Chapter 5
Job Order Costing
Basic Cost Accounting
Procedures
Process
Costing
Job Order
Costing
 Used for production of large,
unique, high-cost items.
 Built to order rather than mass
produced.
 Many costs can be directly traced
to each job.
Basic Cost Accounting
Procedures
Process
Costing
Job Order
Costing
 Typical job order cost applications:
 Special-order printing
 Building construction
 Also used in service industry
 Hospitals
 Law firms
Basic Cost Accounting
Procedures
Process
Costing
Job Order
Costing
 Used for production of small,
identical, low-cost items.
 Mass produced in automated
continuous production process.
 Costs cannot be directly traced to
each unit of product.
Basic Cost Accounting
Procedures
Process
Costing
Job Order
Costing
Typical process cost applications:
 Petrochemical refinery
 Paint manufacturer
 Paper mill
Job Order Costing
Manufacturing
overhead (OH)
Applied to each
job using a
predetermined
rate (POHR)
Direct
materials
THE JOB
Direct
labor
Job Order Costing
The primary
document for
tracking the costs
associated with a
given job is the job
cost sheet.
Let’s investigate
The Job Cost Sheet
RoseCo Job Cost Sheet
Job Number A - 143
Department B3
Item Wooden cargo crate
Date Initiated 3-4-X9
Date Completed
Units Completed
Direct Materials
Direct Labor
Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours
Rate
Amount
Cost Summary
Direct Materials
Direct Labor
Manufacturing Overhead
Total Cost
Unit Cost
Units Shipped
Date Number Balance
The Job Cost Sheet
RoseCo Job Cost Sheet
Job Number A - 143
Department B3
Item Wooden cargo crate
Date Initiated 3-4-X9
Date Completed
Units Completed
Direct Materials
Direct Labor
Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours
Rate
Amount
X7-6890 $ 116
Cost Summary
Direct Materials
Direct Labor
Manufacturing Overhead
Total Cost
Unit Cost
$
116
Units Shipped
Date Number Balance
The Job Cost Sheet
RoseCo Job Cost Sheet
Job Number A - 143
Department B3
Item Wooden cargo crate
Date Initiated 3-4-X9
Accumulate direct
Date Completed
labor costs by
Units Completed
means of a work
record, such as a
Direct Materials
Direct Labor
Manufacturing Overhead
time
ticket,
for each
Req. No. Amount Ticket Hours Amount Hours
Rate
Amount
employee.
X7-6890 $ 116
36
8
$
88
Cost Summary
Direct Materials
Direct Labor
Manufacturing Overhead
Total Cost
Unit Cost
$
$
116
88
Units Shipped
Date Number Balance
The Job Cost Sheet
RoseCo Job Cost Sheet
Apply manufacturing overhead to jobs using a
Job
Number A - 143
Date Initiated
3-4-X9
predetermined
overhead rate (POHR)
based on
direct labor
Date Completed 3-5-X9
hours (DLH).
Department B3
Item Wooden cargo crate
Units Completed
2
Direct Materials
Direct Labor
Manufacturing Overhead
Req. No. Amount Ticket Hours Amount Hours
Rate
Amount
X7-6890 $ 116
36
8
$
88
8
$
4 $
32
Cost Summary
Direct Materials
Direct Labor
Manufacturing Overhead
Total Cost
Unit Cost
$
$
$
$
$
116
88
32
236
118
Units Shipped
Date Number Balance
questions
Exercise No.01
Classify these industries into Job order
costing and process costing
industries:
a. Meat
c. Pianos
e. Breakfast cereals
g. Wood furniture
i. Coke
k. Leather
m. Tyres and tubes.
b. sugar
d. steel
f. paper boxes
h. toys
j. cooking utensils
l. paint
n. locomotives
Exercise No.02
Forge Machine works collects it cost data by the job order costing
system. For job 642, the following data are available:
Direct Material used:
14/9 issued $1,200
20/9 issued $ 668
22/9 issued $ 480
Direct Labour:
20/9 180 hours @$6.2/hr
26/9 140 hours@$7.3/hr
Factory overhead is applied at the rate of $3.5 per
direct labour hour.
Required:
1. The appropriate information entered on job
cost sheet.
2. The estimated sales price if markup is 40%
of cost.
Exercise
No.03
TedySung company produces special machines made to customers specifications.
The following data pertain to job 1106:
Customer: Markem machine shop
Dated started: 4/11/19--Dated finished: 18/11/19—
Sales price: $20,425
Materials used
Direct labour rate in dept 1
Labour hour s used in Dept 1
Dated: October 27
Customers order No. C696
Description: 18 drilling machines
11/11
$2400
$8.2 per
hour
300
18/11
$1300
$8.2 per
hour
200
Direct labour rate in dept 2
$8.00 per
$8.00 per
hour
hour
Labour hour s used in Dept 2
150
70
Machine Hours in Dept 2.
200
120
Applied FOH in Dept 1
$4.00 per
$4.00 per
direct lab hour
direct lab hour
Applied FOH in Dept 2
$1.80 per
$1.80 per
machine hour
machine hour
Marketing and admin expenses are charged to each order at a rate of 25% of the cost to
manufacture.
Required: Prepare a Job Cost Sheet for order number 1106.
Exercise No.04
Cambridge Company uses job order
costing.
At the beginning of May, two jobs were in process:
Job No.369
Job No.372
Materials
$2,000
$700
Direct labour
$1,000
$300
Applied factory overhead
$1,500
$450
During the month the following expenditures incurred on these jobs to complete
them.
Materials
$10,000
$5,000
Direct labour
$15,000
$3,500
Facto jry overhead
$12,000
$2,300
Markup
20%
30%
Required: calculate the:
1. Total production cost of each job.
2. Sales price of each job.