1. Job Costing Concepts ACG 4361 1-6 Prepared by Diane Tanner
University of North Florida
1-6

2. Methods of Tracking Costs
Process Costing
Job Costing
Homogeneous products manufactured
Costs are traced or allocated to each process
Examples: Dog food, frosted flakes, canned green beans, CocaCola
Manufactured to order
Costs are traced or allocated to jobs
Separate cost records for each distinct ‘job’ or project
Examples: Patients, printing orders, buildings, audit, law case
Operation Costing
For products with differing materials and similar processes
Material costs are traced while conversion costs are allocated
Examples: Men’s suits, Cheerios flavors, wine

3. Overview of Job Costing
Also called job order costing
Appropriate for production of
Tangible items/projects—ships, bridges, cabinets, etc.
Services—tax returns, lawn care, criminal law cases, etc.
Involves accumulating costs by ‘job’ usually for a particular order, project, or batch
Normal costing is often used to apply MOH
Applied using a budgeted overhead rate based on actual activity
ABC may be used

4. Cost Flows Raw Materials Work in process Finished goods
Flow of costs is the same under all cost accumulation systems--job costing, process costing, and operation costing: RM → WIP → FG → CGS
Inventory Accounts
Raw Materials
Contains costs of materials acquired to be used on jobs
Work in process
Contains costs of partially completed jobs
Finished goods
Contains completed jobs, not yet sold or delivered to customers

5. Job Cost Accounting = = General ledger Subsidiary ledger
One WIP ‘control’ account
Subsidiary ledger
Used to track individual job costs
Consists of multiple job cost sheets
One cost sheet (subsidiary account) for each job
Month end: Reconcile general ledger account balance with the subsidiary ledger
WIP Control Account in the General ledger
WIP Subsidiary ledger
Total costs posted to all 'jobs‘ =
Total costs posted to the control account
Total account balances of all jobs =
Balance of the control account

6. Traced from material requisition forms Traced from time tickets
Tracking Job Costs
Job cost sheet
The primary document for tracking individual job costs
Job Cost Sheet
Job Number A - 143
Date Initiated March 3
Date Completed
Department B3
Units Completed
Item Wooden cargo crate
Direct Materials
Direct Labor
Manufacturing Overhead
Req. No.
Amount
Ticket
Hours
Rate
Cost Summary
Manufacturing overhead
Total Cost
Unit Cost
Direct Materials
Traced from material requisition forms
Direct Labor
Traced from time tickets
Manufacturing Overhead
Applied using an overhead rate

7. Journal Entries in Job Costing
Entries are recorded in the same manner as basic product costing
Direct materials recorded as used
Materials requisition forms
Direct labor is recorded when incurred (typically at each payroll date)
Labor time tickets
Overhead is applied using an overhead rate as the activity is incurred

8. Subsidiary Ledger
Individual costs are posted to each job in the WIP subsidiary ledger.
The total of direct material, direct labor, and overhead applied is posted to each job cost sheet (represented by subsidiary t-accounts here for simplicity)
WIP Control
WIP - Job 27
WIP - Job 28
WIP - Job 30
WIP - Job 31
1,360
800
560
2,110
570
440
780
320
2,265
450
840
600
375
1,812
360
672
480
300
 5,687
 2,180
 2,512
 995
 1,860  0
1,860 BB DM DL OH
The balance of the WIP control account must equal the balance of the jobs in the WIP subsidiary ledger.

9. Job Costing Example
Sanja Enterprises uses job costing and applies overhead based on machine hours. Sanja’s budgeted annual information follows:
Direct labor cost
14,800 $14.60 per hour
Factory overhead
$248,492
Machine hours
8,875 machine hours
Actual data for Job 178
Direct materials requisitioned
$400
Direct labor hours $15.20 per hour
Machine hours
42 machine hours
Actual annual direct labor cost for all jobs
$220,200
Actual annual manufacturing overhead cost
$247,000
Determine the total cost of Job 178.
WIP – Job 178
Direct labor = 70 × $15.20 = $1,064
Direct materials 400
Direct labor ,064
POHR =
$248,492
8,875
MOH ($28 × 42) ,176
= $28.00/MH
$2,640

10. The End