1. Traditions and Innovations
Cost Accounting
Traditions and Innovations
Barfield, Raiborn, Kinney
Chapter 5
Job Order Costing

2. Learning Objectives (1 of 2)
Explain the difference between job order and process costing systems
Define actual, normal, and standard costing valuation methods for job order and process costing systems
Explain when to use a job order costing system
Define what the term ‘job’ means

3. Learning Objectives (2 of 2)
Describe the documents and prepare the journal entries in a job order costing system
Identify how technology is used in job order costing systems
Explain how standard costs are used in a job order costing system
Describe decisions that are made based on job order costing information

4. Methods of Product Costing
Product Costing System defines
cost object
method of assigning costs to production
Valuation Method specifies
how product costs will be measured

5. Six Possibilities V A L M U E A T T H I O O D N COSTING SYSTEM
Job Order
Actual
Normal
Standard
Process
Actual
Normal
Standard

6. Valuation Methods Actual Normal Standard Actual direct material
Actual direct labor
Actual overhead
Normal
Predetermined overhead
Standard
Standard direct material
Standard direct labor
Standard overhead

7. Costing Systems
Job order costing
Process costing
COLA

8. Which Costing System?
Tax
Return

9. Job Order Costing System
Each job is a cost object
Accumulate costs for each job
Use subsidiary ledger
WIP Subsidiary Ledger
Job 2
Job 1
Job 3
WIP Control =
100
200
500
Job
Job
Job
Total 800
Job 1 + Job 2 + Job = WIP Control

10. Material Requisition Form
Tracks who is responsible for materials
Verifies flow of materials from warehouse to department to job
Journal entry
Work in Process Inventory (direct material)
Manufacturing Overhead (indirect material)
Raw Material Inventory

11. Materials Requisition Form
Date ___________________
No. ###
Job No. _________________
Department _______________
Issued by _________________
Authorized by ___________
Inspected by _______________
Received by _____________
Item Part Unit of Quantity Quantity Unit Total
No. No. Descrip. Measure Required Issued Cost Cost

12. Job Order Cost Sheet All financial information about a job
direct material (from material requisition)
direct labor (from time sheets or labor tickets)
applied overhead
budgeted cost information
When job is complete, use job order cost sheet to analyze actual costs to budgeted costs

13. Job Order Cost Sheet Customer ____________ Job No. ###
Starting Date _________ Job Description ____________
Completion Date ______ Contract Price _____________
Materials
Date Ref# Amount
Direct Labor
Date Ref # Amount
Overhead Applied
Date Ref# Amount
Total Materials _________
Total Labor _________ Total Cost of Job
Total OH Applied _________ ========

14. Employee Time Sheet Time worked on each job Journal entry
Work in Process Inventory (direct labor)
Overhead (indirect labor)
Salaries and Wages Payable

15. Employee Time Sheet Employee Name _______________
Employee No. _______________
Department _______________
For week ending
_______
Start Stop Total
Type of Work Job No. Time Time Day Hours
Employee Signature Supervisor’s Signature

16. Overhead Overhead Account Journal Entry Actual Overhead
Applied Overhead
Journal Entry
Work in Process Inventory
Overhead (applied)

17. Completion of a Job
Move job cost sheet from WIP subsidiary to Finished Goods subsidiary
Journal entry
Finished Goods Inventory
Work in Process Inventory

18. Sale Journal entry Accounts Receivable Sale Cost of Goods Sold
Finished Goods Inventory

19. Job Order Costing and Technology
Automate data collection and data entry
Accounting software includes Job Costing modules
Share information using intranet

20. Journal Entries WIP consists of job cost sheets W & Sal Pay Materials
WIP-Job 1 FG
Accts Pay
WIP-Job 2
Overhead
CGS
WIP consists of job cost sheets

21. Purchase Materials on Account (a)
W & Sal Pay
Materials
WIP-Job 1 FG a
Accts Pay
WIP-Job 2
Overhead
CGS a

22. Use Materials Requisition to Request Materials for Jobs (b)
W & Sal Pay
Materials
WIP-Job 1 FG a b b
Accts Pay
WIP-Job 2
Overhead
CGS a b b
Direct materials to WIP
Indirect materials to Overhead

23. Record Labor from Employee Time Sheets (c)
W & Sal Pay
Materials
WIP-Job 1 FG c a b b c
Accts Pay
WIP-Job 2
Overhead
CGS a b b c c
Direct labor to WIP
Indirect labor to Overhead

24. Apply Overhead (d) c b a b c d b a b d c c d W & Sal Pay Materials
WIP-Job 1 FG c b a b c d
Accts Pay
WIP-Job 2
Overhead
CGS b a b d c c d

25. Complete Job 1 (e) c b e e a b c d b a b d c c d W & Sal Pay Materials
WIP-Job 1 FG c b e e a b c d
Accts Pay
WIP-Job 2
Overhead
CGS b a b d c c d

26. Sell Job (f,g) b e e c f a b c d b f a b d c c d g g W & Sal Pay
Materials
WIP-Job 1 FG b e e c f a b c d
Accts Pay
WIP-Job 2
CGS
Overhead b f a b d c c d
Accts Rec
Sales g g

27. Standard Cost System Actual cost Normal cost Standard cost
Predetermined norms (or standards) for materials, labor, and overhead
Compare actual costs to standard costs - difference is a variance

28. Management Use of Job Order Costing Systems
Estimate future job costs
Establish realistic bids and selling prices
Develop budgets and standards
Compare actual costs to estimated costs
Determine which jobs are profitable
Manage inventory

29. Questions
What is the difference between job order and process costing systems?
What is meant by actual, normal, and standard costing valuation methods?
How is the job order cost sheet used?