Q. 13SE-a - Horngren'S Financial And Managerial Accounting

Question

Question: Using job order costing in a service company

Roth Accounting pays Jack Smith $90,000 per year.

Requirements

1. What is the hourly cost to Roth Accounting of employing Smith? Assume a

30-hour week and a 50-week year.

Step-by-Step Solution

Answer

The Hourly cost of the Roth Accounting of employing smith is $60.

Step 1: Job order costing

Job order costing system is used by an organization when customer order special or unique product of small quantity to manufacture.

Step 2: Hourly cost

$$\begin{gathered} \mathbf{Hourly}\mathbf{ }\mathbf{cost}\mathbf{=}\frac{\mathbf{Total}\mathbf{ }\mathbf{cost}\mathbf{ }\mathbf{per}\mathbf{ }\mathbf{year}}{\mathbf{Working}\mathbf{ }\mathbf{hour}\mathbf{ }\mathbf{per}\mathbf{ }\mathbf{year}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{90}\mathbf{,}\mathbf{000}}{\mathbf{30}\mathbf{hour}\mathbf{\times }\mathbf{50}\mathbf{week}} \\ \mathbf{=}\mathbf{\$}\mathbf{60} \end{gathered}$$