{"id":154,"date":"2021-01-26T22:16:27","date_gmt":"2021-01-26T22:16:27","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/?post_type=chapter&#038;p=154"},"modified":"2021-06-02T18:24:15","modified_gmt":"2021-06-02T18:24:15","slug":"direct-costs","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/chapter\/direct-costs\/","title":{"raw":"Direct Costs","rendered":"Direct Costs"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Record direct materials and direct labor for a job<\/li>\r\n<\/ul>\r\n<\/div>\r\nIn this section, you\u2019ll be assigning direct material and direct labor costs to a job.\r\n\r\n<img class=\"aligncenter wp-image-1381 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/06214142\/Screen-Shot-2021-05-06-at-2.40.31-PM-1024x475.png\" alt=\"Two horizontal flowcharts are shown. The first flow chart is labeled \u201cPhysical flow of inventory\u201d. It shows four boxes, from left to right, Materials storeroom, Production departments, Finished goods storeroom, and Delivered to customers. The second flowchart is labeled \u201cJob costing\u201d. It shows four boxes, from left to right, Raw Materials inventory, Work in Process inventory, Finished Goods inventory, and Cost of Goods Sold. Below Work in Process inventory, there are two additional boxes pointing to it, Direct labor and Manufacturing overhead. Three boxes are highlighted--Raw Materials inventory, Direct labor, and Work in Process inventory.\" width=\"1024\" height=\"475\" \/>\r\n\r\nSo far, MaBoards has accumulated the following costs:\r\n<table class=\"fin-table tchart\"><caption>Checking Account<\/caption>\r\n<thead>\r\n<tr>\r\n<th class=\"u-sr-only\" scope=\"col\">Debit<\/th>\r\n<th class=\"u-sr-only\" scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"r\">150,000<\/td>\r\n<td class=\"r\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\">2,500<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<tfoot>\r\n<tr class=\"total\">\r\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span> 147,500<\/td>\r\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tfoot>\r\n<\/table>\r\n<table class=\"fin-table tchart\"><caption>Owner's Capital<\/caption>\r\n<thead>\r\n<tr>\r\n<th class=\"u-sr-only\" scope=\"col\">Debit<\/th>\r\n<th class=\"u-sr-only\" scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\">150,000<\/td>\r\n<\/tr>\r\n<tr>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\"><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<tfoot>\r\n<tr class=\"total\">\r\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span>150,000<\/td>\r\n<\/tr>\r\n<\/tfoot>\r\n<\/table>\r\n<table class=\"fin-table tchart\"><caption>Factory Overhead<\/caption>\r\n<thead>\r\n<tr>\r\n<th class=\"u-sr-only\" scope=\"col\">Debit<\/th>\r\n<th class=\"u-sr-only\" scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"r\">2,500<\/td>\r\n<td class=\"r\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\"><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<tfoot>\r\n<tr class=\"total\">\r\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span> 2,500<\/td>\r\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tfoot>\r\n<\/table>\r\n&nbsp;\r\n<h2>DIRECT MATERIALS INVENTORY<\/h2>\r\nOn July 5th, Jackie purchased enough wood for 60 skateboards from a local supplier who has agreed to let her pay the $3,000 bill within 30 days with no interest. She journalized the entry like this:\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<th scope=\"row\">Jul 05<\/th>\r\n<td class=\"highlight\">Raw Materials - direct<\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 3,000<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Accounts Payable<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 3,000<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Purchased materials on account, $3,000 (60 units x $50\/unit)<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nAccounts Payable is a liability account that represents bills that are due for purchases and other costs of doing business, and the Raw Materials account is an asset that represents materials on hand.\r\n\r\nAs she posted the transaction to the ledger, she created a new account for Raw Materials that would be used directly to make boards, and a new account to track bills that she had to pay (Accounts Payable).\r\n\r\n<img class=\"aligncenter\" src=\"https:\/\/lh6.googleusercontent.com\/ybR7vKOZdgtM30rlrID0SV7MOs19JBcV1VUsNemJBb8Zo79ZEiwvSsPX8j0DDmQfwK78GjtlWWAL1aASZ0r2Cri5s2wiKZyDE3mLfRLyC_TpygpT-nnd5rGz_Oqai4k5-WEZYDOP\" alt=\"A journal entry dated July 05 shows a debit of $3,000 to Raw Materials - Direct and a credit of $3,000 to Accounts Payable with the note \u201cPurchased materials on account, $30,000 (300 units x $10\/unit)\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"1600\" height=\"539\" \/>\r\n\r\nThe general ledger now appears as follows:\r\n\r\n<img class=\"aligncenter wp-image-1154 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/29190051\/5.2.1.png\" alt=\"A t-account for Checking Account shows a debit of $150,000 beginning balance, a credit of $2,500, and a $147,500 ending balance. A t-account for Raw Materials - Direct shows a debit of $3,000 beginning and ending balance. A t-account for Accounts Payable shows a credit of $3,000 beginning and ending balance. A t-account for Owner's Capital shows a credit of $150,000 beginning and ending balance. A t-account for Factory Overhead shows a debit of $2,500 beginning and ending balance.\" width=\"521\" height=\"613\" \/>\r\n\r\nThe accounting equation is still in balance, proving that debits = credits:\r\n\r\n147,500 + 3000 = 3000 + 150,000 - 2,500\r\n\r\nAnother way to show this is called a trial balance:\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\">DR<\/th>\r\n<th class=\"r\" scope=\"col\">CR<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td>Checking Account<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 147,500<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Raw Materials - direct<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 3,000<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Accounts Payable<\/td>\r\n<td><\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 3,000<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Owner's Capital<\/td>\r\n<td><\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 150,000<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Factory Overhead<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 2,500<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 153,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 153,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n<h2>INDIRECT MATERIALS INVENTORY (Manufacturing supplies)<\/h2>\r\nOn the 10th of July, Jackie purchased supplies, like paint and graphics and lacquer, that would be used during production but can\u2019t be traced directly to any particular job. She agreed to pay $1,000 within 30 days.\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<th scope=\"row\">Jul 10<\/th>\r\n<td class=\"highlight\">Raw Materials - indirect<\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 1,000<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Accounts Payable<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1,000<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Purchased materials on account.<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nAfter posting the transactions to the ledger, her accounts show the following balances:\r\n\r\n<img class=\"aligncenter\" src=\"https:\/\/lh3.googleusercontent.com\/AfD05EMpIwCyaX20n7sJvQQFXCjok0uFw1nnIvLYW7p-H_HJul441AfaLWXLip28Rpe9QFS7PRfUzw5g7K5iMdQHl6Z-tonMzSJwLZXqJln5yQMplr4nsKsV7czW8ohec-BiMuYz\" alt=\"A journal entry dated July 10 shows a debit of $1,000 to Raw Materials - Indirect and a credit of $1,000 to Accounts Payable with the note \u201cPurchased materials on account\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"1600\" height=\"681\" \/>\r\n\r\n<img class=\"aligncenter wp-image-1155 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/29190148\/5.2.1b.png\" alt=\"A t-account for Checking Account shows a debit of $150,000 beginning balance, a credit of $2,500, and a $147,500 ending balance. A t-account for Raw Materials - Direct shows a debit of $3,000 beginning and ending balance. A t-account for Raw Materials - Indirect shows a debit of $1,000 beginning and ending balance. A t-account for Accounts Payable shows a credit of $3,000 beginning balance, a credit of $1,000, and a $4,000 ending balance. A t-account for Owner's Capital shows a credit of $150,000 beginning and ending balance. A t-account for Factory Overhead shows a debit of $2,500 beginning and ending balance.\" width=\"669\" height=\"737\" \/>\r\n\r\nFrom now on, Jackie won\u2019t run a trial balance check every time she posts. She\u2019ll wait until the end of the month.\r\n<h2>ESTABLISHING A JOB ORDER<\/h2>\r\nOn July 15th, she received an order from Dhanila Parboteeah for a custom skateboard built to her detailed specifications. She has agreed to pay $2,000 for it. Jackie took two units of wood out of storage and placed them on the workbench and started a job card, which is a form that she will use to track direct and indirect costs of the project. She labels Parboteeah\u2019s order as \u201cJob 1\u201d and will track it from now on that way.\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th scope=\"col\">Job Sheet<\/th>\r\n<th class=\"r\" scope=\"col\">Job 1<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td colspan=\"2\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Direct Materials<\/strong><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wood<\/td>\r\n<td class=\"r\">100<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wheels and trucks<\/td>\r\n<td class=\"r\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Direct Labor<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Overhead allocation<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total Job Cost<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>100<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nShe also made the following journal entry:\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<th scope=\"row\">Jul 15<\/th>\r\n<td class=\"highlight\">Work in Process<\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Raw materials - direct<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Started job 1 - moved raw materials into production<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n<img class=\"aligncenter\" src=\"https:\/\/lh4.googleusercontent.com\/3ppt7jMcCrL724NyXkhXfBDrUWGvY_7LrENEr5P_R5XYf9OVRATl6MQPLvce7FVsWMg94BOQE7ZCHVWPaH4XJMzAT4mFNBYXeOp-UbNz1BHQh6puu_RQGrD7_YB9qu4S43xGacXC\" alt=\"A journal entry dated July 15 shows a debit of $100 to Work in Process and a credit of $100 to Raw Materials - Direct with the note \u201cStarted job 1 - moved raw materials into production\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"1600\" height=\"718\" \/>\r\n\r\n<img class=\"aligncenter wp-image-1156 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/29190245\/5.2.1c.png\" alt=\"A t-account for Checking Account shows a debit of $150,000 beginning balance, a credit of $2,500, and a $147,500 ending balance. A t-account for Raw Materials - Direct shows a debit of $3,000 beginning balance, a credit of $100 dated July 15, and a $2,900 ending balance. A t-account for Work in Process shows a debit of $100 dated July 15 beginning balance, and a debit of $100 ending balance. A t-account for Raw Materials - Indirect shows a debit of $1,000 beginning and ending balance. A t-account for Accounts Payable shows a credit of $3,000 beginning balance, a credit of $1,000, and a credit of $4,000 ending balance. A t-account for Owner's Capital shows a credit of $150,000 beginning and ending balance. A t-account for Factory Overhead shows a debit of $2,500 beginning and ending balance.\" width=\"653\" height=\"783\" \/>\r\n\r\n&nbsp;\r\n<h2>DIRECT MATERIALS ADDED TO JOB<\/h2>\r\nBetween the 15th and the 20th, Jackie paid a college student $400 to shape and finish the board. The final touch was installing the trucks and wheels that Jackie purchased online for $50. Since she uses a just-in-time system for the hardware, she doesn\u2019t keep a raw materials inventory account for them. She adds the direct labor and additional materials to both the Work In Process ledger account and the job card.\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<th scope=\"row\">Jul 20<\/th>\r\n<td class=\"highlight\">Work in Process<\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 450<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Checking Account<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 400<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Checking Account<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 50<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Labor for skateboard #1 ($400) and wheels\/trucks ($50)<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n&nbsp;\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th scope=\"col\">Job Sheet<\/th>\r\n<th class=\"r\" scope=\"col\">Job 1<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td colspan=\"2\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Direct Materials<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wood<\/td>\r\n<td class=\"r\">100<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wheels\/trucks<\/td>\r\n<td class=\"r\">50<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Direct Labor<\/td>\r\n<td class=\"r\">400<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Overhead allocation<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total Job Cost<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>550<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n<img class=\"aligncenter\" src=\"https:\/\/lh4.googleusercontent.com\/Vph07esBSGJmZNT-p8qE3q6selwqYlej52zMQlYqmaDXG3Bh1v2D6V0j-HzhcORXmDoDU0nqQGfvtiRdyU3lk4jvKK1aPxNCzPQ9Hj9i4WOKTikv6CpQpClhrtkmI6mvW_38AuRr\" alt=\"A journal entry dated July 20 shows a debit of $450 to Work in Process and two credits of $400 and $50 both to Checking Account with the note \u201cLabor for skateboard #1 ($400) and wheels\/trucks ($50)\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"1600\" height=\"718\" \/>\r\n\r\nThe general ledger for MaBoards now looks like this:\r\n\r\n<img class=\"aligncenter wp-image-1157 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/29192550\/5.2.1d.png\" alt=\"A t-account for Checking Account shows a debit of $150,000 beginning balance, credits of $2,500, $400, and $50, and a debit of $147,050 ending balance. A t-account for Raw Materials - Direct shows a debit of $3,000 beginning balance, a credit of $100, and a debit of $2,900 ending balance. A t-account for Work in Process shows a debit of $100 beginning balance, a debit of $450, and a debit of $550 ending balance. A t-account for Raw Materials - Indirect shows a debit of $1,000 beginning and ending balance. A t-account for Accounts Payable shows a credit of $3,000 beginning balance, a credit of $1,000, and a credit of $4,000 ending balance. A t-account for Owner's Capital shows a credit of $150,000 beginning and ending balance. A t-account for Factory Overhead shows a debit of $2,500 beginning and ending balance.\" width=\"626\" height=\"770\" \/>\r\n\r\nNotice the job card shows $550 and is the detail that supports the ledger account called Work in Process.\r\n<h2>NEW JOB STARTED<\/h2>\r\nOn July 21, Jackie decided to make a custom board to her own specifications to sell online. She put it into production with two units of wood from the supply room. She made a journal entry and started a new job card (#2).\r\n<div align=\"left\">\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<th scope=\"row\">Jul 21<\/th>\r\n<td class=\"highlight\">Work in Process<\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Raw Materials - direct<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Job #2 started<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th scope=\"col\">Job Sheet<\/th>\r\n<th class=\"r\" scope=\"col\">Job 1<\/th>\r\n<th class=\"r\" scope=\"col\">Job 2<\/th>\r\n<th class=\"r\" scope=\"col\">Total WIP<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td colspan=\"4\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Direct Materials<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wood<\/td>\r\n<td class=\"r\">100<\/td>\r\n<td class=\"r\">100<\/td>\r\n<td class=\"r\">200<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wheels\/trucks<\/td>\r\n<td class=\"r\">50<\/td>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\">50<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Direct Labor<\/td>\r\n<td class=\"r\">400<\/td>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\">400<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Overhead allocation<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r\">0<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total Job Cost<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>550<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>100<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>650<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n<\/div>\r\n<img class=\"aligncenter\" src=\"https:\/\/lh5.googleusercontent.com\/93YvKKJwfKOPdUypS-3nplY2vRKfTU0z-_q1_96DFNVNMzHZlrvNUNPRUrEhC9Yb_IfHRT4umNeqHKnyzfZlwsSz7HcPmwOyd3GJgbaKuMwC62spnmhNP-aa8DV2lmce_Pv028vt\" alt=\"A journal entry dated July 21 shows a debit of $100 to Work in Process and a credit of $100 to Raw Materials - direct with the note \u201cJob #2 Started\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"1600\" height=\"745\" \/>\r\n\r\nNotice again that the total of the job cards matches the ledger account called Work in Process. This will always be true. Work in Process is a \u201ccontrol\u201d account that accumulates costs chronologically. The Job Cards serve as a \u201csubsidiary\u201d ledger that sorts those same costs by project.\r\n\r\nOn July 25th, Jackie purchased deluxe trucks and wheels for $100 for Job 2 and paid her worker $600 for completing the job. She made the journal entry, posted it to the ledger, and updated the job card.\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<th scope=\"row\">Jul 25<\/th>\r\n<td class=\"highlight\">Work in Process<\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 700<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Checking Account<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 600<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Checking Account<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Labor for skateboard #2 ($600) and wheels\/trucks ($100)<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th scope=\"col\">Job Sheet<\/th>\r\n<th class=\"r\" scope=\"col\">Job 1<\/th>\r\n<th class=\"r\" scope=\"col\">Job 2<\/th>\r\n<th class=\"r\" scope=\"col\">Total WIP<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td colspan=\"4\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Direct Materials<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wood<\/td>\r\n<td class=\"r\">100<\/td>\r\n<td class=\"r\">100<\/td>\r\n<td class=\"r\">200<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wheels\/trucks<\/td>\r\n<td class=\"r\">50<\/td>\r\n<td class=\"r\">100<\/td>\r\n<td class=\"r\">150<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Direct Labor<\/td>\r\n<td class=\"r\">400<\/td>\r\n<td class=\"r\">600<\/td>\r\n<td class=\"r\">1000<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Overhead allocation<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r\">0<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total Job Cost<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>550<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>800<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>1350<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nAfter posting, the relevant part of the general ledger looks like this (just the Checking Account and Work in Process are shown):\r\n\r\n<img class=\"aligncenter wp-image-1158 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/29192824\/5.2.1e.png\" alt=\"A t-account for Checking Account shows a debit of $150,000 beginning balance, credits of $2,500, $400, $50, $600 for July 25, and $100 for July 25, and a debit of $146,350 ending balance. A t-account for Work in Process shows a debit of $100 beginning balance, debits of $450, $100, and $700 for July 25, and a debit of $1,350 ending balance.\" width=\"365\" height=\"551\" \/>\r\n\r\nDo the job cards match the Work in Process account?\r\n<h2>NEW JOB ORDER<\/h2>\r\nOn July 26, Jackie received an order from Xia Zang for a skateboard so she put it into production as Job 3:\r\n<div align=\"left\">\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\">\r\n<thead>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Account\/Explanation<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<th scope=\"row\">Jul 26<\/th>\r\n<td class=\"highlight\">Work in Process<\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Raw materials - direct<\/td>\r\n<td class=\"highlight\"><\/td>\r\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><em>Job #3 started<\/em><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n&nbsp;\r\n\r\n<\/div>\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th scope=\"col\">Job Sheet<\/th>\r\n<th class=\"r\" scope=\"col\">Job 1<\/th>\r\n<th class=\"r\" scope=\"col\">Job 2<\/th>\r\n<th class=\"r\" scope=\"col\">Job 3<\/th>\r\n<th class=\"r\" scope=\"col\">Total WIP<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Direct Materials<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wood<\/td>\r\n<td class=\"r\">100<\/td>\r\n<td class=\"r\">100<\/td>\r\n<td class=\"r\">100<\/td>\r\n<td class=\"r\">300<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wheels\/trucks<\/td>\r\n<td class=\"r\">50<\/td>\r\n<td class=\"r\">100<\/td>\r\n<td><\/td>\r\n<td class=\"r\">150<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Direct Labor<\/td>\r\n<td class=\"r\">400<\/td>\r\n<td class=\"r\">600<\/td>\r\n<td><\/td>\r\n<td class=\"r\">1000<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Overhead allocation<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td class=\"r\">0<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total Job Cost<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>550<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>800<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>100<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>1450<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n<\/div>\r\n&nbsp;\r\n\r\nAfter posting, the relevant part of the general ledger looks like this (just the direct Raw Materials and Work in Process accounts are shown):\r\n\r\n<img class=\"aligncenter wp-image-1159 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/29192900\/5.2.1f.png\" alt=\"A t-account for Raw Materials - Direct shows a debit of $3,000 beginning balance, credits of $100, $100, and $100 for July 26, and a debit of $2,700 ending balance. A t-account for Work in Process shows a debit of $100 beginning balance, debits of $450, $100, $700, and $100 for July 26, and a debit of $1,450 ending balance.\" width=\"696\" height=\"294\" \/>\r\n\r\nWhat you may have noticed on the job cards so far is that we haven\u2019t allocated any indirect factory overhead yet. Before we do that, let\u2019s check your understanding of allocating direct costs to jobs.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Question<\/h3>\r\n[ohm_question hide_question_numbers=1]219038[\/ohm_question]\r\n\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Record direct materials and direct labor for a job<\/li>\n<\/ul>\n<\/div>\n<p>In this section, you\u2019ll be assigning direct material and direct labor costs to a job.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1381 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/06214142\/Screen-Shot-2021-05-06-at-2.40.31-PM-1024x475.png\" alt=\"Two horizontal flowcharts are shown. The first flow chart is labeled \u201cPhysical flow of inventory\u201d. It shows four boxes, from left to right, Materials storeroom, Production departments, Finished goods storeroom, and Delivered to customers. The second flowchart is labeled \u201cJob costing\u201d. It shows four boxes, from left to right, Raw Materials inventory, Work in Process inventory, Finished Goods inventory, and Cost of Goods Sold. Below Work in Process inventory, there are two additional boxes pointing to it, Direct labor and Manufacturing overhead. Three boxes are highlighted--Raw Materials inventory, Direct labor, and Work in Process inventory.\" width=\"1024\" height=\"475\" \/><\/p>\n<p>So far, MaBoards has accumulated the following costs:<\/p>\n<table class=\"fin-table tchart\">\n<caption>Checking Account<\/caption>\n<thead>\n<tr>\n<th class=\"u-sr-only\" scope=\"col\">Debit<\/th>\n<th class=\"u-sr-only\" scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"r\">150,000<\/td>\n<td class=\"r\"><\/td>\n<\/tr>\n<tr>\n<td class=\"r\"><\/td>\n<td class=\"r\">2,500<\/td>\n<\/tr>\n<\/tbody>\n<tfoot>\n<tr class=\"total\">\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span> 147,500<\/td>\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tfoot>\n<\/table>\n<table class=\"fin-table tchart\">\n<caption>Owner&#8217;s Capital<\/caption>\n<thead>\n<tr>\n<th class=\"u-sr-only\" scope=\"col\">Debit<\/th>\n<th class=\"u-sr-only\" scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"r\"><\/td>\n<td class=\"r\">150,000<\/td>\n<\/tr>\n<tr>\n<td class=\"r\"><\/td>\n<td class=\"r\"><\/td>\n<\/tr>\n<\/tbody>\n<tfoot>\n<tr class=\"total\">\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span>150,000<\/td>\n<\/tr>\n<\/tfoot>\n<\/table>\n<table class=\"fin-table tchart\">\n<caption>Factory Overhead<\/caption>\n<thead>\n<tr>\n<th class=\"u-sr-only\" scope=\"col\">Debit<\/th>\n<th class=\"u-sr-only\" scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"r\">2,500<\/td>\n<td class=\"r\"><\/td>\n<\/tr>\n<tr>\n<td class=\"r\"><\/td>\n<td class=\"r\"><\/td>\n<\/tr>\n<\/tbody>\n<tfoot>\n<tr class=\"total\">\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span> 2,500<\/td>\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tfoot>\n<\/table>\n<p>&nbsp;<\/p>\n<h2>DIRECT MATERIALS INVENTORY<\/h2>\n<p>On July 5th, Jackie purchased enough wood for 60 skateboards from a local supplier who has agreed to let her pay the $3,000 bill within 30 days with no interest. She journalized the entry like this:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<th scope=\"row\">Jul 05<\/th>\n<td class=\"highlight\">Raw Materials &#8211; direct<\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 3,000<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Accounts Payable<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 3,000<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Purchased materials on account, $3,000 (60 units x $50\/unit)<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>Accounts Payable is a liability account that represents bills that are due for purchases and other costs of doing business, and the Raw Materials account is an asset that represents materials on hand.<\/p>\n<p>As she posted the transaction to the ledger, she created a new account for Raw Materials that would be used directly to make boards, and a new account to track bills that she had to pay (Accounts Payable).<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/lh6.googleusercontent.com\/ybR7vKOZdgtM30rlrID0SV7MOs19JBcV1VUsNemJBb8Zo79ZEiwvSsPX8j0DDmQfwK78GjtlWWAL1aASZ0r2Cri5s2wiKZyDE3mLfRLyC_TpygpT-nnd5rGz_Oqai4k5-WEZYDOP\" alt=\"A journal entry dated July 05 shows a debit of $3,000 to Raw Materials - Direct and a credit of $3,000 to Accounts Payable with the note \u201cPurchased materials on account, $30,000 (300 units x $10\/unit)\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"1600\" height=\"539\" \/><\/p>\n<p>The general ledger now appears as follows:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1154 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/29190051\/5.2.1.png\" alt=\"A t-account for Checking Account shows a debit of $150,000 beginning balance, a credit of $2,500, and a $147,500 ending balance. A t-account for Raw Materials - Direct shows a debit of $3,000 beginning and ending balance. A t-account for Accounts Payable shows a credit of $3,000 beginning and ending balance. A t-account for Owner's Capital shows a credit of $150,000 beginning and ending balance. A t-account for Factory Overhead shows a debit of $2,500 beginning and ending balance.\" width=\"521\" height=\"613\" \/><\/p>\n<p>The accounting equation is still in balance, proving that debits = credits:<\/p>\n<p>147,500 + 3000 = 3000 + 150,000 &#8211; 2,500<\/p>\n<p>Another way to show this is called a trial balance:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\">DR<\/th>\n<th class=\"r\" scope=\"col\">CR<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td>Checking Account<\/td>\n<td class=\"r\">\u00a0 \u00a0 147,500<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Raw Materials &#8211; direct<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 3,000<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Accounts Payable<\/td>\n<td><\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 3,000<\/td>\n<\/tr>\n<tr>\n<td>Owner&#8217;s Capital<\/td>\n<td><\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 150,000<\/td>\n<\/tr>\n<tr>\n<td>Factory Overhead<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 2,500<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 153,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 153,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<h2>INDIRECT MATERIALS INVENTORY (Manufacturing supplies)<\/h2>\n<p>On the 10th of July, Jackie purchased supplies, like paint and graphics and lacquer, that would be used during production but can\u2019t be traced directly to any particular job. She agreed to pay $1,000 within 30 days.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<th scope=\"row\">Jul 10<\/th>\n<td class=\"highlight\">Raw Materials &#8211; indirect<\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 1,000<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Accounts Payable<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 1,000<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Purchased materials on account.<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>After posting the transactions to the ledger, her accounts show the following balances:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/lh3.googleusercontent.com\/AfD05EMpIwCyaX20n7sJvQQFXCjok0uFw1nnIvLYW7p-H_HJul441AfaLWXLip28Rpe9QFS7PRfUzw5g7K5iMdQHl6Z-tonMzSJwLZXqJln5yQMplr4nsKsV7czW8ohec-BiMuYz\" alt=\"A journal entry dated July 10 shows a debit of $1,000 to Raw Materials - Indirect and a credit of $1,000 to Accounts Payable with the note \u201cPurchased materials on account\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"1600\" height=\"681\" \/><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1155 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/29190148\/5.2.1b.png\" alt=\"A t-account for Checking Account shows a debit of $150,000 beginning balance, a credit of $2,500, and a $147,500 ending balance. A t-account for Raw Materials - Direct shows a debit of $3,000 beginning and ending balance. A t-account for Raw Materials - Indirect shows a debit of $1,000 beginning and ending balance. A t-account for Accounts Payable shows a credit of $3,000 beginning balance, a credit of $1,000, and a $4,000 ending balance. A t-account for Owner's Capital shows a credit of $150,000 beginning and ending balance. A t-account for Factory Overhead shows a debit of $2,500 beginning and ending balance.\" width=\"669\" height=\"737\" \/><\/p>\n<p>From now on, Jackie won\u2019t run a trial balance check every time she posts. She\u2019ll wait until the end of the month.<\/p>\n<h2>ESTABLISHING A JOB ORDER<\/h2>\n<p>On July 15th, she received an order from Dhanila Parboteeah for a custom skateboard built to her detailed specifications. She has agreed to pay $2,000 for it. Jackie took two units of wood out of storage and placed them on the workbench and started a job card, which is a form that she will use to track direct and indirect costs of the project. She labels Parboteeah\u2019s order as \u201cJob 1\u201d and will track it from now on that way.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th scope=\"col\">Job Sheet<\/th>\n<th class=\"r\" scope=\"col\">Job 1<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td colspan=\"2\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Direct Materials<\/strong><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wood<\/td>\n<td class=\"r\">100<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wheels and trucks<\/td>\n<td class=\"r\"><\/td>\n<\/tr>\n<tr>\n<td>Direct Labor<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Overhead allocation<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Total Job Cost<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>100<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>She also made the following journal entry:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<th scope=\"row\">Jul 15<\/th>\n<td class=\"highlight\">Work in Process<\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Raw materials &#8211; direct<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Started job 1 &#8211; moved raw materials into production<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/lh4.googleusercontent.com\/3ppt7jMcCrL724NyXkhXfBDrUWGvY_7LrENEr5P_R5XYf9OVRATl6MQPLvce7FVsWMg94BOQE7ZCHVWPaH4XJMzAT4mFNBYXeOp-UbNz1BHQh6puu_RQGrD7_YB9qu4S43xGacXC\" alt=\"A journal entry dated July 15 shows a debit of $100 to Work in Process and a credit of $100 to Raw Materials - Direct with the note \u201cStarted job 1 - moved raw materials into production\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"1600\" height=\"718\" \/><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1156 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/29190245\/5.2.1c.png\" alt=\"A t-account for Checking Account shows a debit of $150,000 beginning balance, a credit of $2,500, and a $147,500 ending balance. A t-account for Raw Materials - Direct shows a debit of $3,000 beginning balance, a credit of $100 dated July 15, and a $2,900 ending balance. A t-account for Work in Process shows a debit of $100 dated July 15 beginning balance, and a debit of $100 ending balance. A t-account for Raw Materials - Indirect shows a debit of $1,000 beginning and ending balance. A t-account for Accounts Payable shows a credit of $3,000 beginning balance, a credit of $1,000, and a credit of $4,000 ending balance. A t-account for Owner's Capital shows a credit of $150,000 beginning and ending balance. A t-account for Factory Overhead shows a debit of $2,500 beginning and ending balance.\" width=\"653\" height=\"783\" \/><\/p>\n<p>&nbsp;<\/p>\n<h2>DIRECT MATERIALS ADDED TO JOB<\/h2>\n<p>Between the 15th and the 20th, Jackie paid a college student $400 to shape and finish the board. The final touch was installing the trucks and wheels that Jackie purchased online for $50. Since she uses a just-in-time system for the hardware, she doesn\u2019t keep a raw materials inventory account for them. She adds the direct labor and additional materials to both the Work In Process ledger account and the job card.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<th scope=\"row\">Jul 20<\/th>\n<td class=\"highlight\">Work in Process<\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 450<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Checking Account<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 400<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Checking Account<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 50<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Labor for skateboard #1 ($400) and wheels\/trucks ($50)<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th scope=\"col\">Job Sheet<\/th>\n<th class=\"r\" scope=\"col\">Job 1<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td colspan=\"2\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Direct Materials<\/strong><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wood<\/td>\n<td class=\"r\">100<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wheels\/trucks<\/td>\n<td class=\"r\">50<\/td>\n<\/tr>\n<tr>\n<td>Direct Labor<\/td>\n<td class=\"r\">400<\/td>\n<\/tr>\n<tr>\n<td>Overhead allocation<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Total Job Cost<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>550<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/lh4.googleusercontent.com\/Vph07esBSGJmZNT-p8qE3q6selwqYlej52zMQlYqmaDXG3Bh1v2D6V0j-HzhcORXmDoDU0nqQGfvtiRdyU3lk4jvKK1aPxNCzPQ9Hj9i4WOKTikv6CpQpClhrtkmI6mvW_38AuRr\" alt=\"A journal entry dated July 20 shows a debit of $450 to Work in Process and two credits of $400 and $50 both to Checking Account with the note \u201cLabor for skateboard #1 ($400) and wheels\/trucks ($50)\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"1600\" height=\"718\" \/><\/p>\n<p>The general ledger for MaBoards now looks like this:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1157 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/29192550\/5.2.1d.png\" alt=\"A t-account for Checking Account shows a debit of $150,000 beginning balance, credits of $2,500, $400, and $50, and a debit of $147,050 ending balance. A t-account for Raw Materials - Direct shows a debit of $3,000 beginning balance, a credit of $100, and a debit of $2,900 ending balance. A t-account for Work in Process shows a debit of $100 beginning balance, a debit of $450, and a debit of $550 ending balance. A t-account for Raw Materials - Indirect shows a debit of $1,000 beginning and ending balance. A t-account for Accounts Payable shows a credit of $3,000 beginning balance, a credit of $1,000, and a credit of $4,000 ending balance. A t-account for Owner's Capital shows a credit of $150,000 beginning and ending balance. A t-account for Factory Overhead shows a debit of $2,500 beginning and ending balance.\" width=\"626\" height=\"770\" \/><\/p>\n<p>Notice the job card shows $550 and is the detail that supports the ledger account called Work in Process.<\/p>\n<h2>NEW JOB STARTED<\/h2>\n<p>On July 21, Jackie decided to make a custom board to her own specifications to sell online. She put it into production with two units of wood from the supply room. She made a journal entry and started a new job card (#2).<\/p>\n<div style=\"text-align: left;\">\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<th scope=\"row\">Jul 21<\/th>\n<td class=\"highlight\">Work in Process<\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Raw Materials &#8211; direct<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Job #2 started<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th scope=\"col\">Job Sheet<\/th>\n<th class=\"r\" scope=\"col\">Job 1<\/th>\n<th class=\"r\" scope=\"col\">Job 2<\/th>\n<th class=\"r\" scope=\"col\">Total WIP<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td colspan=\"4\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Direct Materials<\/strong><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wood<\/td>\n<td class=\"r\">100<\/td>\n<td class=\"r\">100<\/td>\n<td class=\"r\">200<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wheels\/trucks<\/td>\n<td class=\"r\">50<\/td>\n<td class=\"r\"><\/td>\n<td class=\"r\">50<\/td>\n<\/tr>\n<tr>\n<td>Direct Labor<\/td>\n<td class=\"r\">400<\/td>\n<td class=\"r\"><\/td>\n<td class=\"r\">400<\/td>\n<\/tr>\n<tr>\n<td>Overhead allocation<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r\">0<\/td>\n<\/tr>\n<tr>\n<td>Total Job Cost<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>550<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>100<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>650<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/lh5.googleusercontent.com\/93YvKKJwfKOPdUypS-3nplY2vRKfTU0z-_q1_96DFNVNMzHZlrvNUNPRUrEhC9Yb_IfHRT4umNeqHKnyzfZlwsSz7HcPmwOyd3GJgbaKuMwC62spnmhNP-aa8DV2lmce_Pv028vt\" alt=\"A journal entry dated July 21 shows a debit of $100 to Work in Process and a credit of $100 to Raw Materials - direct with the note \u201cJob #2 Started\u201d. Each line item in the journal entry points to the corresponding debit or credit on its respective t-account.\" width=\"1600\" height=\"745\" \/><\/p>\n<p>Notice again that the total of the job cards matches the ledger account called Work in Process. This will always be true. Work in Process is a \u201ccontrol\u201d account that accumulates costs chronologically. The Job Cards serve as a \u201csubsidiary\u201d ledger that sorts those same costs by project.<\/p>\n<p>On July 25th, Jackie purchased deluxe trucks and wheels for $100 for Job 2 and paid her worker $600 for completing the job. She made the journal entry, posted it to the ledger, and updated the job card.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<th scope=\"row\">Jul 25<\/th>\n<td class=\"highlight\">Work in Process<\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 700<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Checking Account<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 600<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Checking Account<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Labor for skateboard #2 ($600) and wheels\/trucks ($100)<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th scope=\"col\">Job Sheet<\/th>\n<th class=\"r\" scope=\"col\">Job 1<\/th>\n<th class=\"r\" scope=\"col\">Job 2<\/th>\n<th class=\"r\" scope=\"col\">Total WIP<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td colspan=\"4\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Direct Materials<\/strong><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wood<\/td>\n<td class=\"r\">100<\/td>\n<td class=\"r\">100<\/td>\n<td class=\"r\">200<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wheels\/trucks<\/td>\n<td class=\"r\">50<\/td>\n<td class=\"r\">100<\/td>\n<td class=\"r\">150<\/td>\n<\/tr>\n<tr>\n<td>Direct Labor<\/td>\n<td class=\"r\">400<\/td>\n<td class=\"r\">600<\/td>\n<td class=\"r\">1000<\/td>\n<\/tr>\n<tr>\n<td>Overhead allocation<\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r\">0<\/td>\n<\/tr>\n<tr>\n<td>Total Job Cost<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>550<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>800<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>1350<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>After posting, the relevant part of the general ledger looks like this (just the Checking Account and Work in Process are shown):<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1158 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/29192824\/5.2.1e.png\" alt=\"A t-account for Checking Account shows a debit of $150,000 beginning balance, credits of $2,500, $400, $50, $600 for July 25, and $100 for July 25, and a debit of $146,350 ending balance. A t-account for Work in Process shows a debit of $100 beginning balance, debits of $450, $100, and $700 for July 25, and a debit of $1,350 ending balance.\" width=\"365\" height=\"551\" \/><\/p>\n<p>Do the job cards match the Work in Process account?<\/p>\n<h2>NEW JOB ORDER<\/h2>\n<p>On July 26, Jackie received an order from Xia Zang for a skateboard so she put it into production as Job 3:<\/p>\n<div style=\"text-align: left;\">\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<thead>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Account\/Explanation<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<th scope=\"row\">Jul 26<\/th>\n<td class=\"highlight\">Work in Process<\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\n<td class=\"highlight\"><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"highlight\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Raw materials &#8211; direct<\/td>\n<td class=\"highlight\"><\/td>\n<td class=\"r highlight\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 100<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><em>Job #3 started<\/em><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<\/div>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th scope=\"col\">Job Sheet<\/th>\n<th class=\"r\" scope=\"col\">Job 1<\/th>\n<th class=\"r\" scope=\"col\">Job 2<\/th>\n<th class=\"r\" scope=\"col\">Job 3<\/th>\n<th class=\"r\" scope=\"col\">Total WIP<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Direct Materials<\/strong><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wood<\/td>\n<td class=\"r\">100<\/td>\n<td class=\"r\">100<\/td>\n<td class=\"r\">100<\/td>\n<td class=\"r\">300<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wheels\/trucks<\/td>\n<td class=\"r\">50<\/td>\n<td class=\"r\">100<\/td>\n<td><\/td>\n<td class=\"r\">150<\/td>\n<\/tr>\n<tr>\n<td>Direct Labor<\/td>\n<td class=\"r\">400<\/td>\n<td class=\"r\">600<\/td>\n<td><\/td>\n<td class=\"r\">1000<\/td>\n<\/tr>\n<tr>\n<td>Overhead allocation<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td class=\"r\">0<\/td>\n<\/tr>\n<tr>\n<td>Total Job Cost<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>550<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>800<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>100<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>1450<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n<p>&nbsp;<\/p>\n<p>After posting, the relevant part of the general ledger looks like this (just the direct Raw Materials and Work in Process accounts are shown):<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1159 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/29192900\/5.2.1f.png\" alt=\"A t-account for Raw Materials - Direct shows a debit of $3,000 beginning balance, credits of $100, $100, and $100 for July 26, and a debit of $2,700 ending balance. A t-account for Work in Process shows a debit of $100 beginning balance, debits of $450, $100, $700, and $100 for July 26, and a debit of $1,450 ending balance.\" width=\"696\" height=\"294\" \/><\/p>\n<p>What you may have noticed on the job cards so far is that we haven\u2019t allocated any indirect factory overhead yet. Before we do that, let\u2019s check your understanding of allocating direct costs to jobs.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Question<\/h3>\n<p><iframe loading=\"lazy\" id=\"ohm219038\" class=\"resizable\" src=\"https:\/\/ohm.lumenlearning.com\/multiembedq.php?id=219038&theme=oea&iframe_resize_id=ohm219038\" width=\"100%\" height=\"150\"><\/iframe><\/p>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-154\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Direct Costs. <strong>Authored by<\/strong>: Joseph Cooke. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">Lumen Learning authored content<\/div><ul class=\"citation-list\"><li>Job costing inventory flowchart. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":364389,"menu_order":7,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Direct Costs\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"lumen\",\"description\":\"Job costing inventory flowchart\",\"author\":\"\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-154","chapter","type-chapter","status-publish","hentry"],"part":29,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/154","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/users\/364389"}],"version-history":[{"count":20,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/154\/revisions"}],"predecessor-version":[{"id":2009,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/154\/revisions\/2009"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/parts\/29"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/154\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/media?parent=154"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=154"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/contributor?post=154"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/license?post=154"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}