Explain and provide an example for the following job order cost system entries: initial purchase of...

Explain and provide an example for the following job order cost system entries: initial purchase of raw materials, the requisition of materials from the warehouse to the production floor, and factory labor used in production. For each journal entry, identify if the cost being recorded is a product cost or a period cost.

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Expert Solution

Example:

a. Initial purchase of raw materials on credit, $ 80,000.

b. Raw materials issued from warehouse to production : $ 50,000 ( 80 % being direct materials)

c. Factory labor used in production : $ 40,000 ( 70% being direct labor)

For direct materials and direct labor, Work in Process will be debited, while for indirect materials and indirect labor, Manufacturing Overhead will be debited.

Journal entries:

Transaction / Event	Account Titles	Debit	Credit
		$	$
a.	Raw Materials Inventory	80,000
	Accounts Payable		80,000
	To record purchase of raw materials
b.	Work in Process Inventory	40,000
	Manufacturing Overhead	10,000
	Raw Materials Inventory		50,000
	To record issue of raw materials to production floor
c.	Work in Process Inventory	28,000
	Manufacturing Overhead	12,000
	Factory Wages Payable		40,000
	To record factory labor costs incurred.

Cost of Materials consumed in production and factory labor used in production are both product cost. Manufacturing overhead is also product cost.

ekkarill92 answered 7 months ago

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