1. Prepared by Diane Tanner University of North Florida Chapter 4 Job Costing Concepts

2. 2 Methods of Tracking Product Costs Process Costing Job Costing  Homogeneous products manufactured  Costs are traced or allocated to each process  Examples: Dog food, cereal, canned vegetables, bottles of beer  Manufactured to order  Costs are traced or allocated to jobs  Separate cost records for each distinct ‘job’ or batch  Examples: Patients, printing, buildings, patients, clients Operation Costing  For products with differing materials and similar processes  Material costs are traced while conversion costs are allocated Flow of costs is the same under all methods: RM → WIP → FG → CGS Flow of costs is the same under all methods: RM → WIP → FG → CGS

3. 3 Overview of Job Costing  Also called job order costing  Appropriate for production of  Tangible items—ships, bridges, cabinets, etc.  Services—tax returns, lawn care, divorce cases, etc.  Involves costs accumulated by ‘job’ usually for a particular order or batch Normal costing used to apply MOH –Applied using a predetermined OH rate based on actual activity

4. Job Costing Accounting  General ledger  One WIP ‘control’ account  Subsidiary ledger  Used with job costing systems to track the individual job costs  Consists of multiple job cost sheets  One account/job cost sheet for each job  Used to track/capture costs of a job  Reconcile at end of period 4 Totals of all costs posted to each 'job' in the subsidiary ledger Total amounts posted to the control account in the general ledger =

5. 5 Job Cost Sheet Job Number A - 143Date Initiated March 3 Date Completed Department B3Units Completed Item Wooden cargo crate Direct MaterialsDirect LaborManufacturing Overhead Req. No.AmountTicketHours Amoun tHoursRateAmount Cost Summary Direct Materials Direct Labor Manufacturing overhead Total Cost Unit Cost Tracking Job Costs Manufacturing Overhead Applied using a predetermined rate Manufacturing Overhead Applied using a predetermined rate Direct Materials Traced from materials requisition forms Direct Materials Traced from materials requisition forms Direct Labor Traced from time tickets Direct Labor Traced from time tickets Job cost sheet Primary document for tracking individual job costs

6. 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 the WIP control account. 6 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 0 0  The balance of the WIP control account must equal the balance of the jobs in the WIP subsidiary ledger.

7. Job Cost Example Direct labor cost14,800 hours @ $14.60 per hour Factory overhead$248,492 Machine hours8,875 machine hours 7 Direct materials requisitioned$400 Direct labor hours 70 hours @ $15.20 per hour Machine-hours42 machine hours Sanja Enterprises uses job costing and applies overhead based on machine hours. Sanja’s budgeted annual information follows: Actual data for Job #178 Actual direct labor cost for all jobs for the entire year totaled $220,200. Actual annual manufacturing overhead cost was $247,000. Actual machine hours for all jobs for the entire year totaled 96,050. Show the calculation of the total cost of Job 178. POHR = $248,492 8,875 = $28.00 per machine hour DM$ 400 DL (70 x $15.20) 1,064 MOH ($28 x 42) 1,176 Total job cost$2,640

8. 8 The End