Job Order Costing System in Manufacturing Industries

ACC200
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Table of Contents
1.......................................................................................................................................................3
a. Circumstances when the job order costing system can be used........................................3
b. Balance as on 30 June 2017 for work in process account..................................................4
c. Computation of Chairs in Finished Goods Inventory at 30 June 2017.............................5
d. Calculate over or under applied overhead for the year.....................................................7
e. Treatment for over applied of Overhead.............................................................................9
f. Approach to be used if the over applied overhead is material.........................................10
g. Activity-Based Costing should be used by the company to expand the range of the
product......................................................................................................................................11
References.....................................................................................................................................12
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1.
a. Circumstances when the job order costing system can be used
The job order costing system can be followed by the service and manufacturing industries. The
companies following this system will of the nature of manufacturing different products. The
system can be used by the company who requires the orders to be placed in a customized
manner. When the products of the company are manufactured on the basis of the customers then
the job order costing system should be used. When the products are similar then the system used
will be the process costing system. The job order costing system will create cost record of the job
for every product. The cost record will state the cost of the direct material, direct labour and
overheads relating to the manufacturing. The cost records also help the company in the
preparation of the ledger and the documents required for the finished stock inventory, work in
process inventory and the goods sold cost (Bragg, 2017).
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b. Balance as on 30 June 2017 for work in process account
Turramurra Furniture company
Calculation of WIP inventory as on 30 June 2017
Particulars Opening
inventor
y
Complete
d Units
Closing
Inventor
y
Cost
($)
Storage
Equipment
20000 20000 0 0
Printer Stand 25000 0 25000 300000
Chair 15000 15000 0 0
Total inventory 300000
The work in process inventory has been completed in the month of June; hence the inventory
which has been completed will not be included in the closing inventory of work in process. The
cost of the inventory will be apportioned accordingly.
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