 In this presentation we will take a look at multiple choice questions related to a job cost system. First question, job cost sheets include a direct materials, direct labor, finished goods, b direct materials, estimated overhead, selling costs, c direct labor, actual overhead, administrative costs, d direct materials, direct labor, estimated overhead, e direct materials, direct labor, cost of goods sold. Okay so here we go we're going to use the process of elimination see if we can if we can cancel some of these out here so job cost sheets include. Now as we do this we can this is one of those questions that have a lot in common we can try to use the process of elimination here between the choices if we had no idea which one to to look at now as we see this in a job cost system we should think that we're talking about making inventory and the three things involved all support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a youtube page we also include added resources such as excel practice problems pdf files and more like quickbooks backup files when applicable so once again click the link below for a free month membership to our website and all the content on it are going to be direct materials direct labor and overhead so as we go through this we probably have an idea with that's what we should have an idea of that's what I would expect to see so the first one says direct materials direct labor and finished good goods and finished goods doesn't doesn't seem right right that's what you know once the job is complete it is finished goods that's not what's on the job sheet so we're kind of missing I'm saying okay we're missing overhead on that one so I don't think that's going to be it second one says direct materials estimated overhead and selling costs now this one looks good I'm not sure on this one with the estimate I know overhead possibly would be there you know selling costs however I'm pretty confident are not on the job cost sheet because those are period costs not part of the cost of production which is what the job cost sheet is tracking so I don't think it's B C says direct labor actual overhead and administrative costs so now we see these two kinds of overhead actual and estimated but again I can eliminate this one not based on that but based on the fact that it's administrative costs which are period costs not part of production not therefore on the job cost sheet so it's not C D says direct materials direct labor and estimated overhead so again if maybe I don't have an idea of what this estimated overhead is but that looks pretty good because those those are the three that I would expect to see so then the then the last one E says direct materials direct labor cost of goods sold and that one is we wouldn't think it's cost of goods sold because that's what's going to happen once we finally sell it so again that's that's not on the job cost sheet we use the job cost sheet to determine cost of goods sold once it is sold so it's actually E and and I was kind of thinking they would have one one that would be direct materials direct labor and actual overhead and if they were to do that just recognize that we it would be the estimated overhead here that we were looking for because when we applied to the job cost sheet we didn't know what actual overhead was we used an estimate to do so so if there was a question between D and another one that was all the same except this was actual overhead just note that the job cost sheets will be using an estimate not the actual overhead that's the point of overhead we don't know what the actual cost should be applied to the job that's why we have to use an estimate that's why we have to use overhead in general okay so final answer job cost sheets include D direct material direct labor and estimated overhead next question a source document to request materials for production A job cost sheet B purchase order C materials requisition D materials summons E new job notification let's go through this again using the process of elimination a source document to request materials for production is either A a job cost sheet now we might think well that's what we're working on so maybe it is a job cost sheet I'll keep that for now because you know that's the main things we're working with here the job costing system B a purchase order and again we might think well the materials is the first step and we might need a purchase order for that I'll keep that for now C says a materials requisition and again materials requisition it's if we're requesting materials that sounds kind of reasonable I'll keep that for now D says a materials summons and I'm not sure that sounds funny to me as summons summons is like if there's summon someone that sounds kind of serious type of terminology for requesting materials I don't think that doesn't sound right to me I think that's a made-up thing so and then E says new job notification new job notification and that might be the reason for us requesting materials but I don't think we request materials with a new job notification we got notified we got a new job and therefore our request so I don't think it's E so if we go through this again then we're going to say a source document to request materials for production is either A job cost sheet B purchase order or C materials requisition now of those three I don't think it's A because A is going to include all of everything on it it's going to include materials labor and overhead that's where we track it so it's not going to be the requesting document or form purchase order or materials requisition now of the two the purchase order is the one that we use to request from the vendor so so when we when we are buying the materials from the vendor we may use a purchase order to request the materials that they will then ship but when we're getting the materials to the from the warehouse to the production to the factory then that's the one we're going to use a materials requisition form so we're going to request with the requisition form materials so C is going to be the answer final answer a source document to request materials for production is C materials requisition next question journal entry to record payroll costs for labor in the factory A payroll expense is debited and work in process inventory is credited B work in process inventory and factory overhead are debited and payroll payable is credited C cost of goods sold is debited and payroll payable is credited D direct labor and indirect labor are debited and payroll payable is credited or E work in process inventory is debited and overhead is credited okay let's go through this again see if we can use the process of elimination journal entry to record payroll costs for labor in the factory is either A so we got a payroll journal tree for people that work in the factory so A is payroll expense is debited and work in process is credited now we might think that sounds reasonable if we're paying payroll that's normally the payroll journal tree we're not talking about withholding they didn't put anything in here with social security and Medicare and payroll taxes but if we eliminate all those that's usually what we think of as payroll debit expense wages payroll expense credit work in process so or we would credit cash you would think so the second part work in process seems kind of unusual the debit to payroll seems like the norm so let's go to the next one so we're going to say we'll keep that one for now these says work in process inventory and factory overhead are debited and payroll payable is credited now you know this might seem reasonable in some ways because we're going to put it in work in process is is where we want to apply the wages somehow because we want to put it into work and process an inventory account and then we're going to credit wages payable which may be instead of crediting cash because we haven't paid it yet possibly so i'm going to keep b for now and then c says cost of good sold is debited and payroll payable is credited that doesn't seem reasonable really because cost of good sold is where we would expense the inventory at the end we haven't sold it yet so clearly if it's going to be an expense you would think it'd be payroll not cost of good sold at this point so i don't think see d says direct labor and indirect labor are debited and payroll payable is credited now that actually sounds kind of reasonable here because again it says that's what we have here you would you would think i mean if we're paying payroll it would be direct labor and indirect labor so i'll keep that for now and then he says work in process inventory is debited and overhead is credited and in this case work in process it might you might think well something should go to work in process and something should go to overhead but you would think they would both be going the same direction because they you know we're increasing them both and they're both inventory accounts so it doesn't really make sense that one would be debited and credited so i don't think it's e so let's go through this again we've got a d a b and d so journal entry to record payroll costs for labor in the factory so first one says payroll expense is debited and work in process inventory is credited now this one the payroll makes it sound kind of kind of like it's possible and the fact that we have work in process uh is part of inventory sounds kind of plausible but if this was the journal entry when are they going to get paid how are we going to pay them there's no cash being credited and there's no payable so it would never be a payable plus the work in process is um is going down or is a credit and it's an asset account so we should be debiting the work in process and payroll expense is actually wrong because we're not going to be expensing it even though we're processing payroll we're going to be putting it into an asset we're not consuming it to help us generate revenue so if that's why it's not a and then we're left with b and d b says work in process inventory and factory overhead are debited and payroll payable is credited which is similar to d which is saying that direct labor and indirect labor are debited and payroll payable is credited now of those two b is actually the correct one because d is is really telling us why we do b meaning in other words d is saying direct labor and indirect labor are the types of wages we could be paying meaning we're either paying people who are working directly on a job or people who are working indirectly and if they're working directly on a job we determine that so that we can debit work in process if they're not working directly on a job we determine that so that we will have to then debit factory overhead so so these are the determining factors these aren't actual accounts these are just telling us which account we should be uh hitting based on the fact that we can apply these to a job and these we can't so the correct answer is actually b final answer journal entry to record payroll costs for labor in the factory b work in process inventory and factory overhead are debited and payroll payable is credited