Cost Accounting

The Journal Entries of Job Order Costing

Manufacturing Cost Flows

Costs

Material Purchases

Raw Materials

Direct Labor

Work in
Process

Manufacturing
Overhead

Finished
Goods

Cost of
Goods
Sold

Example
The ABC Company uses a job order costing system. The following
activities took place during the month of July 2014:
1.
Raw materials purchased $100,000.
2. The direct raw materials used in production, $60,000 and the
indirect raw materials $20,000
3. Salaries and wages cost incurred:
Direct labor cost, $80,000.
Indirect labor cost, $25,000.
4. Factory utility costs incurred $20,000
,and the depreciation on factory equipment, $65,000.
5. Advertising expense incurred $90,000.
6. Manufacturing overhead is applied at the predetermined rate of
200% of direct labor cost.
7. Cost of Goods Manufactured for the month, $140,000.
8.

Cost of Goods Sold for the month, $125,000.

Required:
Prepare journal entries to record the information
given above.

Solution

(9) Calculating the under applied or over applied overhead:

We compare between the following:
1) The actual MOH:
Indirect raw materials
$20,000
Indirect labor cost,
$25,000
Factory utility
$20,000.
Depreciation on factory equipment, $65,000
Total
130,000
2) The applied MOH:
=

So,

160,000

The applied MOH <

160,000 <

The actual MOH

130,000

There is overapplied MOH 30,000 and the entry is:

Manufacturing overhead
COGS

30,000
30,000

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Note: If there is under applied MOH the entry will be as follows:

COGS
Manufacturing overhead

xxx
xxx

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