Ch02 Job Order Costing 2

Chapter 2

Job Order Costing

Learning Objectives
After studying this chapter, you should be able to:
[1] Explain the characteristics and purposes of cost accounting.
[2] Describe the flow of costs in a job order cost system.
[3] Explain the nature and importance of a job cost sheet.
[4] Indicate how the predetermined overhead rate is determined and used.
[5] Prepare entries for jobs completed and sold.
[6] Distinguish between under- and overapplied manufacturing overhead.
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Preview of Chapter 2

Managerial Accounting
Sixth Edition
Weygandt Kimmel Kieso
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Cost Accounting Systems
Cost Accounting involves:
Measuring,
Recording, and
Reporting product costs.

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

Accounts are fully integrated into the general ledger.



Perpetual inventory system provides immediate, up-to-date information. 

Two basic types: (1) a job order cost system and (2) a process cost system.
LO 1 Explain the characteristics and purposes of cost accounting.

Cost Accounting Systems
Job Order Cost System


Costs are assigned to each job or batch.



Key feature: Each job or batch has its own distinguishing characteristics.



Objective: Compute the cost per job.



Measures costs for each job completed – not for set time periods.

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LO 1 Explain the characteristics and purposes of cost accounting.

Cost Accounting Systems
Illustration 2-1

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LO 1 Explain the characteristics and purposes of cost accounting.

Cost Accounting Systems
Process Cost System


Used when a large volume of similar products are manufactured - (cereal, refining of petroleum, production of ice cream).



Costs are accumulated for a time period – (week or month). 

Costs are assigned to departments or processes for a specified period of time.

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LO 1 Explain the characteristics and purposes of cost accounting.

Cost Accounting Systems
Illustration 2-2

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LO 1 Explain the characteristics and purposes of cost accounting.

Cost Accounting Systems
Review Question
Cost accounting involves the