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Definition of a job: A job is each line of customer order (RMS order). In the case for order for
aircraft/ helicopter/ major assemblies and repair & overhaul jobs each order line will be for
unit quantity. But in case of spares each order line may be for multiple quantities. Order line
in a customer order relates to one date of delivery.
Scenario 1 Job is shipped in one Lot
1. A purchase of standard parts for a total PO cost of 30. The purchase is received into
inventory and then invoiced but now at a total cost of 35.
Job wise cost accumulation: 0
2. A purchase of Job specific parts at a total PO cost of 20. The purchase is received into
inventory and then invoiced and matched but now at a total cost of 26.
Job wise cost accumulation: 6 (PPV = 26-20)
3. Standard parts are issued to the shop order for a total weighted average of 12.
Job wise cost accumulation: 12+6=18
4. Job specific parts are issued to the shop order for a total weighted average cost of 22
(i.e. all of the purchased articles purchased in event 2).
Job wise cost accumulation: 18+22=40
5. Labor booking at a cost of 20.
Job wise cost accumulation: 40+20=60
6. DRE amortization in GL at value of 10.
Job wise cost accumulation: 60+10=70
7. The customer order is shipped.
Cost of Sales: 70
Inventory
30
Purchase
Liability
Purchase
Price
Variance
30
Cr
Purchase
Liability
Supplier
30
35
Trial Balance
Account
Dr
Cr
Inventory
30
Purchase Price Variance
5
Supplier
35
2. A purchase of Job specific parts at a total PO cost of 20. The purchase is received into
inventory and then invoiced and matched but now at a total cost of 26. The price variance
is capitalized.
Dr
Event
Purchase of job specific part
Creation of Supplier Invoice
Inventory
20
Purchase
Liability
Purchase
Price
Variance (JC)
WIP (JC)
20
Cr
Purchase
Liability
Supplier
20
Purchase
Price
Variance (JC)
26
6
6
Trial Balance
Account
Inventory
Purchase Price Variance
WIP (JC) Cost Accumulation
Supplier
Dr
Cr
50
5
6
61
3. Standard parts are issued to the shop order for a total weighted average of 12.
Dr
Event
Issue of standard part
WIP (JC)
12
Cr
Inventory
12
Trial Balance
Account
Dr
Cr
Inventory
38
Purchase Price Variance
5
WIP (JC) Cost Accumulation
18
Supplier
61
4. Job specific parts (DOP-parts) are issued to the shop order for a total weighted average
cost of 22 (i.e. all of the purchased articles purchased in event 2).
Dr
Event
Issue of standard part
WIP (JC)
22
Cr
Inventory
22
Trial Balance
Account
Inventory
16
Purchase Price Variance
5
WIP (JC) Cost Accumulation
40
Supplier
5. Labor booking at a cost of 20.
Dr
Cr
61
Dr
Event
Labor reporting
WIP (JC)
20
Cr
Labor
Absorption
20
Trial Balance
Account
Inventory
Purchase Price Variance
WIP (JC) Cost Accumulation
Supplier
Labor Absorption
Dr
Cr
16
5
60
61
20
6. The shop order is received at a standard cost of 45 (Material 30; Labor 15). This
gives a total labor variance of 5 and material variance of 4.
Dr
Event
Store Credit of manufactured
part
WIP at stores
(JC)
45
Cr
WIP (JC)
45
Trial Balance
Account
Inventory (RM)
WIP at Stores (JC)
Purchase Price Variance
WIP (JC)
Supplier
Labor Absorption
Dr
Cr
16
45
5
15
61
20
DRE
Amortization
(JC)
WIP (JC)
Cr
10
DRE
10
10
DRE
Amortization
(JC)
10
Trial Balance
Account
Inventory
Purchase Price Variance
WIP at Stores (JC)
WIP (JC)
Supplier
Labor Absorption
DRE
Dr
Cr
16
5
45
25
61
20
10
WIP (JC)
45
Cr
WIP at Stores
(JC)
45
Trial Balance
Account
Inventory
Purchase Price Variance
WIP (JC) Cost Accumulation
Supplier
Labor Absorption
DRE
9. The Job is closed
Dr
Cr
16
5
70
61
20
10
Dr
Event
Job is closed
Cost of Sales
(JC)
70
Cr
WIP (JC)
70
Trial Balance
Account
Inventory
Purchase Price Variance
WIP (JC)
Supplier
Labor Absorption
DRE
Cost of Sales
Dr
Cr
16
5
0
61
20
10
70
13. Merging of work orders is catered to in IFS system by first combining multiple shop
orders into one & on completion, allocating actual costs to individual work orders in the
ratio of quantities.