Stephen F. Austin State University Stephen F. Austin State University
SFA ScholarWorks SFA ScholarWorks
Faculty Publications Gerald W. Schlief School of Accountancy
2017
Lumberjack Construction: Job-Order Costing & Manufacturing Lumberjack Construction: Job-Order Costing & Manufacturing
Simulation Simulation
Marie Kelly
Stephen F Austin State University
Nikki Shoemaker
Stephen F Austin State University
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Kelly, Marie and Shoemaker, Nikki, "Lumberjack Construction: Job-Order Costing & Manufacturing
Simulation" (2017).
Faculty Publications
. 36.
https://scholarworks.sfasu.edu/accounting_facultypubs/36
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16 Journal of Accounting and Finance Vol. 17(5) 2017
Lumberjack Construction: Job-Order Costing & Manufacturing Simulation
Marie Kelly
Stephen F. Austin State University
Nikki Shoemaker
Stephen F. Austin State University
This paper describes a classroom Job-Order Costing and manufacturing simulation called Lumberjack
Construction. This simulation is used in introductory managerial accounting and cost accounting courses
to help students understand the various parts of the manufacturing process and the application of Job-
Order Costing principles. For this simulation, students are placed into manufacturing groups. Each
group is responsible for manufacturing a building and calculating the cost of that building using job-
order costing.
INTRODUCTION
Concepts in introductory managerial accounting and cost accounting courses can be challenging for
students and faculty because many of these concepts are rooted in manufacturing. However, few students
have been exposed to a manufacturing environment. In these courses, students are also introduced to
multiple ways of allocating costs to jobs and products. The combination of an unfamiliar work setting and
the introduction of multiple abstract allocation concepts make it difficult for faculty to help students grasp
these principles. Nevertheless, it is important for students to understand how costs are distributed among
different products, as this information is vital not only to accounting majors, but across numerous
business disciplines such as marketing, management, economics, and finance. This paper describes a Job-
Order Costing and manufacturing simulation that promotes understanding of the cost allocation process,
the manufacturing environment and the tracking of costs within this environment.
The remainder of this paper is organized as follows. First, the Job-Order Costing/Manufacturing
simulation is described. Second, learning objectives along with guidance on simulation implementation is
discussed. Third, evidence supporting the efficacy of the simulation is considered.
JOB-ORDER COSTING AND MANUFACTURING SIMULATION
Students often have difficulty understanding managerial accounting concepts that are based in a
manufacturing environment. Most introductory managerial accounting textbooks initially teach cost
terminology and then introduce job order costing to assign direct materials, direct labor, and to apply
manufacturing overhead costs to products. Students are often confused with these concepts as they have
never been exposed to a manufacturing environment. Consequently, terminology such as direct labor.
Journal of Accounting and Finance Vol. 17(5) 2017 17
direct materials, and materials requisitions is difficult to understand because they are not able to apply this
terminology to a real-life scenario. In order to improve comprehension of these concepts, this simulation
lets students complete a small scale building project within the classroom and calculate costs of their
building.
At the beginning of this project, students are divided into groups to model a manufacturing facility.
Once groups are assigned, each group is required to choose one student in their group to be the designated
student supervisor. The supervisors assemble at the front of the room to get their production assignments
from factory management. Each supervisor receives a packet that contains the following: Supervisor
Handout, Materials Requisition Form, Time Report Sheet, Overhead Application Sheet, Job Cost Sheet,
and blueprints for their construction project. Sample forms are provided in Appendices A - E.
Each group supervisor chooses a Materials Handler within their group, and assigns assembly jobs
based on the information in their Supervisor Handout. The Materials Handler fills out the Materials
Requisition Form for the number of items needed to manufacture their building and calculates the total
cost of these materials. The supervisor reviews this form and if the materials requisition form is filled out
correctly, the Materials Handler comes up to the front of the room to receive materials for construction
from the Materials Inventory warehouse manager, a.k.a. the instructor. Each group then works through
the blueprints to understand how the building will be manufactured. As Direct Labor employees begin
construction, group supervisors start monitoring their time, with one minute equivalent to 100 hours of
Direct Labor construction time. Once they have completed the manufacturing process, students in the
group work together to determine the cost of the building their group has manufactured. Student
supervisors are responsible for ensuring that each student participates and Job Cost calculations, including
Direct Materials, Direct Labor, and Applied Manufacturing Overhead, are agreed upon by all group
members before a project is deemed complete. Once the Materials Handlers job is complete and
construction has started, their position converts to Quality Control Inspector, where they must examine
and approve all finished products.
LEARNING OBJECTIVES AND SIMULATION IMPLEMENTATION
Learning Objectives
The Job-Order Costing/Manufacturing Costing simulation provides three specific learning objectives.
The first objective illustrates a simulated manufacturing environment using a building project. Requiring
students to work in groups to construct a building and complete source documents related to this project
reinforces concepts such as direct labor, direct materials and indirect costs.
The second learning objective is to enhance student comprehension of the application of job-order
costing. During the construction process, students are required to be aware of the costs of their job. They
must complete a materials requisition sheet for their building materials, keep a time sheet to record direct
labor hours, and complete a job cost sheet to calculate the final cost of their building. These steps
reinforce to students how source documents are used to determine the final cost of a job or product.
Finally, students gain awareness of the impact of various components of the manufacturing process
on total job cost. Through group and class discussion toward the end of the simulation, students realize
that assigning direct labor hours as a cost driver not only influences the direct labor cost associated with
the job, but also the overhead applied to the project. This allows the students to understand why efficient
use of labor time is important for cost control.
Implementation Guidance
Background
The current version of the project has been developed as a result of many other trials. This project
originally began as a key chain building project where students manufactured key chains during class.
This experience led us to realize that there was value in having different groups complete different types
of products. So, we developed a simulation where students manufactured small crafts (i.e., wooden
airplanes, pinwheels, sail boats, etc.). This version of the project was not ideal either because it cost a
18 Journal of Accounting and Finance Vol. 17(5) 2017
significant amount of money to purchase these items for use each semester. Consequently, we developed
the current version of the simulation discussed in this article. This version allows students to construct
multiple different types of products, but allows the instructor to reuse materials from semester to
semester.
Courses
This simulation was designed for an introductory managerial accounting course, which is normally
the second accounting class that a college business student will take, after introductory financial
accounting. It has been implemented in medium to large classes of up to 70 students. It is most effective
in medium-sized classes of around 50 students. Students attending these courses include accounting,
economics, finance, management, marketing, and general business majors. In addition, the project has
been used as a review tool for cost accounting classes.
This project simulation is normally presented in class following the Job-Order costing lecture. It is
important for the project to be placed at this point in the curriculum because students need a basic
background in job-order costing to understand the various components of the simulation. Project points
are included within the overall points awarded during the semester for the class, in order to persuade
students to attend and participate.
Materials
The simulation requires materials for two sets of each of the five different types of buildings. Two
100 piece sets of magnetic building tiles were purchased to provide the necessary materials. A sample of
the buildings and materials required are included in the appendices. Students should be instructed to
replace all materials back in their bag as soon as the project is over to ensure that building tiles are not
lost and can be used for future classes. Materials cost is approximately $200.00
In-class implementation
The project takes approximately one hour of class time to complete. In order to create variation
among students within the classroom and control project simulation outcomes, five different building
projects were created. Two student groups are assigned to each building, for a total of ten groups. This
allows for cost comparisons between the two groups who built the same building. A sample of the
Townhome project blueprints are included in Appendix F. Sample source documents are included in
Appendices A - E.
Evidence of Efficacy
This simulation was initially used in four different introductory managerial accounting classes taught
by two different accounting instructors over a period of two semesters. To determine effectiveness of the
project, the same exam administered in previous semesters testing Job Order Costing concepts without
this simulation project was administered during later semesters after the simulation project was
implemented.
The pre-simulation and post-simulation exams were identical, the classes used the same textbook, the
instructors were unchanged, and the exams were given at the same point during the semester calendar. In
all classes, the average increase in exam scores was approximately 8 to 10 points, between the pre and
post-simulation semesters. These results suggest significant improvement in student understanding of Job
Order Costing methods and applications as a result of this project simulation. In addition, student
approval measured by teaching evaluations indicated an increased appreciation for this experiential
learning activity.
Journal of Accounting and Finance Vol. 17(5) 2017 19
APPENDIX A
SUPERVISOR HANDOUT
It is your job to make sure that the manufacture of your product goes smoothly and that all costs are
recorded and accounted for. This means that you must:
1) Appropriately assign jobs to individuals in your group
1 supervisor
1 materials handler
1 quality control inspector
Remaining group members are construction workers
2) Make sure that you receive the materials requisition for your job.
a. This will be obtained from the materials handling personnel after they have received all
materials from the warehouse and distributed the materials to the employees using those
materials.
b. Materials will not be released without an accurate materials cost on your materials
requisition.
3) Make sure that you keep track of the amount of direct labor time spent working on your jobs
(Time starts when the first construction worker begins working and ends when the last
construction worker finishes working.)
a. This will be used to calculate the cost of direct labor (see the time report sheet)
b. NOTE: 1 minute = 100 direct labor hours
4) Make sure that operations are running smoothly and that all employees are actively
participating in the manufacturing process.
a. If there is an issue with operations, you should determine a solution to make operations
run more smoothly.
5) Help your group calculate the total cost of your job using the materials requisition, time
report, and overhead application sheets. Complete this cost calculation on the job cost sheet.
20 Journal of Accounting and Finance Vol. 17(5) 2017
APPENDIX B
MATERIALS REQUISITION FORM
FIGURE 1
Materials Requisition
Townhome
Materials Requisition Number: _________ Date _____________
Job Number: ________
Description: __________________________________________________________
Material Description Quantity Unit Cost Total Cost of
Material
Equilateral Triangle-Green 6 $9,000.00
Equilateral Triangle-Red 2 $9,000.00
Equilateral Triangle-Orange 6 $9,000.00
Equilateral Triangle-Yellow 2 $9,000.00
Large Triangle-Yellow 2 $52,000.00
Small Square-Green 2 $12,000.00
Small Square-Yellow 6 $12,000.00
Small Square-Orange 3 $12,000.00
Small Square-Red 4 $12,000.00
Holey Square-Orange 2 $16,200.00
Rectangle-Purple 2 $4,500.00
Rectangle-Yellow 3 $4,500.00
Large Square-Red 2 $75,000.00
Total Cost of All Materials Used: _________________
Authorized Signature: _________________________________
Journal of Accounting and Finance Vol. 17(5) 2017 21
APPENDIX C
TIME REPORT
FIGURE 2
Time Report
Date: _____________
Job Number: ________
Description: __________________________________________________________
Time
Started Time Ended Total Time
Hourly
Rate
Number of DL
Employees
Total
Amount
$10.00
NOTE: 1 minute = 100 hours of direct labor
Authorized Signature: _________________________________
APPENDIX D
OVERHEAD APPLICATION SHEET
FIGURE 3
Overhead Application
Total Estimated Yearly Overhead
Glue $20,000.00
Nails $40,000.00
Paint $60,000.00
Hammers $10,000.00
Trucks (Depr., Repairs, Main., Gas) $170,000.00
Materials Handlers Salaries $240,000.00
Trash Cleanup Personnel Salaries $100,000.00
Inspection Costs $360,000.00
Supervisors Salaries $500,000.00
Total OH $1,500,000.00
Cost Driver: Direct Labor Hours
Total Estimated Yearly Direct Labor Hours = 50,000 DLH
Step 1: Calculate the OH Rate
Step 2: Apply OH to your products
22 Journal of Accounting and Finance Vol. 17(5) 2017
APPENDIX E
JOB COST SHEET
FIGURE 4
Job Cost Sheet
Job Number: ________
Time Started _____________
Time Completed _____________
Description: __________________________________________________________
Direct Materials Direct Labor Applied Manufacturing Overhead
Requisition
No. Amount Ticket No. Amount OH Rate
Actual Cost
Driver Amount
Cost Summary:
Direct Materials Cost ____________
Direct Labor Cost ____________
Applied Manufacturing Overhead Cost ____________
Total Cost of Job ____________
Authorized Signature: _________________________________
Journal of Accounting and Finance Vol. 17(5) 2017 23
APPENDIX F
SAMPLE BLUEPRINTS FOR TOWNHOME
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