Job Order and Process Costing


Job Order
 Custom/built to order products
 House
 Cost = direct labor + direct materials + overhead applied
Process
 Products priced the same
 BUS 2102 textbooks
 Bushel of soybeans
 Cost = total manufacturing cost/total units
Job Order and Process Costing

Pricing
 ER visit
 Bagels
 Aircraft carrier
 Dent car door
 Box of paper clips
 Charleston newspaper
Job Order and Process Costing

Job Order

Overhead Cost

Track actual overhead or,

Guess (normal costing using estimated overhead)

Overhead rate = Estimated Overhead/Estimated Units

Estimating Overhead

Units: labor and machine

Applying Overhead

Labor hours (lots of peons – lawyers)

Machine hours (highly mechanized – paper clip factory)

Hours x Overhead Rate = Overhead Applied

Under/Over Applied

Less busy: ____ applied

Overhead costs lower than expected: _____ applied

Cost of Goods Sold is adjusted for over/under applied overhead
Job Order and Process Costing

Process Costing
 Equivalent Units Weighted Average Method
(combines Beginning WIP and current
period units/costs)
 Costs = Beg WIP costs + Cost this
Period
 Total Units = Units Completed +
 Ending WIP Equivalent Units
Job Order and Process Costing




Total Costs / Total Units = Cost Per Unit
Amount to Finished Goods = Finished
Units x Unit Cost
Ending WIP = Ending WIP equivalent
units x unit cost
Example: Exercise 6-26: Page 246
Job Order and Process Costing

Job Order

Job Cost Sheets
 Total for all jobs equals Work In Process