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Job Ordering

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CHAPTER 2

Job Order Costing

YOUR LEARNING OBJECTIVES
After completing this chapter, you should be able to:
LO1
LO2
LO3
LO4
LO5
LO6

Describe the key differences between job order costing and process costing.
Describe the source documents used to track direct materials and direct labor costs to the job cost sheet.
Calculate a predetermined overhead rate and use it to apply manufacturing overhead cost to jobs.
Describe how costs flow through the accounting system in job order costing.
Calculate and dispose of overapplied or underapplied manufacturing overhead.
Calculate the cost of goods manufactured and cost of goods sold.

Lecture Presentation–LP2 www.mhhe.com/whitecotton1e 36

whi10777_ch02_036-087.indd 36

9/17/09 2:29:08 PM

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FOCUS COMPANY: Toll Brothers Inc.
“America’s Luxury Home Builder” www.tollbrothers.com H

ave you ever found yourself in the following situation? You go out to a trendy new restaurant with a group of friends. You are on a limited budget, so you order the cheapest dish on the menu and a glass of ice water. Meanwhile, your friends indulge in a full-course meal with drinks, appetizers, entrees, and dessert. When it is time to pay the bill, would you prefer to split the check or get a separate tab for each person at the table?
This common scenario illustrates the basic difference between the two costing systems discussed in the next two chapters. Process costing is similar to splitting the check, or spreading the total cost over the number of units produced (or in the case of a restaurant meal, the number of customers at the table). This simple method works well as long as each unit (or customer) consumes about the same amount of cost (or food).
Process costing is discussed in the next chapter.
With job order costing, a separate cost record is kept for

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