Cost Accounting (14th Edition)

112 CHAPTER 4 JOB COSTING
Manufacturing overhead costs, therefore, are first accumulated in a manufacturing overhead
account and later allocated to individual jobs. As manufacturing overhead costs are
allocated, they become part of work-in-process inventory.
As individual jobs are completed, work-in-process inventory becomes another balance
sheet asset, finished goods inventory. Only when finished goods are sold is an expense, cost
of goods sold, recognized in the income statement and matched against revenues earned.
The lower part of Exhibit 4-6 shows the period costs—marketing and customerservice
costs. These costs do not create any assets on the balance sheet because they are
not incurred to transform materials into a finished product. Instead, they are expensed
in the income statement, as they are incurred, to best match revenues.
We next describe the entries made in the general ledger.
General Ledger
You know by this point that a job-costing system has a separate job-cost record for each
job. A summary of the job-cost record is typically found in a subsidiary ledger. The general
ledger account Work-in-Process Control presents the total of these separate job-cost
records pertaining to all unfinished jobs. The job-cost records and Work-in-Process
Control account track job costs from when jobs start until they are complete.
Exhibit 4-7 shows T-account relationships for Robinson Company’s general ledger.
The general ledger gives a “bird’s-eye view” of the costing system. The amounts shown in
Exhibit 4-7
Manufacturing Job-Costing System Using Normal Costing: Diagram of General Ledger
Relationships for February 2011
GENERAL LEDGER
1
2
Purchase of
direct and indirect
materials, $89,000
Usage of direct
materials, $81,000,
and indirect
materials, $4,000
3 Cash paid for direct
manufacturing labor,
$39,000, and indirect
manufacturing labor,
$15,000
4
5
Incurrence of other
manufacturing
dept. overhead,
$75,000
Allocation of
6
7
Completion and
transfer to finished
goods, $188,800
Cost of goods sold,
$180,000
8
9
Incurrence of
marketing and
customer-service
costs, $60,000
Sales, $270,000
manufacturing
overhead, $80,000
GENERAL LEDGER
WORK-IN-PROCESS
MATERIALS CONTROL
CONTROL
1 89,000 2 85,000
2 81,000 6 188,800
3 39,000
MANUFACTURING
5 80,000
OVERHEAD CONTROL Bal. 11,200
2 4,000
3 15,000
FINISHED GOODS
CASH
4 75,000
CONTROL
CONTROL
6 188,800 7 180,000
3 54,000
Bal. 8,800
4 57,000 MANUFACTURING
8 60,000 OVERHEAD ALLOCATED ACCOUNTS RECEIVABLE
5 80,000
CONTROL
ACCOUNTS PAYABLE
9 270,000
CONTROL
ACCUMULATED
1 89,000
DEPRECIATION
CONTROL
4 18,000
REVENUES
9 270,000
COST OF GOODS SOLD
7 180,000
MARKETING EXPENSES
8 45,000
CUSTOMER-SERVICE
EXPENSES
8 15,000
The debit balance of $11,200 in the Work-in-Process Control account represents the total cost of all jobs that have not been
completed as of the end of February 2011. There were no incomplete jobs as of the beginning of February 2011.
The debit balance of $8,800 in the Finished Goods Control account represents the cost of all jobs that have been completed but
not sold as of the end of February 2011. There were no jobs completed but not sold as of the beginning of February 2011.