Basics of Job-Order Costing Next Page Click Here Basics of Job-Order Costing Job-Order Costing Process Costing (next chapter) Many different products are produced each period. Products are manufactured to order. Costs are traced or allocated to jobs. Cost records must be maintained for each distinct product or job.

Applications of Job-Order Costing Next Page Click Here Applications of Job-Order Costing Job-Order Costing Process Costing (next chapter) Typical job order cost applications: Special-order printing Building construction Also used in the service industry Hospitals Law firms

Sequence of Events in a Job-Order Costing System Next Page Click Here Sequence of Events in a Job-Order Costing System Direct Materials Charge direct material and direct labor costs to each job as work is performed. Job No. 1 Direct Labor Job No. 2 Job No. 3

Sequence of Events in a Job-Order Costing System Next Page Click Here Sequence of Events in a Job-Order Costing System Direct Materials Apply overhead to each job using the predetermined rate (covered separately). Job No. 1 Direct Labor Job No. 2 Job No. 3 Factory Overhead

Materials Requisition Form Next Page Click Here Materials Requisition Form Production managers use materials requisition forms to request materials for manufacturing. This source document is used to assign materials costs to specific jobs (or to overhead). Will E. Delite Total cost is transferred to job cost sheet for job A-143 Type, quantity, and total cost of material charged to job A-143.

Information is transferred to job cost sheet for job A-143 Next Page Click Here Employee Time Ticket A worker uses a time ticket to record the time spent on each job (or overhead activity). This source document determines the amount of direct labor that is charged to a job (or the amount of indirect labor that is charged to overhead). Information is transferred to job cost sheet for job A-143

Job Cost Sheet – Recording Materials and Labor Next Page Click Here Job Cost Sheet – Recording Materials and Labor The primary document for tracking the costs associated with a given job is the job order cost sheet. From the time ticket From the materials requisition form

Job Cost Sheet – Recording Overhead Next Page Click Here Job Cost Sheet – Recording Overhead Assume that the company applies (or allocates) overhead to jobs using a predetermined overhead rate of $4 per direct labor hour.

Job-Order Costing – Flow of Materials Costs Next Page Click Here Job-Order Costing – Flow of Materials Costs Materials used may be either direct or indirect. Record on each Job Order Cost Sheet and add to Work in Process Account Direct materials Materials Requisition Indirect materials Record in Manufacturing Overhead Account

Job-Order Costing Flow of Labor Costs Next Page Click Here Job-Order Costing Flow of Labor Costs An employee’s time may be either direct or indirect. Record on each Job Order Cost Sheet and add to Work in Process Account Direct Labor Employee Time Ticket Indirect Labor Record in Manufacturing Overhead Account

Job-Order Costing Document Flow Summary Next Page Click Here Job-Order Costing Document Flow Summary Employee Time Ticket Indirect Labor Record on each Job Order Cost Sheet and add to Work in Process Account Applied (or allocated) Overhead Record in Manufacturing Overhead Account Other Actual Overhead Charges Materials Requisition Indirect Material

Entry to Record Cost Flows – Material Purchases Next Page Click Here Entry to Record Cost Flows – Material Purchases Raw materials purchased are recorded in an inventory account.

Entry to Record Cost Flows – Use of Materials Next Page Click Here Entry to Record Cost Flows – Use of Materials Direct materials issued to a job increase the Work in Process account and decrease the Raw Materials account. Indirect materials that are used in the factory increase the Manufacturing Overhead account and decrease the Raw Materials account.

Entry to Record Cost Flows – Labor Next Page Click Here Entry to Record Cost Flows – Labor The cost of direct labor incurred increases the Work in Process account and increases the Salaries and Wages Payable account. The cost of indirect labor incurred increases the Manufacturing Overhead account and increases the Salaries and Wages Payable account.

Entry to Record Cost Flows – Application of Overhead Next Page Click Here Entry to Record Cost Flows – Application of Overhead The Work in Process account is increased and the Manufacturing Overhead account is decreased when overhead is applied (or allocated) to jobs.

Entry to Record Cost Flows – Transfer to Finished Goods Next Page Click Here Entry to Record Cost Flows – Transfer to Finished Goods As a job is completed, the cost of goods that were completed for that job is transferred from the Work in Process account to the Finished Goods account.

Entry to Record Cost Flows – Sale of Job to Customer Next Page Click Here Entry to Record Cost Flows – Sale of Job to Customer When a job is sold to a customer on account: (1) the sale is recorded; and (2) the cost of the job is transferred from the Finished Goods account to the Cost of Goods Sold account.