M.G CASTRO
JOB ORDER COSTING
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Job order costing is a costing method which is used to determine the cost of manufacturing each
product. This costing method is usually adopted when the manufacturer produces a variety of
products which are different from one another and needs to calculate the cost for doing an individual
job. Job costing includes the direct labor, direct materials, and manufacturing overhead for that
particular job.
1. Heterogeneous Products
- are products with attributes that are significantly different from each other, which makes
it difficult to substitute one product for another. An example of a heterogeneous product
is a computer. You really can't substitute a PC for a Mac because each computer platform
is too different.
2. Manufactured Individually
3. Requires different amount of costs
System of Cost Accumulation
Actual costing
Normal Costing
Actual
Actual
Actual
Actual
Actual
Applied
Direct Materials
Direct Labor
Overhead
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Standard
Costing
Applied
Applied
Applied
kapag nag-a-accumulate/nagpapasok tayo ng cost, ano yung nagiging basis:
Actual Costing
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our basis would be ACTUAL lahat ng cost na ginagamit.
Ang ipapasok na cost ay dapat yung mismong actual na invoice/bill na natanggap
natin
Ang disadvantage of using actual costing is that if for example, you would like to
know/project/assess the possible cost per unit of a product – you cannot, because
you are waiting for the actual cost. So, hindi mo sya magagamit.
Normal Costing
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Ang argument dito is that yung Direct materials & Direct Labor is ACTUAL. Then sa
Overhead is hindi na natin kelangan maghintay ng actual. Ang gagawin natin will be
APPLYING – meaning, ESTIMATE. Mag-e’estimate muna pansamantala habang
hindi pa dumarating yung actual cost. And usually, ang application ng overhead is
based on the experienced/relationship of the overhead to the other elements of
production.
Standard Costing
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Ito usually ang ginagawa kapag wala pa talagang start of operation. As in hindi pa
nag-s’start and then you would like na mag-budget kunwari.
It’s very important to remember this because you might encounter problems that
would say “the system of cost allocation of the company is standard costing”. So dapat
ang ipasok is dapat estimate lahat. Kasi once na nagkamali sa pagpasok,
magkakamali ka ng cost of goods manufactured, finish goods inventory end – lahat
affected.
M.G CASTRO
Cost of Goods Sold
Direct Materials, Beginning
Add: Direct Materials Purchases
Direct Materials Available for Use
Less: Direct Materials, End
Direct Materials Used
Direct Labor
Overhead
Total Manufacturing Cost
Add: Work in Process, Beginning
Total Cost Available put into Process
Less: Work in Process, End
Cost of Goods Manufactured
Finished Goods, Beginning
Total Goods Available for Sale
Finished Goods, End
Cost of Goods Sold
xxx
xxx
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Kapag magpa-problem, gumawa ng T-ACCOUNTS
ASSET
(Debit)
*kapag
normal
side is DEBIT
–usually
BEGINNING lahat
1. Raw Materials
 Materials we will be using in the production
2. Work in Process
 Ito yung last year, prinocess mo, but nung patapos na yung financial end –
hindi sya natapos/complete (hindi pa sya finished goods)
3. Finished Goods
 Mga natapos na
 Saleable/mabebenta na
Raw materials




Madadagdagan kapag may purchases (debit)
Beginning plus Purchases (Direct Materials Available for Use)
End (usually binibigay yan)
Materials – moved to production (credit)
Work in Process
 Ipasok yung Direct Materials na inalis sa ‘Raw Materials’
(Debit)
 Completed Goods plus Beginning (Total Goods Available for
Sale)
 Cost of Good Sold – kapag nag alis ka finished goods
M.G CASTRO
Finished Goods
 Ipasok yung Completed Goods na inalis sa ‘Work in Process’
(Debit)
 Direct Labor – usually binibigay lang yan (Debit)
 Factory Overhead (Debit)
 Tignan mabuti kung Actual or Applied Factory Overhead
 Kapag in-add yung DM, DL, FO (Total Manufacturing Cost)
 Total manufacturing cost plus Beginning (Total Cost Available
put into Process)
 Nababawasan kapag may ‘Completed/Finished Goods’
Factory Overhead
 Dito ipapasok yung Indirect Materials
 ACTUAL (Right side of T–Accounts)
 APPLIED (Left side of T–Accounts) – estimate lang
Importante na meron tayong pinag-u-update’an ng
FO-Actual para later on ma-compare natin sa
Applied.
Importante na i-compare kasi magkakaroon ng
adjustments. Kaya pumapasok yung Over Applied &
Under Applied
 Mag-e-estimate muna kapag Normal Costing Factory
Overhead (kaya nga Applied FO), pero kahit estimate lang
– kailangan at the end of the accounting period, we have to
follow the actual. Kaya tayo mag-a-adjust from the APPLIED
to the ACTUAL.
 Sa financial report, ang kailangan talagang makita ay ang Actual. Ginagawa lang Applied kasi
need na yung data for the timeliness
PROBLEMS
1. GHI Company employs normal costing for its production. The following data are provided during the
current year:
Net purchases of raw materials during the year
500,000
Total labor costs during the year
800,000
Depreciation of factory assets during the year
100,000
Utilities on the factory during the year
300,000




The entity uses a single account for its direct material and indirect materials. Indirect material used
is one-fourth of the total material used.
The indirect labor cost is 1/8 of the total labor costs.
The overhead application rate is 80% of the direct labor costs.
Any over or under application of overhead is considered material.
M.G CASTRO
A. What is the total manufacturing cost during the current year?
B. What is the cost of goods manufactured during the current year?
C. What is the over or under application of overhead?
Importante na alam natin ung Direct Materials and Indirect Materials kasi ang ipapasok lang natin sa Work
in Process is the Direct Materials
Kahit anong Indirect – Actual sya. (Indirect Materials, Indirect Labor, Utilities, Depreciation) – pinapasok sa
FO Control.
Kapag pinag-uusapan yung “Application of Factory Overhead”, meron dapat tandan: kung Material /
Immaterial kasi magiging iba yung adjustment.
Yung 40K sa letter C na dapat i-add sa cost para mahabol yung actual na 600K since diba 560K lang yung
nirecord/estimate. So, yung 40K kailangan maipasok sya as expense.
 If sinabi sa problem na yung Application of Overhead is Immaterial – yung 40K is kakainin ni Cost
of Good Sold (COGS). Mag-add lang ng 40K sa COGS Balance – nahabol mo na yung Applied to
Actual Overhead.
 If naman Material, i-add mo sya sa COGS, WIP & FG (basis yung end)
 If the problem is SILENT, we assume that the Application of Factory Overhead is Immaterial (COGS
adjustment lang), because this is the generally used by companies
 Yung COGS sa ‘finished goods T-account’ amounting to 2,160,000 – kapag tinanong “adjusted
COGS” then underapplied ka, yung 2,160,000 (unadjusted) i-add yung 40,000 na underapplied, then
yung adjusted COGS mo na is 2,200,000. Kailangan yung cost mo habulin mo pa
SOLUTION:
M.G CASTRO
2. ABC is employing normal costing for its job orders. The overhead is applied using a predetermined
overhead rate. The following information relates to the ABC for the year ended December 31, 2020:
Additional information:
 Actual overhead for the year 2020 amounted to P350,000.
 Jobs No. 101 and 102 were completed and transferred to finished goods during year 2020.
 Job No. 101 was sold during year 2020.
 The gross profit rate is 20% based on cost.
A. What is the total manufacturing cost for 2020?
B.
C.
D.
E.
What is the cost of goods manufactured for 2020?
What is the cost of goods sold for 2020?
What is the gross profit for 2020?
What is the cost of work in process on December 31, 2020, and the cost of finished goods on
December 31, 2020, respectively?
B. Tignan kung ano sa mga JOB ung natapos