1. Job Order Costing Job order costing assigns costs to each job. A job can be an order, a contract or a unit of production. e.g. If we want to accumulate the cost of repair of a machine this is done by collecting the cost of parts, direct labor and overhead costs (applied by using an overhead rate).

2. Therefore job order accounting system is a product system used in making one-of –a-kind or special order products. In such system direct materials, direct labor and overhead costs are assigned to specific jobs. In computing unit costs the total manufacturing costs for each job order are divided by the number of units produced for that order. Therefore job order accounting system is a product system used in making one-of –a-kind or special order products. In such system direct materials, direct labor and overhead costs are assigned to specific jobs. In computing unit costs the total manufacturing costs for each job order are divided by the number of units produced for that order.

3. Accordingly Job order costing characteristics Accordingly Job order costing characteristics 1. Collect manufacturing costs 1. Collect manufacturing costs 2. Measure costs of completed jobs 2. Measure costs of completed jobs 3. Has ONE work in process account for all unfinished jobs 3. Has ONE work in process account for all unfinished jobs

4. Accounting for material in job order system Accounting for material in job order system Materials if they form an identifiable part of the end product they are classified as direct materials and if they are used in the manufacturing process; they are classified as indirect. Once material are there a material requisition form is made to record the material flow. Materials if they form an identifiable part of the end product they are classified as direct materials and if they are used in the manufacturing process; they are classified as indirect. Once material are there a material requisition form is made to record the material flow.

5. This is the basic source of document informing the cost accounting department that materials have been issued. (Internal control) other documents include material purchase request, purchase orders and receiving reports. This is the basic source of document informing the cost accounting department that materials have been issued. (Internal control) other documents include material purchase request, purchase orders and receiving reports.

6. Material requisitions facilitate assigning the cost to a job or a department. Material requisitions facilitate assigning the cost to a job or a department. This source document allows for the transfer costs from direct materials inventory to work in process inventory. This source document allows for the transfer costs from direct materials inventory to work in process inventory.

7. Labor Accounting in job order costing Labor Accounting in job order costing Accurate and understandable methods for calculating payroll are necessary because no other area in accounting has more impact on the morale of employees than their wages or benefit policies. Accurate and understandable methods for calculating payroll are necessary because no other area in accounting has more impact on the morale of employees than their wages or benefit policies.

8. Labor systems Labor systems Wages are hourly or piece-rate payment and they are variable costs. Wages are hourly or piece-rate payment and they are variable costs. Salaries are fixed periodic payments such as weekly or monthly payments. If tax is withheld then it has to appear in the books. Salaries are fixed periodic payments such as weekly or monthly payments. If tax is withheld then it has to appear in the books.

9. Labor related costs Labor related costs These include bonuses, vacation pay, free uniform and hospitalization insurance. Cost accountants account for these costs by job or department. To account for all costs we need timekeeping records. These include These include bonuses, vacation pay, free uniform and hospitalization insurance. Cost accountants account for these costs by job or department. To account for all costs we need timekeeping records. These include

10. Timecard or clock card: this show the time each employee arrives and leaves. It provides evidence of when the employee was on the work site. Timecard or clock card: this show the time each employee arrives and leaves. It provides evidence of when the employee was on the work site. DateTime DateTime 1/18:00 1/18:00 1/1 3:00 1/1 3:00

11. Job time ticket: as time cards indicate the total time worked companies needed an indicator of the time spent on each job during the day. A job time ticket shows where an employee worked during the day, the time he started and the time he stopped and the rate of pay. Job time ticket: as time cards indicate the total time worked companies needed an indicator of the time spent on each job during the day. A job time ticket shows where an employee worked during the day, the time he started and the time he stopped and the rate of pay. DateEmployee name DateEmployee name Time startedJob No. Time startedJob No. Time StoppedDepartment Time StoppedDepartment Hours workedPieces completed Hours workedPieces completed RateAmount RateAmount

12. Daily time ticket: this summarizes all the jobs performed during the day. This form shows where an employee worked during the day, the time he started and the time he stopped. Daily time ticket: this summarizes all the jobs performed during the day. This form shows where an employee worked during the day, the time he started and the time he stopped. Date Employee name Date Employee name Started Stopped Hours Job No. Department Started Stopped Hours Job No. Department Total Hours worked Total Hours worked Regular Overtime Regular Overtime

13. Factory overhead Accounting Factory overhead Accounting Because factory overhead for are linked to certain products they are debited to a factory overhead control account. They are accounted for by the techniques discussed earlier. Because factory overhead for are linked to certain products they are debited to a factory overhead control account. They are accounted for by the techniques discussed earlier.

14. Example Example ABC company had following operations for the month of November. ABC company had following operations for the month of November. Material requisition and factory labor used Material requisition and factory labor used Materials Labor Materials Labor Job1 23401090 Job1 23401090 Job 233901990 Job 233901990 Job 329801440 Job 329801440 Job 447652890 Job 447652890 Job 5 2240940 Job 5 2240940 Job 6 19401090 Job 6 19401090 For general factory use515690 For general factory use515690

15. 2. Factory overhead is applied at 60% of direct labor cost. 2. Factory overhead is applied at 60% of direct labor cost. 3. Jobs completed no. 1, 2, 4, and 5 3. Jobs completed no. 1, 2, 4, and 5 4. Jobs no. 1, 2, and 4 were shipped and costumers were billed $ 5690, $ 9490, and $ 13290 4. Jobs no. 1, 2, and 4 were shipped and costumers were billed $ 5690, $ 9490, and $ 13290 Required Required calculate the cost of finished jobs calculate the cost of finished jobs calculate the cost of jobs sold calculate the cost of jobs sold

16. Solution Solution 1. Cost of finished jobs 1. Cost of finished jobs JobD.M D.L O. head Total JobD.M D.L O. head Total 1 $2340 $1090$654$4084 1 $2340 $1090$654$4084 2 3390 1990 1194 6574 2 3390 1990 1194 6574 4 47652890 1734 9389 4 47652890 1734 9389 52240 940 564 3744 52240 940 564 3744 Total 23791

17. 2. Cost of jobs sold 2. Cost of jobs sold job 1$4084 job 1$4084 job 2 6574 job 2 6574 job 4 9389 job 4 9389 $20047 $20047