a) 4,100,000
Enchanted Co., is using job-order costing c. Costs were incurred for employee services: direct labor,
system. On Jan. 1, the beginning of its P750,000; indirect labor, P1,100,000, sales commission,
fiscal year, the company’s inventory P900,000; and administrative salaries, P2,000,000.
balances were as follows: Work in process inventory 750,000
Factory OH control 1,100,000
Sales commission expense 900,000
Administrative salaries expense 2,000,000
The company applies overhead cost to Salaries and Wages Payable 4,750,000
jobs on the basis of machine-hours Work in Process Administrative salary expense
worked. For the current year, the company BB 150,000 c) 2,000,000
estimated that it would work 750,000 b) 3,600,000
machine-hours and incur P 4,500,000 in c) 750,000
Factory overhead control Sales commission expense
b) 200,000 c) 900,000
c) 1,100,000
Enchanted Co., is using job-order costing d. Sales travel costs, P170,000.
system. On Jan. 1, the beginning of its Sales travel expense 170,000
Accounts payable 170,000
Work in Process inventory 150,000 Accounts Payable
Finished goods inventory 300,000 a) 4,100,000
d) 170,000
jobs on the basis of machine-hours Sales travel expense
worked. For the current year, the company d) 170,000
Enchanted Co., is using job-order costing e. Utility costs in the factory, P430,000.
system. On Jan. 1, the beginning of its Factory OH control 430,000
Accounts payable 430,000
Factory overhead control
b) 200,000
c) 1,100,000
e) 430,000
jobs on the basis of machine-hours Accounts Payable
worked. For the current year, the company a) 4,100,000
estimated that it would work 750,000 d) 170,000
machine-hours and incur P 4,500,000 in e) 430,000
Enchanted Co., is using job-order costing f. Advertising costs, P1,800,000.
system. On Jan. 1, the beginning of its Advertising expense 1,800,000
Accounts payable 1,800,000
Raw Materials inventory 200,000 Accounts Payable
Work in Process inventory 150,000 a) 4,100,000
Finished goods inventory 300,000 d) 170,000
e) 430,000
The company applies overhead cost to f) 1,800,000
jobs on the basis of machine-hours
worked. For the current year, the company Advertising expense
estimated that it would work 750,000 f) 1,800,000
Enchanted Co., is using job-order costing g. Depreciation for the year, P3,500,000 (80% relates to factory
system. On Jan. 1, the beginning of its operations, and 20% relates to selling and administrative
fiscal year, the company’s inventory activities)
balances were as follows: Factory OH control 2,800,000
Raw Materials inventory 200,000 Depreciation expense 700,000
Work in Process inventory 150,000 Accumulated depreciation 3,500,000
The company applies overhead cost to b) 200,000
jobs on the basis of machine-hours c) 1,100,000
worked. For the current year, the company e) 430,000
estimated that it would work 750,000 g) 2,800,000
Depreciation expense
g) 700,000
Enchanted Co., is using job-order costing h. Insurance expired during the year, P100,000 (70%
system. On Jan. 1, the beginning of its relates to factory operations, and the remaining 30% relates
fiscal year, the company’s inventory to selling and administrative activities.
balances were as follows: Factory OH control 70,000
Raw Materials inventory 200,000 Insurance expense 30,000
Work in Process inventory 150,000 Prepaid insurance 100,000
The company applies overhead cost to b) 200,000
jobs on the basis of machine-hours c) 1,100,000
worked. For the current year, the company e) 430,000
estimated that it would work 750,000 g) 2,800,000
h) 70,000
factory overhead cost. Insurance expense
h) 30,000
Enchanted Co., is using job-order costing i. Factory overhead applied to production. Due to greater
system. On Jan. 1, the beginning of its than expected demand for its products, the company
fiscal year, the company’s inventory worked 800,000 machine-hours during the year.
balances were as follows: Predetermined Estimated total factory overhead control cost
Raw Materials inventory 200,000 =
overhead rate (POHR) Estimated total machine-hours (allocation base)
Work in Process inventory 150,000 P 4,500,000
Finished goods inventory 300,000 =
750,000 machine hours
= P 6 per machine-hour
jobs on the basis of machine-hours Factory OH (applied) = Actual amount of allocation base x POHR
worked. For the current year, the company = 800,000 machine-hours x P6
estimated that it would work 750,000 = P 4,800,000
Enchanted Co., is using job-order costing i. Factory overhead applied to production. Due to greater
system. On Jan. 1, the beginning of its than expected demand for its products, the company
fiscal year, the company’s inventory worked 800,000 machine-hours during the year.
balances were as follows: Work in process inventory 4,800,000
Raw Materials inventory 200,000 Factory OH control applied 4,800,000
Finished goods inventory 300,000 Work in Process
BB 150,000
The company applies overhead cost to b) 3,600,000
jobs on the basis of machine-hours c) 750,000
worked. For the current year, the company i) 4,800,000
machine-hours and incur P 4,500,000 in Factory overhead applied
factory overhead cost. i) 4,800,000
Enchanted Co., is using job-order costing j. Goods costing P9,000,000 to manufacture according to
system. On Jan. 1, the beginning of its their job cost sheets completed during the year.
fiscal year, the company’s inventory Finished goods inventory 9,000,000
balances were as follows: Work in process inventory 9,000,000
Work in Process inventory 150,000 Finished goods
Finished goods inventory 300,000 BB 300,000
j) 9,000,000
The company applies overhead cost to Work in Process
jobs on the basis of machine-hours
BB 150,000 j) 9,000,000
worked. For the current year, the company
b) 3,600,000
c) 750,000
i) 4,800,000
Enchanted Co., is using job-order costing k. Goods sold on account to customers during the year at a
system. On Jan. 1, the beginning of its total selling price of P15,000,000. The goods cost
fiscal year, the company’s inventory P8,700,000 to manufacture according to their job cost
balances were as follows: sheets.
Raw Materials inventory 200,000 Accounts receivable 15,000,000
Work in Process inventory 150,000 Sales 15,000,000
Cost of goods sold 8,700,000
Finished goods inventory 8,700,000
jobs on the basis of machine-hours Accounts Receivable Finished goods
worked. For the current year, the company k) 15,000,000 BB 300,000 k) 8,700,000
estimated that it would work 750,000 j) 9,000,000
factory overhead cost. Sales Cost of Goods Sold
k) 15,000,000 k) 8,700,000
Enchanted Co., is using job-order costing Raw Materials Work in Process
system. On Jan. 1, the beginning of its BB 200,000 b) 3,800,000 BB 150,000 j) 9,000,000
fiscal year, the company’s inventory (a) 4,100,000 b) 3,600,000
balances were as follows: EB 500,000 c) 750,000
Raw Materials inventory 200,000 i) 4,800,000
Work in Process inventory 150,000 Finished goods EB 300,000
Finished goods inventory BB
300,000 300,000 k) 8,700,000
j) 9,000,000 Factory overhead control
b) 200,000
The company applies overhead cost to EB 600,000
c) 1,100,000
jobs on the basis of machine-hours e) 430,000
Cost of Goods Sold
worked. For the current year, the company g) 2,800,000
k) 8,700,000
estimated that it would work 750,000 h) 70,000
machine-hours and incur P 4,500,000 in 4,600,000
factory overhead cost. Factory overhead applied
i) 4,800,000
Enchanted Co., is using job-order costing Raw Materials Work in Process
system. On Jan. 1, the beginning of its BB 200,000 b) 3,800,000 BB 150,000 j) 9,000,000
fiscal year, the company’s inventory (a) 4,100,000 b) 3,600,000
balances were as follows: EB 500,000 c) 750,000
Raw Materials inventory 200,000 i) 4,800,000
Work in Process inventory 150,000 Finished goods EB 300,000
Finished goods inventory BB
300,000 300,000 k) 8,700,000
j) 9,000,000 Factory overhead control
b) 200,000
The company applies overhead cost to EB 600,000
c) 1,100,000
jobs on the basis of machine-hours e) 430,000
Cost of Goods Sold
worked. For the current year, the company g) 2,800,000
k) 8,700,000
estimated that it would work 750,000 h) 70,000
machine-hours and incur P 4,500,000 in 4,600,000
factory overhead cost. Factory overhead applied
i) 4,800,000
Enchanted Co., is using job-order costing Factory overhead control Factory overhead applied
system. On Jan. 1, the beginning of its b) 200,000 i) 4,800,000
fiscal year, the company’s inventory c) 1,100,000
balances were as follows: e) 430,000
Raw Materials inventory 200,000 g) 2,800,000
Work in Process inventory 150,000 h) 70,000
Finished goods inventory 300,000 4,600,000

jobs on the basis of machine-hours Factory overhead 200,000
worked. For the current year, the company Cost of goods sold 200,000
Enchanted Co.
Income Statement
For the year ended December 31, 2022
Sales 15,000,000
Less: Cost of goods sold (P8,700,000-200,000) 8,500,000
Gross profit 6,500,000
Less: Selling and adminitrative expenses
Administrative salaries expense 2,000,000
Advertising expesne 1,800,000
Commission expense 900,000
Depreciation expense 700,000
Sales travel expense 170,000
Insurance expense 30,000 5,600,000
Net operating income 900,000
“The surest foundation of a manufacturing
concern is quality. After that, and a long way
after, comes cost.”
-Andrew Carnegie
THE
COST OF
QUALITY
NICOLE HEART A. SANTIAGO
THE COST OF QUALITY
I. Introduction to Cost of Quality III. Measuring Cost of Quality
IV. Total Quality Management
II. Types of Quality Cost
i. The Cost of Good Quality V. Continuous Quality Improvement
a) Prevention Cost i. Relation of Quality Costs to

Production Loss
b) Appraisal Cost
ii. The Cost of Poor Quality
a. Internal Failure Cost
b. External Failure Cost

I. Introduction
to Cost of
Quality
Cost of Quality
(CoQ)
➢ According to Carter, the Cost of Quality (CoQ) is the cost
of obtaining quality as well as the cost incurred from
lack of quality
➢ Cost of Quality is a methodology used to define and
measure where and what amount of an organization’s
resources are being used for prevention activities and
maintaining product quality as opposed to the costs
resulting from internal and external failures.
Preventive maintenance of your
vehicle could prevent more
costly repairs down the road.
—Principle of Cost of
Quality
II. Types of
Quality Costs
TYPES OF QUALITY COSTS
Cost of Good Quality
(CoGQ)
➢ Costs for investing in the prevention of
non-conformance to requirements.
➢ Costs for appraising a product or
service for conformance to
requirements. Prevention Cost
Appraisal Cost
Cost of Good Quality (CoGQ)
Prevention Costs
➢ costs incurred from activities planned and designed
before operations to guarantee good quality and prevent
bad quality products or services
➢ Examples include but are not limited to :
Quality planning
Supplier surveys
Process reviews
Quality improvement teams
Employee education and training
Cost of Good Quality (CoGQ)
Appraisal Costs
➢ Costs incurred from measurement and inspection
activities during operations to determine conformance to
quality requirements.
➢ Appraisal Costs include but are not limited to :
Incoming Material Inspections
Process Controls
Check Fixtures
Quality Audits
Cost of Poor Quality
(CoPQ)
➢ Internal and external costs
resulting from failing to meet
requirements.
Internal Failure
Cost
External Failure
Cost
Cost of Poor Quality (CoPQ)
Internal Failure Costs
➢ costs associated with defects found before the product or
service reaches the customer.
➢ Internal Failures may include, but are not limited to, the
following examples:
Excessive Scrap
Product Re-work
Waste/spoilage due to poorly designed processes
Machine breakdown due to improper maintenance
Cost of Poor Quality (CoPQ)
External Failure Costs
➢ costs associated with defects found after the customer receives
the product or service.
➢ External Failures may include, but are not limited to, the
following examples:
Service and Repair Costs
Warranty Claims
Customer Complaints
Product or Material Returns
Shipping Damage due to Inadequate Packaging
III. Measuring
Cost of Quality
Measuring Cost of Quality
(CoQ)
Where:
Cost of quality = CoGQ + CoPQ
CoGQ= Cost of Good Quality
CoPQ= Cost of Poor Quality
It can further be expressed as
displayed below: PC= Prevention Cost
AC= Appraisal Cost
IFC= Internal Failure Cost
Cost of Quality = PC + AC + IFC + EFC
EFC= External Failure Cost
Illustration:
Let us take the example of a business that
generates P1,000,000 in sales. It incurs P10,200 in
Quality checks and inspection. It pays P30,000 for
appraising the purchased raw materials.
Additionally, it pays P15,000 for repairs on finished
items. It maintains a provision of P5,000 for
warranty costs and product returns. Help the
management determine the cost of quality as the
percentage of sales.
Solution:
Step 1: Calculation of CoGQ
Solution:
Step 2: Calculation of CoPQ
Solution:
Step 3: Calculation of Total CoQ
Solution:
Step 4: Calculation of Cost of Quality as percentage of Sales
III. Total Quality
Management
Principles of TQM
1. The company’s objective for all business activity is to serve
its customers
2. Top management provides an active leadership role in
quality improvement
3. All employees are actively involved in quality improvement
4. The company has a system of identifying quality problems,
developing solutions, and setting quality improvement
objectives
5. The company places a high value on its employees and
provides continuous training as well as recognition for
achievement
IV. Continuous
Quality
Improvement
Continuous Quality Improvement
➢ A better approach to quality improvement is to

concentrate on prevention
➢ By increasing prevention costs, fewer defects will occur,
and total quality costs will decline
➢ According to W. Edwards Deming, continuous quality
improvement requires constant effort of everyone in the
company--- both the management and labor working
together
Why Implement Cost of Quality
(CoQ)
➢ Effective use and implementation of Cost of
Quality methodology enables an organization to
accurately measure the amount of resources
being used for Cost of Good Quality and Cost of
Poor Quality. With this valuable information the
organization can determine where to allocate
resources to improve product quality and the
bottom line.
The Value of Cost of Quality (CoQ)
Alpha Company once measured Cost of Quality as the amount of
warranty cost versus total sales. This method only examined the
Cost of Poor Quality. This data did reveal a problem area in the
facility. It was discovered that customer part shortages
originating from one work cell were resulting in warranty costs
of over $400,000 in one year. A team was formed to investigate
and perform Root Cause Analysis (RCA) of the shortages and a
plan was developed to redesign the work cell for an estimated
cost of $60,000. With management approval, the work cell was
redesigned with a revised layout, pick bins, dedicated locations
for all the parts, process controls were defined and implemented
and several additional improvements were made.
The changes reduced tact times and the number of operators
required for the process. This provided resources for the
addition of quality technicians to regularly audit and maintain
the process on all shifts. Within the first year of operation,
shortages were reduced by 50% equaling a $200,000 reduction
in warranty costs. The project resulted in a positive impact on
the bottom line of $140,000 in the first year. Alpha Company has
since implemented processes to measure and reduce scrap,
improved process controls and introduced new quality metrics
throughout the organization. They are now actively measuring
and evaluating both the cost of good quality and poor quality.
***The name of the company has been changed but the content
represents actual events and results.
Relation of Cost of Quality to
Production Losses
➢ Production losses include the cost of materials scrap, spoilage,
and reworking defective goods
➢ A way to call attention to the need for reducing these types of
quality failures is to determine their costs and report these
costs to top management
➢ Large costs signal an opportunity to improve quality
substantially, which should be interpreted by management as
an opportunity to improve profits
References
○ Buthmann, A. (2022). Cost of Quality: Not only Failure Costs.
Retrievedfrom:
https://www.isixsigma.com/implementation/financial-
analysis/cost-quality-not-only-failure-costs/
○ Carter, W.K. (2006). Cost Accounting. USA: Thomson Custom

Solutions
○ Nigam, R., and Vaidya D. (2021) Cost of Quality. Retrieved from:
https://www.wallstreetmojo.com/cost-of-quality/
○ Tulip Co., (n.d.) What is Cost of quality (CoQ)?; Managing
Production Quality. Retrieved from:
https://www.isixsigma.com/implementation/financial-
analysis/cost-quality-not-only-failure-costs/
○ Quality-One International. (2021) Cost of Quality. Retrieved from:
https://quality-one.com/coq/
Thanks!
CREDITS: This presentation template was created
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PRODUCTION
LOSSES IN
JOB ORDER
COSTING
DECEREY MAE C. DORIA
PRODUCTION LOSSES UNDER
JOB ORDER COSTING
01 02
PRODUCTION IN/OUT OF ROUTINE
Job Order Costing System Handling, storage, or
manufacturing
03 04
MATERIAL LOSSES OUTPUT ≠ INPUT
Scrap, spoilages, defects, Usually Output is less
and wastes than Input
TWO TYPES OF MATERIAL
LOSSES
A. NORMAL LOSSES B. ABNORMAL LOSSES

• Unavoidable, inherent, and usual in • Avoidable, unexpected, and unusual or it
production arises due to inefficiency in operation.
• Material lossess cannot be totally avoided • Treated as period costs and charges as an
but may be controlled to limited extent expense
• Losses that are transferred to factory • Examples: Theft, Fire, Breakage, Flood,
overhead or work in process account Accidents, etc.
• Ex:losses due to evaporation, loss due to
loading and unloading
“WHY DO WE NEED TO
ACCOUNT PRODUCTION
LOSSES?”
CAUSES AND EFFECTS OF
PRODUCTION LOSSES
CAUSES: EFFECTS:
LACK OF QUALITY PRODUCTION
CONTROL DELAYS
POOR DECLINE OF
PRODUCTION PROFIT
MANAGEMENT
“WHY DO WE NEED TO ACCOUNT
PRODUCTION LOSSES?”
To call the attention of

top management by
determining the cost of
production losses.
PRODUCTION LOSSES IN JOB
ORDER COST OF SYSTEM
01 SCRAP 02 SPOILED
GOODS/
SPOILAGE
03 DEFECTIVE / 04 DISPOSED/
REWORK WASTE
PRODUCTION LOSSES
1 SCRAP
• residual material that results from manufacturing a

product.
• scrap is similar to byproducts, The difference is that scrap
arises as a residual from the manufacturing process, and is
not a product targeted for manufacture or sale by the firm.
• EX: • short lengths from woodworking operations
• frayed cloth and end cuts from suit-making operations.
• edges from plastic molding operations
ACCOUNTING FOR SCRAP
IMMATERIAL MATERIAL
COMMON TO ALL
SPECIFIC JOB JOBS
COULD BE SOLD
CANNOT BE SOLD
IMMEDIATELY
PRODUCTION LOSSES
2 SPOILED GOODS/ SPOILAGE
• is units of production—whether fully or partially completed—

that do not meet the specifications required by customers for
good units and that are discarded or sold at reduced prices
• EX: • defective shirts, jeans, shoes,
• carpeting sold as “seconds,”
• defective aluminum cans sold to aluminum
manufacturers for remelting to produce other aluminum
products.
ACCOUNTING FOR SPOILED GOODS
SPOILED GOODS
COMMON TO ALL
SPECIFIC JOB JOBS
PRODUCTION LOSSES
3 DEFECTIVE - REWORK
• DEFECTIVE GOODS are units of production that fail to meet

production standards but that can be brought up to standard
by adding more materials, labor, and overhead.
• REWORK COSTS additional cost required to bring these goods
up to standard
• EX: • defective units of products (such as pagers, computers, and
telephones) detected during or after the production process
but before units are shipped to customers can sometimes
be reworked and sold as good products.
PRODUCTION LOSSES
4 DISPOSED/ WASTE
• Waste as distinguished from scrap materials refers to the

amount of raw materials left over from a production process
for which there is no further use. Waste is not usually
salable at any price and must be discarded.
COMPLETING THE COST CYCLE
COMPLETION OF GOODS SALE OF GOODS
Finished Goods Inventory xx Accounts Receivable/Cash xx

Work In Process xx Sales xx
or
Cost of Goods Sold xx
Finished Goods Inventory xx
SELF
CHECK
QUESTION 1
Type of material Losses that is unavoidable, inherent,
and usual in production
A. Abnormal Losses
B. Normal Losses
C. Immaterial Losses
D. Production Losses
QUESTION 1
Type of material Losses that is unavoidable, inherent,
and usual in production
A. Abnormal Losses
B. Normal Losses
C. Immaterial Losses
D. Production Losses
QUESTION 2
The reason to account for production losses is to call the
attention of top management by determining the cost of
production losses.
TRUE OR FALSE?
QUESTION 2
The reason to account for production losses is to call the
attention of top management by determining the cost of
production losses.
TRUE OR FALSE?
QUESTION 3
Additional cost required to bring defective goods up to
standard
A. Factory Overhead
B. Direct Costs
C. Rework Costs
D. Manufacturing Costs
QUESTION 3
Additional cost required to bring defective goods up to
standard
A. Factory Overhead
B. Direct Costs
C. Rework Costs
D. Manufacturing Costs
QUESTION 4
carpeting sold as “seconds” is an example of what
production losses.
A. Defective
B. Spoiled
C. Waste
D. Scrap
QUESTION 4
carpeting sold as “seconds” is an example of what
production losses.
A. Defective
B. Spoiled
C. Waste
D. Scrap
QUESTION 5
Journal entry for COMPLETION OF GOODS in completing
the cost cycle
A. DR: Finished Goods Inventory CR: Work In Process
B. DR: Work In Process CR: Finished Goods Inventory
C. DR: Cost of Goods Sold CR: Finished Goods Inventory
D. DR: Finished Goods Inventory CR: Cost of Goods Sold

QUESTION 5
Journal entry for COMPLETION OF GOODS in completing
the cost cycle
A. DR: Finished Goods Inventory CR: Work In Process
B. DR: Work In Process CR: Finished Goods Inventory
C. DR: Cost of Goods Sold CR: Finished Goods Inventory
D. DR: Finished Goods Inventory CR: Cost of Goods Sold

QUESTION 6
Type of production losses wherein it is a residual
material that results from manufacturing a product.
A. Scrap
B. Rework
C. Spoilage
D. Waste
QUESTION 6
Type of production losses wherein it is a residual
material that results from manufacturing a product.
A. Scrap
B. Rework
C. Spoilage
D. Waste
QUESTION 7
_________ is units of production—whether fully or
partially completed—that do not meet the specifications
required by customers for good units and that are
discarded or sold at reduced prices
A. Scrap
B. Defective
C. Waste
D. Spoiled
QUESTION 7
_________ is units of production—whether fully or
partially completed—that do not meet the specifications
required by customers for good units and that are
discarded or sold at reduced prices
A. Scrap
B. Defective
C. Waste
D. Spoiled
QUESTION 7
_________ refers to the amount of raw materials left
over from a production process for which there is no
further use
A. Scrap
B. Defective
C. Waste
D. Spoiled
QUESTION 7
_________ refers to the amount of raw materials left
over from a production process for which there is no
further use
A. Scrap
B. Defective
C. Waste
D. Spoiled
01
ACCOUNTING
FOR SCRAP
PRODUCTION LOSSES
1 SCRAP
• residual material that results from manufacturing a

product.
• scrap is similar to byproducts, The difference is that scrap
arises as a residual from the manufacturing process, and is
not a product targeted for manufacture or sale by the firm.
• EX: • short lengths from woodworking operations
• frayed cloth and end cuts from suit-making operations.
• edges from plastic molding operations
TWO ASPECTS OF
ACCOUNTING FOR SCRAP:
1. Planning and control, 2. Inventory costing,

including physical including when and how
tracking scrap affects operating
income
Initial entries to scrap records are It helps keep track of scrap, and so
commonly expressed in physical reduce the chances of theft.
terms
The accounting procedures will depend on the
following:
When should the value of scrap be

1 recognized in the accounting
records?
- at the time scrap is produced or

- at the time scrap is sold?
2 How should revenues from scrap

be accounted for?
ILLUSTRATION 1
Assume that tan lumber company accumulates sawdust
and that the scrap from a job has a net sales value of
P2,000.
Required:
1. Journal entries Recognizing Scrap at the Time of Its
Sale
Production
ACCOUNTING FOR SCRAP
IMMATERIAL MATERIAL
COMMON TO ALL
SPECIFIC JOB JOBS
COULD BE SOLD
CANNOT BE SOLD
IMMEDIATELY
RECOGNIZING AT THE TIME OF ITS SALE
IMMATERIAL MATERIAL
Notation of the quantity ATTRIBUTABLE TO

of the scrap returned to SPECIFIC JOB COMMON TO ALL JOBS
the storeroom & to
record the sale:
CASH or A/R 2,000
SCRAP REVENUES 2,000 Proceeds from the sale Proceeds of sale is
are deducted from the credited to
cost of materials in that manufacturing overhead
certain job control to reduce the
product costs
CASH or A/R 2,000 CASH or A/R 2,000
WORK IN PROCESS INVENTORY2,000
MANUFACTURING OH CONTROL 2,000
RECOGNIZING AT THE TIME OF ITS PRODUCTION
ATTRIBUTABLE TO COMMON TO ALL

SALE OF SCRAP
A SPECIFIC JOB JOBS
Scrap Inventory 2,000 Scrap Inventory 2,000 Cash or A/R 2,000

WIP Iinventory MOHC 2,000 Scrap Inventory 2,000
2,000
ILLUSTRATION 2
Assume that tan lumber company accumulates sawdust
and that the scrap from a job has a net sales value of
P2,000.
Required:
1. Journal entries Recognizing Scrap at the Time of Its Sale
Production
Additonal Requirement:
1. Assume that the scrap is sold at 1,500 having its original
price of 2,000.
2. Assume that the scrap was reused as direct materials
rather than sold as scrap
ILLUSTRATION 2:
1. SCRAP SOLD AT 1,500 2. REUSED AS DIRECT

BUT THE ORIGINAL PRICE MATERIALS RATHER THAN
IS 2,000 SOLD AS SCRAP
Cash or A/R 1,500

WIP Inventory 500 Materials 2,000 WIP inventory 2,000
Scrap Inventory 2,000 Materials 2,000
MOHC 2,000
To record scrap returned To record reuse of scrap

to storeroom.
ILLUSTRATION 3
ABC uses a variety of metals in the production of its
product. Scrap metals from Job 32 is sold for P5,000
Required: Prepare journal entries to record the sale of the

scrap metals for the following alternatives.
1. Sales of scrap metals are regarded as other income

2. Sale of scrap metals are regarded as a deduction to
factory overhead control
3. Sale of scrap metals is charged to the jobs that
generated the scrap
4. The scrap is returned to the storeroom. A month later, the
scrap is reused as direct materials on other jobs
ABC uses a variety of metals in the production of
ILLUSTRATION 3: its product. Scrap metals from Job 32 is sold for
P5,000
1. Sales of scrap metals are regarded as other income
CASH or ACCOUNTS RECEIVABLE 5,000
OTHER INCOME 5,000
2. Sale of scrap metals are regarded as a deduction to factory overhead control
FACTORY OVERHEAD CONTROL 5,000
3. Sale of scrap metals is charged to the jobs that generated the scrap
WORK IN PROCESS INVENTORY 5,000
4. The scrap is returned to the storeroom. A month later, the scrap is reused as direct
materials on other jobs
MATERIALS 5,000 WIP 5,000
FOH CONTROL 5,000 MATERIALS 5,000
SUMMARY OF ACCOUNTING
FOR SCRAP
THANK YOU!
Keep safe!
Accounting
for
Production
Losses
Karold A. Saludez
Presenter
What are Production Losses?
These happens in a manufacturing process where lack of
quality control originates, hence should be prevented if not
eliminated at all.
Characteristics:
● Normally Inevitable and Inherent
to Commit
● Can be minimized by Proper
Quality Control
● Varies uniquely in every Industry
● Can signify negative effect on a
Company’s Profits
Production Losses 101
01 Accounting for
Scraps
02 Accounting for
Spoilage
03 Accounting for
Rework
04 Accounting for
Wastages
02
Accounting
for Spoilage
Spoiled Units
Spoiled Units
Units that do not meet
production standards and
are either sold for their
salvage value or discarded.
Examples:
● Fast Food Industry – Spoiled
and Mishandled Orders
● Metal Industry – Substandard

Produced Aluminum Cans
● Fashion Industry – Defective

and Obsolescence of Apparel
Designs
● Furniture Industry –
Improperly Cured Lumbers for
Tables and Chairs
Normal Spoilage
Attributable to Common to All

Specific Job Production
Reason for spoilage is the job Reason for spoilage is
itself, because it requires considered normal to the
exacting specifications, or a production process and the
difficult, intricate or number does not exceed the
complicated manufacturing limit set by the company.
process.
Example:
Example: Internal Failure like
Changed customer Employee’s Error and Worn-
Specifications out Machinery
Abnormal
Spoilage
Spoilage that is not inherent in a
particular production process and
would not arise under efficient
operating conditions.
Example:
Spoilage induced by occasional power
interruption on factories, leading for
uncontrolled situations of losses.
Accounting Treatment
Normal Spoilage
Abnormal
Entries Charged to Charged in All Spoilage
Dr: Spoiled Goods Dr: Spoiled Goods Dr: Spoiled Goods

Discovery and Dr: Factory Overhead Dr: Loss on Abnormal
Cr: Work in Control Spoilage
Removal Process Cr: Work in Process Cr: Work in Process
Subsequent
Dr: Cash (or A/R)
Sale of Spoiled
Units Cr: Spoiled Goods
Illustration #1 – Problem
Pinkish Plastics Company uses a job order cost system to account for
its production costs. During the current period, 1,000 chairs were molded and
assembled as Job 9823. The total cost incurred on the job is:
Materials P 12,000
Labor (500 hrs x P10 per hr) 5,000
Factory Overhead (P20 per labor hour) 10,000
Total cost charged to Job 9823 P 27,000
Before being transferred to Finished Goods Inventory, the chairs were

inspected and 100 were found to be spoiled. The spoiled chairs cannot be
reworked because the defects are embedded in the plastic; however, they
can be salvaged for P10 each.
Illustration #1 - Problem
Continue..
The company maintains a separate Spoiled Goods
Inventory for defective products and charges the unrecoverable
cost of spoilage to Factory Overhead Control.
Required:
➢ Determine the costs of Job 9823 to be transferred to Finished

Goods Inventory and to Spoiled Goods Inventory and give the
general journal entry to record the spoilage and the transfers.
Solution – Internal Failure
1. Spoiled goods inventory (P10 x 100) 1,000
Factory overhead control 1,700
Work in process inventory 2,700
To record cost of spoilage – (P27,000/1,000) x 100

To record cost of finished goods – (27,000 – P2,700)
Unit Cost = Total Cost – Cost of Spoilage

Total Units – Spoiled Units
= P 27,000 – 2,700 = P 24,300
1,000 – 100 units 900 units
Unit Cost after Spoilage = P27.00 (same as UC before Spoilage)

Baby M’s Sheet Metal Works manufactures custom sheet metal
products ranging from cabinets and storage containers to portable
buildings and custom trailers. During the current period, an order for 500
custom storage containers was begun as Job 308 for Sarah Air Freight.
After 100 units had been completed, the customer decided to
change the design specification for the containers. The design change
was successfully implemented on the 400 units that were not completed
at the date of change order; however, the 100 completed units could not
be reworked to meet the customer’s new design requirements. As a
consequence, an additional 100 units had to be manufactured (bringing
the total number to 600, 500 that met the customer specifications and
100 that did not).
Continue..
The customer does not want the 100 units that do not meet the
specifications. The spoiled units can be sold in the seconds market for P100
each. Spoiled goods are kept in an inventory account that is separate from
Finished Goods. Total costs charged to Job 308 for Sarah Air Freight are:
Materials P 50,000
Labor (1,200 hrs x P15 per hr) 18,000
Required:
Determine the cost to be transferred to Spoiled Goods Inventory and
the cost of job shipped to customer. and prepare the general journal
entry to record both.
Solution – Change in Design
1. Spoiled goods inventory (100 x P100) 10,000
To record cost of spoilage

To record cost of finished goods – (P104,000 – P10,000)
Unit Cost = Total Cost – Salvage Value of Spoilage

Total Units – Spoiled Units
= P 104,000 – 10,000 = P 94,000
600 – 100 units 500 units
Unit Cost after Spoilage = P188.00 (higher UC than before Spoilage)

PAC-MAN Metal Shop manufactures metal products that require

casting, such as engine blocks, pistons, and engine housings. During the
current period, an order of 10,000 custom housings was begun on Job Number
2899 for Mr. Manny, a customer. After the job was completed, the housings
were inspected and 400 units were determined to be defective. Mr. Manny
agreed to accept the order with only 9,600 units instead of the quantity
originally ordered. The spoiled units can be sold as seconds for P15 each.
Spoiled goods are kept in an inventory account separate from Finished Goods.
Total costs charged to Job Number 2899 are:
Materials P 92,000
Manufacturing Overhead (P30 per labor hour) 60,000
Continue..
Custom jobs are priced at 140% of cost. The unrecoverable cost of
spoilage is charged to Manufacturing Overhead Control when it is the result of
an internal failure.
Required:
1. Prepare the journal entries to record the total costs charged to Job Number
2899, the spoilage cost, their transfers to appropriate inventory account, and
the shipment of Job Number 2899 to the customer.
2. Determine the unit cost of goods sold.
✓ If the spoiled units are the result of an internal failure.
✓ If the spoiled units are the result of change in design specified by the
customer after the units are completed.
1. Work in process inventory 180,000
Materials inventory 92,000
Payroll 28,000
Applied factory overhead 60,000
To record manufacturing cost
Spoiled goods inventory (400 x P15) 6,000

Factory overhead control 1,200
To record cost of spoilage – (P180,000/10,000) x 400

2. Unit cost – (P172,800 / 9,600 units) = P18.00

Payroll 28,000
Applied factory overhead 60,000
To record manufacturing cost
Spoiled goods inventory (400 x P15) 6,000

To record cost of spoilage

Continue…
Cash/Accounts Receivable 243,600

Sales 243,600
To record sales (P174,000 x 140%)
Cost of goods sold 174,000

To record cost of goods sold.
2. Unit cost – (P174,000 / 9,600 units) = P18.125

Ping-Ping Machine Shop is a manufacturer of motorized carts for vacation
resorts.
Mr. Lacson, the plant manager of Ping-Ping Machine Shop, obtains the
following information for Job #10 in August 2010. A total of 32 units were started, and 7
spoiled units were detected and rejected at final inspection, yielding 25 good units. The
spoiled units were considered to be normal spoilage. Costs assigned prior to the
inspection point are P1,450 per unit. The current disposal price of the spoiled units is
P230 per unit. When the spoilage is detected, the spoiled goods are inventoried at P230
per unit.
Required:
1. What is the normal spoilage rate?
2. Prepare the journal entries to record the normal spoilage, assuming the following:
a. The spoilage is related to a specific job.
b. The spoilage is common to all jobs.
c. The spoilage is considered to be abnormal spoilage
Solution – Specific Job
1. Normal spoilage rate

= Units of normal spoilage ÷ Total good units completed
= 7 ÷ 25
= 28%.
2. a) Journal entry for spoilage related to a specific job:
Spoiled Goods Inventory 1,610

Work-in-Process Inventory (Job #10) 1,610
To record cost of spoilage (7 units × P230)
Solution – Common to All Jobs
Continue…
2. b) Journal entry for spoilage common to all jobs:

Factory Overhead Control 8,540
To record cost of spoilage – (P46,400/32) x 7 units
b) Journal entry for abnormal spoilage:

Loss from Abnormal Spoilage 8,540
To record loss on spoilage – (P1,450 – 230) x 7 units
Comparative Effects
Normal Spoilage
Abnormal
Effects Spoilage
Charged to Charged in All
On Sales
Greater Lesser
and Profits
On Unit Cost
Originally Increase No Effect
Charged
03
Accounting
for Rework
Defective Units
Defective Units
Units that do not meet
production standards and must
be processed further in order to
be salable as good units or as
irregulars.
Examples:
● Electronics Industry –
Malfunctioned Computer Set upon
Testing
● Wood Sculpture Industry –

Dissatisfied Customer due to
Conflict on Design
● Plastic Manufacturing Industry –

Remolding of Plasticwares
● Salon Industry – Return of the

Unsatisfied Customer
Normal Rework Costs

Reason for rework is the Reason for rework is
job itself, because it considered normal to the
requires exacting production process and
specifications, or a the number does not
difficult, intricate or exceed the limit set by
complicated the company.
manufacturing process.
Abnormal
Rework
Rework that is not inherent in a
particular production process and
would arise when number exceed the
limit set by the company.
Example:
Drastic increase in number of repairs
beyond minimum quota on the certain
units of cellphone due to mechanical
and workforce failure
Normal Rework
Abnormal
Entries Charged to Charged in All Rework
Dr: Loss from Abnormal
Dr: Work in Process Dr: Factory Overhead Control
Rework
Discovery and Cr: Materials Cr: Materials
Cr: Materials
Reprocessing Cr: Payroll Cr: Payroll
Cr: Payroll
Cr: Factory Overhead Applied Cr: Factory Overhead Applied
Cr: Factory Overhead Applied
Dr: Finished Goods

Transfer to Warehouse
Cr: Work in Process
Dr: Cash (or Accounts Receivable) None

Subsequent Sale of Cr: Sales
Reworked Units
Dr: Cost of Goods Sold
Cr: Finished Goods
Len-Len Furniture Inc. manufactures several different

designs of outdoor furniture. Production costs are accounted for
using a job order cost system. During the current period, 100 metal
tables were manufactured on Job 275. Costs charged to the job
before inspection are:
Materials P 3,300
Labor (150 hrs x P10 per hr) 1,500
Continue..
Inspection revealed that an umbrella ring had not been
attached to the tables. To correct the oversight, a small part was
welded to the table leg brace and the brace was repainted. The
small part cost P0.50 for each table, and the primer and paint cost
P1.00 for each table. Each table required ¼ hour of labor.
Required:
Prepare the general journal entries to record the rework and
the transfer of the completed tables to Finished Goods Inventory.
1. Factory Overhead Control 700
Materials (100 units × P1.50) 150
Payroll (100 units × 1/4 hour × P10 per hour) 250
Applied Factory Overhead (100 × 1/4 hr × P12 rate) 300
To record costs incurred upon rework
Finished Goods Inventory 6,600

Work in Process Inventory 6,600
To record transfer of reworked items to be sold
Unit Cost = Total Cost = P 6,600

Total Units 100 units
Unit Cost after Rework = P6.60 (same as UC before Rework)

Bleng Blong Electronics Inc. manufactures gauges and

instruments for aircraft. During the current year, an order for 1,000
units of a custom-designed gauge was begun for the Guanzon
Aircraft Corporation. The costs incurred on the job are:
Materials P 20,000
Total cost charged to Guanzon Aircraft
Corporation job P 65,000
Continue…
Before taking delivery of the gauges, engineers at Guanzon
Aircraft changed the design specifications for the gauge. The
change required the replacement of a part. The replacement part
cost P1 and required 10 minutes for installation in each gauge. The
change affected all 1,000 gauges manufactured on the job.
Required:
Prepare general journal entries to record the rework and the
shipment of the completed job to the customer, assuming the
company bills its jobs to customers at 150% of cost.
1. Work in Process Inventory 8,500
Materials (1,000 units × P1) 1,000
Payroll (1,000 units × 1/6 hour × P15) 2,500
Applied Factory Overhead (1,000 × 1/6 × P30) 5,000
To record rework costs attributable to Job
Cost of Goods Sold 73,500

Work in Process Inv. (P65,000 + P8,500) 73,500
To record the cost of sales on product delivered
Accounts Receivable (P73,500 × 150%) 110,250

Sales 110,250
To record the revenue earned
Unit Cost = Total Cost + Rework Costs = P 65,000 + 8,500

Total Units 1,000 units
Unit Cost after Rework = P73.50 (higher UC than that before Rework)
Villar Housing, Inc. manufactures tiles for housing companies.

During the current period, an order for 2,000 tiles was begun on Job
Number 7876 for Camella Homes. Job is marked up 150% of cost. Total cost
charged to Job Number 7876 are:
Materials P 184,000
On inspection, 200 units of tiles were found to have defects.

Materials costing P4 and 30 minutes of labor are required to correct each
defective unit. Manufacturing overhead is charged to production on the
basis of direct labor hours.
Continue…
Required:
1. Give the journal entries to record the total costs of Job Number 7876,
the rework costs, and the transfer of goods to inventory account.
2. Determine the cost for each unit manufactured
✓ Assuming that the defective units are the result of an internal failure.
✓ Assuming that the defective units are the result of a change in
specifications after the units are completed.
Payroll 72,000
Applied overhead 144,000
To record manufacturing cost.
Manufacturing overhead control 4,400

Materials inventory (200 units x P4) 800
Payroll (30/60 x P12) x 200 1,200
Applied overhead (30/36 x P24) x 200 2,400
To record rework cost.

To record cost of finished goods.
b. Unit cost: (P400,000 / 2,000 units) = P200

Solution – Change in Specs
Payroll 72,000
To record manufacturing cost.

Materials inventory 800
Payroll 1,200
To record rework cost.

To record cost of finished goods.
b. Unit cost: (P404,400 / 2,000 units) = P202.20

Easy-Ko Moreno Corporation manufactures a computer chip

called XD1. Manufacturing costs of one XD1 chip, excluding rework costs,
are direct materials, P60; direct manufacturing labor, P12; and
manufacturing overhead, P38.
At the inspection point, defective units are sent back for rework.
Rework costs per XD1 chip are direct materials, P12; direct manufacturing
labor, P9; and manufacturing overhead, P15.
In August 2011, Easy Ko manufactured 1,000 XD1 chips, 80 of

which required rework. Of these 80 chips, 50 were considered normal
rework common to all jobs and the other 30 were considered abnormal
rework.
Continue…
Required:
1. Prepare journal entries to record the accounting for both the
normal and abnormal rework.
2. Now assume instead that the normal rework is attributable
entirely to job #3879, for 200 units of XD1. In this case, what
would be the total and unit cost of the good units produced
for that job in August 2011? Prepare journal entries for the
manufacture of the 200 units, as well as the normal rework
costs.
Solution – Rework Costs
1. Manufacturing Overhead Control (rework costs) 1,800
Materials Control (P12 × 50) 600
Wages Payable (P9 × 50) 450
Manufacturing Overhead Allocated (P15 × 50) 750
To record the Normal rework on 50 units, but not
attributable to any specific XD1 job
Loss from Abnormal Rework (P36 × 30) 1,080

To record the Total costs of abnormal rework on 30 units
Computation:
Abnormal rework = Actual rework – Normal rework
= 80 – 50 = 30 units of XD1 chips.
Solution – Rework Costs
2. Manufacturing costs of job #3879 before rework:
200 units × ($60+$12+$38) P22,000
Add: Normal rework costs 1,800
Total cost of job #3879 P23,800
Unit cost of job (Total /200 units) P 119.00

Materials Control (P60 × 200) 12,000
Wages Payable (P12 × 200) 2,400
Manufacturing Overhead Allocated (P38 × 200) 7,600
To record manufacturing costs for 200 units of XD1 on Job #3879

To record Normal rework for 50 units of XD1 attributable to Job #3879
Comparative Effects
Normal Rework
Abnormal
Effects Rework
Charged to Charged in All
On Sales
Greater Lesser
and Profits
On Unit Cost
Originally Increase No Effect
Charged
04
Accounting
for Waste
Wastages and Disposed Materials
Waste Materials
Left-overs from the production process that
has no further use or resale value and may
require cost of their disposal.
These may arise due to the inherent nature of

materials, chemical reaction, evaporation,
drying, sublimation of goods etc.
Examples:
● Cake and Pastries Industry –
Accidental Dropping of
Ingredients
● Sanitation Industry –
Damaging of Materials while
in Warehouse
● Printing Industry – Spillage

of Inks
● Construction Industry –
Wrecked Hollow Blocks
Allocation of Waste Materials

It is not included in the It is included in the
factory overhead factory overhead
application rate. application rate.
Note:
Waste materials are estimated on the pre-determined
rates established by the company upon the nature of products
and the production process itself.
Abnormal
Wastes
Any loss caused by unexpected or
abnormal conditions such as sub-
standard materials, carelessness,
accident etc. or loss in excess of the
margin anticipated for normal
process loss should be regarded as
abnormal waste.
Allocated to Allocated in All Abnormal

Entries Specific Job Production Wastes
Dr: Work in
Dr: Factory
Process Inventory Dr: Loss from
Overhead Control
– Job Number Abnormal Wastes
Disposal Cr: Accounts
Cr: Accounts
Cr: Accounts
Payable
Payable Payable (or Cash)
(or Cash)
(or Cash)
Kakampink Inc. manufactures pottery products. During the current period,

an order for 1,000 pots was begun on Job Number 2022 for Rosas Company. Job is
marked up 180% of cost. Total cost charged to Job Number 7876 are:
Materials P 297,000
Upon production inspection and careful analysis, management believed

and exhaustively estimated that 1% of materials used will be put into waste.
Required:
Prepare journal entries to record the wastage cost in lieu of given rate if:
a. Waste is allocated on specific Job.
b. Waste is allocated in all production.
c. Assuming that 2% of actual materials gone waste and it is
directly traceable to the job.

Accounts Payable/Cash 2970
To record waste cost (P297,000 x 1%)
2. Factory Overhead Control 2,970


Loss from Abnormal Waste 2,970
Production Loss Flow Legend: Rework
Spoilage
Scraps
Wastes
Production Area
Raw Finished
Materials Quality Goods
Control Inventory
Work in Process
Labor Inventory Seconds
Production Market
Losses
Manu.
Production Area Inventory
O/H Disposals
Production Losses Spoilage Reworks Scrap Wastes
Nature Defective Units of Goods Residual Used Materials
Do not meet the production standards, hence:

With no further known
With known usable
use and must be
Characteristics Processed further and purpose different from
immediately
No further work is production process.
repaired as finished discarded.
performed on them.
goods.
Has their own market and these are usually sold:

Marketability As good finished units To outsiders for a nominal
No resale value.
At its salvage value.
or as irregulars. amount.
Can be discarded if Must be discarded

Usually not disposed since these are ready to be
Disposability perished and not
sold and these usually have economic value.
and requires for the
subsequently bought. cost of its disposal.
Credited either on:

Debited either on:
Debited either on: Work in Process
Factory Overhead
Charge of Costs Factory Overhead Control or on the applicable Inventory; Factory
Control or in
and Losses inventory account to reflect cost of Particular Job Overhead Control; or
Work in Process
directly related Scrap Inventory
Inventory
(whichever is applicable)
Thank You for
Listening!
Stay Safe and God Bless!

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JOB

COST OBJECT DIRECT COSTS INDIRECT COSTS

anything for which a can be conveniently cannot be conveniently

COST POOL COST-ALLOCATION

a) Scott Paper Company for Kleenex

a) Scott Paper Company for Kleenex

a) Cruise ship builder

a) Cruise ship builder

1 Actual Costing System

2 Standard Costing System

3 Normal Costing System

1 Actual Costing System

Uses actual costs

Uses actual costs

JOB NO: WPP 298 CUSTOMER: Western Pulp and Paper

Date Naterials Part No. Quantity Unit Total

Period Labor Time Employee Hours Hourly Total

Date Cost Pool Allocation-Base Allocation-Base Allocation-Base Total

TOTAL MANUFACTURING COST OF JOB $9,705

❑ No material should be issued

JOB NO: WPP 298 CUSTOMER: Western Pulp and Paper

Date Materials Part No. Quantity Unit Total

Period Labor Time Employee Hours Hourly Total

Date Cost Pool Allocation-Base Allocation-Base Allocation-Base Total

TOTAL MANUFACTURING COST OF JOB $9,705

JOB NO: WPP 298 CUSTOMER: Western Pulp and Paper

Date Materials Part No. Quantity Unit Total

Period Labor Time Employee Hours Hourly Total

Examples of Cost-Allocation basis used for

Direct Material cost Direct Labor

❑ Robinson chooses direct manufacturing labor-

❑ In 2021, Robinson budgets 28,000 direct

Date Cost Pool Allocation-Base Allocation-Base Allocation-Base Total

Required: Determine the total cost assigned to Job B011

Direct Materials Direct Labor

DATE AMOUNT Direct materials $ 2,342

DATE HOURS RATE COST

TOTAL MANUFACTURING COST $ 5,600

Direct materials Cost of

Materials and supplies Customers are found.

PROCUREMENT PRODUCTION WAREHOUSING SELLING

MATERIALS WORK IN PROCESS FINISHED GOODS COST OF GOODS SOLD

ACCOUNTING FOR LABOR

ACCOUNTING FOR FACTORY OVERHEAD

ACCOUNTING FOR JOBS COMPLETED

deliver materials and

❑ Perpetual inventory system

RETURN OF MATERIALS TO VENDOR

B) Factory overhead control XXX

MATERIAL CREDIT SLIPS

Supervisor: S. Gomez Date: 02/10/2022

Work in Process (if for direct labor) XXX

Accrued factory payroll XXX

✓ To apply overhead, use this formula:

Treatment: UNDER/OVER Applied overhead

FACTORY OVERHEAD APPLIED

Factory overhead XXX

The company applies overhead cost to

IV. Total Quality Management

II. Types of Quality Cost