Chapter 5Chapter 5

Job Order Costing Job Order Costing

ProcessCosting

Job OrderCosting

Used for production of large, unique, high-cost items.

Built to order rather than mass produced.

Many costs can be directly traced to each job.

Basic Cost Accounting Procedures

Typical job order cost applications:

Special-order printing Building construction

Also used in service industry Hospitals Law firms

Basic Cost Accounting Procedures

ProcessCosting

Job OrderCosting

Used for production of small, identical, low-cost items.

Mass produced in automated continuous production process.

Costs cannot be directly traced to each unit of product.

Basic Cost Accounting Procedures

ProcessCosting

Job OrderCosting

Typical process cost applications:

Petrochemical refinery

Paint manufacturer

Paper mill

Basic Cost Accounting Procedures

ProcessCosting

Job OrderCosting

THE JOB

Directmaterials

Direct labor

Traced directly to each job

Traced directly

to each job

Manufacturingoverhead (OH)

Applied to eachjob using a

predeterminedrate (POHR)

Job Order Costing

The primary document for tracking the costs

associated with a given job is the job

cost sheet.

Let’s investigate

Job Order Costing

The Job Cost SheetRoseCo Job Cost Sheet

Job Number A - 143 Date Initiated 3-4-X9Date Completed

Department B3 Units CompletedItem Wooden cargo crate

Direct Materials Direct Labor Manufacturing OverheadReq. No. Amount Ticket Hours Amount Hours Rate Amount

Cost Summary Units ShippedDirect Materials Date Number BalanceDirect LaborManufacturing OverheadTotal CostUnit Cost

The Job Cost SheetRoseCo Job Cost Sheet

Job Number A - 143 Date Initiated 3-4-X9Date Completed

Department B3 Units CompletedItem Wooden cargo crate

Direct Materials Direct Labor Manufacturing OverheadReq. No. Amount Ticket Hours Amount Hours Rate AmountX7-6890 116$

Cost Summary Units ShippedDirect Materials 116$ Date Number BalanceDirect LaborManufacturing OverheadTotal CostUnit Cost

The Job Cost SheetRoseCo Job Cost Sheet

Job Number A - 143 Date Initiated 3-4-X9Date Completed

Department B3 Units CompletedItem Wooden cargo crate

Direct Materials Direct Labor Manufacturing OverheadReq. No. Amount Ticket Hours Amount Hours Rate AmountX7-6890 116$ 36 8 88$

Cost Summary Units ShippedDirect Materials 116$ Date Number BalanceDirect Labor 88$ Manufacturing OverheadTotal CostUnit Cost

Accumulate direct labor costs by

means of a work record, such as a

time ticket, for each employee.

The Job Cost SheetRoseCo Job Cost Sheet

Job Number A - 143 Date Initiated 3-4-X9Date Completed 3-5-X9

Department B3 Units Completed 2Item Wooden cargo crate

Direct Materials Direct Labor Manufacturing OverheadReq. No. Amount Ticket Hours Amount Hours Rate AmountX7-6890 116$ 36 8 88$ 8 4$ 32$

Cost Summary Units ShippedDirect Materials 116$ Date Number BalanceDirect Labor 88$ Manufacturing Overhead 32$ Total Cost 236$ Unit Cost 118$

Apply manufacturing overhead to jobs using a predetermined overhead rate (POHR) based on direct labor

hours (DLH).

questions

Exercise No.01Classify these industries into Job order

costing and process costing industries:

a. Meat b. sugar

c. Pianos d. steel

e. Breakfast cereals f. paper boxes

g. Wood furniture h. toys

i. Coke j. cooking utensils

k. Leather l. paint

m. Tyres and tubes. n. locomotives

Exercise No.02Forge Machine works collects it cost data by the job order costing

system. For job 642, the following data are available:Direct Material used:14/9 issued $1,20020/9 issued $ 66822/9 issued $ 480Direct Labour:20/9 180 hours @$6.2/hr26/9 140 hours@$7.3/hrFactory overhead is applied at the rate of $3.5 perdirect labour hour.

Required:1.The appropriate information entered on job

cost sheet.2.The estimated sales price if markup is 40% of

cost.

Exercise No.03TedySung company produces special machines made to customers specifications.

The following data pertain to job 1106:Customer: Markem machine shop Dated: October 27Dated started: 4/11/19--- Customers order No. C696Dated finished: 18/11/19— Description: 18 drilling

machinesSales price: $20,425

11/11 18/11Materials used $2400 $1300Direct labour rate in dept 1 $8.2 per $8.2 per

hour hourLabour hour s used in Dept 1 300 200Direct labour rate in dept 2 $8.00 per $8.00 per

hour hourLabour hour s used in Dept 2 150 70Machine Hours in Dept 2. 200 120Applied FOH in Dept 1 $4.00 per $4.00 per

direct lab hour direct lab hourApplied FOH in Dept 2 $1.80 per $1.80 per

machine hour machine hourMarketing and admin expenses are charged to each order at a rate of 25% of the cost to

manufacture.

Required: Prepare a Job Cost Sheet for order number 1106.

Exercise No.04 Cambridge Company uses job order

costing. At the beginning of May, two jobs were in process:

Job No.369 Job No.372Materials $2,000 $700Direct labour $1,000 $300Applied factory overhead $1,500 $450During the month the following expenditures incurred on these jobs to complete

them.Materials $10,000 $5,000Direct labour $15,000 $3,500Facto jry overhead $12,000 $2,300Markup 20% 30%

Required: calculate the:1.Total production cost of each job.2.Sales price of each job.