Job costing
1
Job Costing
Job costing is a product costing method
adopted by an enterprise that provides
limited quantities of unique products
 This kind of enterprise produces tailormade goods or services that conform to
the specifications designed by customer
 Costs can be determined separately for
each job order

2
Costing under three different
method
Actual costing
 Normal costing
 Standard costing

3
Costing system
Production cost
Actual costing
Actual direct materials +
Actual labour + Actual
overhead
Actual direct material +
Actual direct labour +
Applied overhead (I.e.
Per-determined overhead
rate * actual level of
productivity)
Standard direct material
+ standard direct labour +
4
applied overhead
Normal costing
Standard costing
Which one better?

Normal product costing and standard
costing are preferable
5
Reasons

Under actual costing, the product cost will be
delayed until the end of the accounting
period. However, the product cost should be
obtained beforehand for setting selling price
 Since monthly productivity may vary due to
holiday periods and seasonal variation, actual
overhead is fluctuating and cannot reflect
normal production conditions
6
Flow chart
indirect
direct
Delivery of materials to job
indirect
direct
Payment of wages to workers
Work
In
Charging of applied overhead
Costs to work in progress
Progress
sold
Cost of sales
7
Accounting entries
Dr. Store ledger control
Cr. Cost ledger control
To record the purchase of materials
Dr. WIP (direct)
Dr. manufacturing overhead (indirect)
Cr. Store ledger control
To record direct and indirect material issued
Dr. wages control
Cr. Cost ledger control
To record wages paid
Dr. WIP (direct)
Dr. Manufacturing overhead (indirect)
Cr. Wages control
To record direct and indirect wages incurred
8
Accounting entries
Dr. Manufacturing overhead
Cr. Cost ledger control
To record indirect expenses
Dr. WIP
Cr. manufacturing overhead
To apply overhead using predetermined overhead absorption rate
Dr. Cost of sales
Cr. WIP control
To record cost of sales of goods produced
Dr. Cost of sales
Cr. Other overhead
To record other applied overhead charged to cost of sales
9
Accounting entries
Dr. Costing Profit and loss
Cr. Cost of sales
Cr. Under-absorbed overheads /Dr. Over-absorbed overheads
To transfer the balance of cost of sales and under- / overabsorbed overheads to profit and loss account
Dr. Cost ledger control
Cr. Costing Profit and loss
To transfer the sale value of jobs completed
10
Example
Refer to textbook P.198
11
Job Account
Job 682
Bal b/f
2310
Materials
9780
Wages
3000
Factory overhead (3000*50%) 1500
Job 683 a/c – material transfer
Material return
Cost of sales
16590
Job 683
Materials
7480
Job 683 a/c – material transfer
Wages
4000
Material return
Factory overhead (4000*50%) 2000
Cost of sales
Job 682 a/c – material transfer 900
Job 684 a/c – Material transfer 500
14880
900
1600
14090
16590
900
1600
14090
14880
12
Job 684
Materials
7900
Wages
2500
Factory overhead (2500*50%) 1250
Job 683 a/c – material transfer
Cost of sales
11650
Job 685
Materials
8840
Material return
Wages
2500
Factory overhead (2500*50%) 1250
Cost of sales
12590
500
11150
11650
340
12250
12590
13
Job Cost Sheet
1260+9780-900-1600
Job 682
Materials
8540 3000+700
Wages
3700
Factory overhead 1850 1500+350
Factory cost
14090
Adm. Overhead
(20%)
2818
Cost of sales
16908
Sales value
21000
Profit/ (Loss)
4092
Job 683
8880
4000
2000
14880
Job 684
7400
2500
1250
11150
2976
17586
24000
6144
2230
13380
16000
2620
Job 685
8500
2500
1250
12250
14
Control Accounts
Store ledger control account
Bal b/f
8400
1940
WIP control (issue direct material 34000
Factory O/H control (issue indirect
Material
3000
Bal c/f
4340
Cost ledger control (purchase)
WIP control (material return
to store)
31000
41340
41340
Wages control account
Cost ledger control ((wages
paid)
(12000+1000)
13000
54310
WIP control (direct labour)
Factory O/H control ( indirect
Labour)
12000
1000
54310
15
Estimated overhead absorbed
Actual overhead
Factory overhead control account
Store ledger control (indirect)
Wages control (indirect)
Cost ledger control
- Factory indirect exp.
3000
1000
WIP control (12000*50%)
6000
2600
Under-absorbed overhead
600
6600
6600
Work in progress control account
Bal b/f
Store ledger control (direct)
Wages control (direct)
Factory O/H (O/H absorbed)
2310
34000
12000
6000
54310
Store ledger control – return
Cost of sales (14090+14880
+11150)
Bal c/f
1940
40120
12250
54310
16
Estimated overhead absorbed
Actual overhead
Admin & marketing overhead control account
Cost ledger control (actual)
1000
Over-absorbed overhead
7950
Cost of sales
(2818+2976+2230)
8024
74
8024
8024
Under - / Over- absorbed overhead control
Factory overhead control
- Under absorbed
Admin & Marketing overhead
600 - Over absorbed
Costing profit and loss
600
74
526
600
17
Cost of Sales
WIP control
Admin & marketing O/H
40120
Costing profit and loss
8024
481444
48144
48144
Costing profit and loss
Cost of sales
Under-absorbed overhead
48144
526
Cost ledger control – net profit
Cost ledger control – sales
61000
12330
61000
61000
Cost ledger control account
Costing profit and loss - sales
61000
Bal c/d (12250 + 4340)
16590
77590
Bal b/f
Store ledger control
Wages control
Factory overhead control
Admin & Marketing O/H control
10710
31000
13000
2600
7950
Consolidated profit and loss
12330
18
77590