Manufacturing and Service Firms In general, firms can be divided into manufacturing and service firms. Manufacturing firms make a tangible product. They need to determine product costs for both inventory valuation and the calculation of cost of goods sold. The cost of inventory appears on the , and the cost of goods sold appears on the . (Wholesale or retail firms purchase a product that is already manufactured. The cost of such products, which are tangible, are carried at that cost.) Service firms produce intangible products called services, which have the following characteristics: intangibility, inseparability, heterogeneity, and perishability. (Select the correct term for each definition.) Non-physical and cannot be touched or held Requires the producer and consumer to be in contact Incapable of being stored More liable to variability in production The method used to keep track of costs depends on the relative uniqueness of the product or service. Three methods of accounting for the cost of services or products are: job-order costing, process costing, and operation costing. Job-order costing is used for unique products where the cost of one unit (or batch) is different from the cost of other units or batches. All costs of a job must be kept separate from the costs of other jobs. Process costing is used for homogeneous products where the cost of one unit is the same as another. In process costing all costs for the time period are added together and then divided by the number of units produced to determine the unit cost. Operation costing is a hybrid method in which the materials cost may differ from batch to batch but conversion cost is the same. Choose the correct job-order costing firms: Source Documents and Cost Flows in Job-Order Costing In job-order costing, the individual costs of each job must be kept track of separately. The costs of each job are kept track of on a job-order cost sheet. The job-order cost sheets are subsidiary records to the account. Each job order cost sheet includes the unique name assigned to the job (e.g., Smith House for a construction firm, or 2014-001 for the first job of 2014 for a custom framing shop). Then the costs of direct materials, direct labor, and applied overhead for each job are entered onto that job's job-order cost sheet. Source documents in job-order costing include any document needed to keep track of the underlying data for jobs. For example, labor time tickets, which keep track of the hours worked on each job by each worker, are important source documents. If a service firm needed to know the miles driven on each job, then mileage logs would be a source document. Materials requisition slips are used to keep track of the direct materials used by each job. At the end of the time period (e.g., month), the information from the source documents is used to determine the cost of direct materials, direct labor, and applied overhead used for each job and to update the job-order cost sheets. Costs flow into the various asset and expense accounts. When materials are purchased, they are debited to the Materials account and credited to (typically) Accounts Payable. When materials are requisitioned for a job, the cost is entered onto that job's job order cost sheet (and will be part of the total in WIP). When direct labor is used on a job, the cost is entered onto that job's job order cost sheet (and will be part of the total in WIP). Finally, overhead is applied to each job at the end of the month and entered onto the job order cost sheet. The balance in WIP at any point in time is the total of all costs of the job-order cost sheets for . When a job is finished, its cost is moved from WIP to Finished Goods, unless it is sold, in which case its cost moves to Cost of Goods Sold. When a job is sold, its cost is debited to Cost of Goods Sold and credited to either Finished Goods or WIP. The price of the job is debited to Accounts Receivable or Cash and is credited to Sales Revenue. Jamison Company uses job-order costing and provided the following information on jobs worked on in the month of September: Total Cost Complete? Sold? Job 101 $4,500 Yes No Job 102 3,400 No No Job 103 1,200 No No Job 104 2,800 Yes No Job 105 3,900 Yes Yes Job 106 1,700 No No Job 107 6,000 Yes No Job 108 7,450 Yes Yes The beginning balance of Finished Goods was $4,000 for Job 100, which was not sold by the end of the month.

Required: 1. Calculate the ending balance of Work in Process.

2. Calculate the ending balance of Finished Goods.

3. Calculate the ending balance of Cost of Goods Sold.

4. Suppose that Job 107 had been sold. How would that affect the ending inventory balances and cost of goods sold? Work in Process would , Finished Goods would , and Cost of Goods Sold would