1. Basics of Job-Order Costing
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Basics of Job-Order Costing
Job-Order Costing
Process Costing
(next chapter)
Many different products are produced each period.
Products are manufactured to order.
Costs are traced or allocated to jobs.
Cost records must be maintained for each distinct product or job.

2. Applications of Job-Order Costing
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Applications of Job-Order Costing
Job-Order Costing
Process Costing
(next chapter)
Typical job order cost applications:
Special-order printing
Building construction
Also used in the service industry
Hospitals
Law firms

3. Sequence of Events in a Job-Order Costing System
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Sequence of Events in a Job-Order Costing System
Direct Materials
Charge direct material and direct labor costs to each job as work is performed.
Job No. 1
Direct Labor
Job No. 2
Job No. 3

4. Sequence of Events in a Job-Order Costing System
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Sequence of Events in a Job-Order Costing System
Direct Materials
Apply overhead to each job using the predetermined rate (covered separately).
Job No. 1
Direct Labor
Job No. 2
Job No. 3
Factory Overhead

5. Materials Requisition Form
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Materials Requisition Form
Production managers use materials requisition forms to request materials for manufacturing. This source document is used to assign materials costs to specific jobs (or to overhead).
Will E. Delite
Total cost is transferred to job cost sheet for job A-143
Type, quantity, and total cost of material charged to job A-143.

6. Information is transferred to job cost sheet for job A-143
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Employee Time Ticket
A worker uses a time ticket to record the time spent on each job (or overhead activity). This source document determines the amount of direct labor that is charged to a job (or the amount of indirect labor that is charged to overhead).
Information is transferred to job cost sheet for job A-143

7. Job Cost Sheet – Recording Materials and Labor
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Job Cost Sheet – Recording Materials and Labor
The primary document for tracking the costs associated with a given job is the job order cost sheet.
From the time ticket
From the materials requisition form

8. Job Cost Sheet – Recording Overhead
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Job Cost Sheet – Recording Overhead
Assume that the company applies (or allocates) overhead to jobs using a predetermined overhead rate of $4 per direct labor hour.

9. Job-Order Costing – Flow of Materials Costs
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Job-Order Costing – Flow of Materials Costs
Materials used may be either direct or indirect.
Record on each Job Order Cost Sheet and add to Work in Process Account
Direct materials
Materials Requisition
Indirect materials
Record in Manufacturing Overhead Account

10. Job-Order Costing Flow of Labor Costs
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Job-Order Costing Flow of Labor Costs
An employee’s time may be either direct or indirect.
Record on each Job Order Cost Sheet and add to Work in Process Account
Direct Labor
Employee Time Ticket
Indirect Labor
Record in Manufacturing Overhead Account

11. Job-Order Costing Document Flow Summary
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Job-Order Costing Document Flow Summary
Employee Time Ticket
Indirect Labor
Record on each Job Order Cost Sheet and add to Work in Process Account
Applied (or allocated) Overhead
Record in Manufacturing Overhead Account
Other Actual Overhead Charges
Materials Requisition
Indirect Material

12. Entry to Record Cost Flows – Material Purchases
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Entry to Record Cost Flows – Material Purchases
Raw materials purchased are recorded in an inventory account.

13. Entry to Record Cost Flows – Use of Materials
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Entry to Record Cost Flows – Use of Materials
Direct materials issued to a job increase the Work in Process account and decrease the Raw Materials account.
Indirect materials that are used in the factory increase the Manufacturing Overhead account and decrease the Raw Materials account.

14. Entry to Record Cost Flows – Labor
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Entry to Record Cost Flows – Labor
The cost of direct labor incurred increases the Work in Process account and increases the Salaries and Wages Payable account.
The cost of indirect labor incurred increases the Manufacturing Overhead account and increases the Salaries and Wages Payable account.

15. Entry to Record Cost Flows – Application of Overhead
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Entry to Record Cost Flows – Application of Overhead
The Work in Process account is increased and the Manufacturing Overhead account is decreased when overhead is applied (or allocated) to jobs.

16. Entry to Record Cost Flows – Transfer to Finished Goods
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Entry to Record Cost Flows – Transfer to Finished Goods
As a job is completed, the cost of goods that were completed for that job is transferred from the Work in Process account to the Finished Goods account.

17. Entry to Record Cost Flows – Sale of Job to Customer
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Entry to Record Cost Flows – Sale of Job to Customer
When a job is sold to a customer on account:
(1) the sale is recorded; and
(2) the cost of the job is transferred from the Finished Goods account to the Cost of Goods Sold account.