Question

Please briefly explain the job order costing income statement and provide a hypothetical example of job order costing income statement in a manufacturing enterprise. Provide in-text citations and explain your example in detail. The period manufacturing costs of a company is comprised of $2,000,000 in direct materials, $1,000,000 in direct labor, and $500,000 in overhead, resulting in 7,000 units of product. Manufacturing operations is consisted of two processes, machining and assembly. Machining takes up 40% of direct materials, 60% of direct labor, and 50% of overhead. Provide a hybrid manufacturing cost statement, containing combined activity based costing and process costing.

Answer 1

Cost statement

Direct materials 2000000

Direct labour 1000000

Over heads 500000

Machining cost 1650000

Total cost 5150000

Answer 2

The job order costing income statement is a financial statement that shows the revenues, costs, and profits associated with specific jobs or custom orders in a manufacturing enterprise. It allows companies to allocate costs to individual jobs or orders based on their unique characteristics and production requirements.

In the job order costing income statement, the costs are categorized into three main sections:

1. Cost of Goods Sold (COGS): This includes all costs directly related to the production of the specific jobs or orders, such as direct materials, direct labor, and overhead costs allocated to those jobs.

2. Gross Profit: Gross profit is calculated by subtracting COGS from the total revenues generated by the sale of the completed jobs or orders.

3. Operating Expenses: Operating expenses include all other costs incurred by the company in its normal operations, such as selling, general, and administrative expenses.

The hypothetical example of a job order costing income statement in a manufacturing enterprise is as follows:

ABC Manufacturing Company

Job Order Costing Income Statement

For the Period Ended [Date]

Revenues: $X (Total revenue from the completed jobs/orders)

Cost of Goods Sold: Direct Materials: $2,000,000 Direct Labor: $1,000,000 Overhead: $500,000 Total COGS: $3,500,000

Gross Profit: $X - $3,500,000

Operating Expenses: Selling Expenses: $X General and Administrative Expenses: $X Total Operating Expenses: $X

Net Income: Gross Profit - Total Operating Expenses

Now, let's break down the hybrid manufacturing cost statement containing combined activity-based costing and process costing based on the provided information:

1. Machining Process Costs:

   Direct Materials: 40% of $2,000,000 = $800,000 Direct Labor: 60% of $1,000,000 = $600,000 Overhead: 50% of $500,000 = $250,000 Total Machining Process Costs: $1,650,000

2. Assembly Process Costs:

   Direct Materials: 60% of $2,000,000 = $1,200,000 Direct Labor: 40% of $1,000,000 = $400,000 Overhead: 50% of $500,000 = $250,000 Total Assembly Process Costs: $1,850,000

3. Total Manufacturing Costs:

   Total Machining Process Costs + Total Assembly Process Costs = $1,650,000 + $1,850,000 = $3,500,000

The combined activity-based costing and process costing approach considers the allocation of costs based on the specific activities involved in each process (machining and assembly). This helps in providing more accurate cost allocation to each process and ultimately to the specific job orders, allowing for better decision-making in the manufacturing enterprise.