1. Job Costing System Mei Lee Sherry Tou Wen Jin Sidney Jaime Reggie Lin Page 5

2. The Process of Job Costing System (1) Total cost of labor and material are calculated and inputted into the Production Labor Transaction File and Materials Issuance Transaction File, respectively. (2) The two transaction files are then merged to form the Production Cost file, which contains the actual direct labor and direct material information. A copy of the Production Labor file is also sent to the Payroll department for wages calculation purpose. With the Production Cost file, sufficient information is available to create other useful reports.

3. The Process (Con’t) (3) First, materials and labor efficiency reports are printed (usage reports, and scrap and lost time report). (4) The Production Cost file is also used for cost allocation. (5) Manufacturing overhead is calculated and applied, and then compared to the budgeted Standard cost file for Overhead residual analysis.

4. The Process (Con’t) (6) Then the Production Cost file is compared to the budgeted Standard Cost file to produce the Standard cost variance report. (7) After the cost distribution process, the Production cost file becomes the Open Job Files, with overhead and direct materials and direct labor costs divided. With this new file, queries can be made to obtain job completion status which is printable.

5. Threats in the Job Costing System 1. Inefficient use of materials; theft of inventory 2. Loss of data due to no backup; data security 3. Inaccurate recording of time card

6. Controls to Mitigate Threats 1. Inefficient use of materials; theft of inventory. - Use budgeted and actual production cost of direct material to compare the efficiency (variance analysis). - Separation of Duties: Have different departments to tally the inventory and another to compare the number to the requisition. - Have the manager to sign the materials requisition to approve the consumption of materials. - Periodically count the inventory and compare to records - Use of access card or key to the inventory. Only authorized personnel may access to it.

7. Controls to Mitigate Threats 2. Loss of data due to no back up; data security. - Build master database, onsite and offsite. - Keep a hard copy backups on tapes or disks. - Print copies and send to other relating departments. - Implement the usage of smartcard with user ID and password, and firewall for security.

8. Controls to Mitigate Threats 3. Inaccurate recording of time card - Have supervisors verify time card and sign the ticket. - Use smart cards to record time in and out. Information should directly send to database and manager should verify time cards. - Send original copy of time card directly to payroll to avoid tampering.