Costing Systems:

Costing Accumulation Systems:Job Costing

Job Costing vs. Process Costing

Examples of Job Costing and Process Costing

job costing or process costing?

Which would be more appropriate in each of the following situations - job costing or process costing?

1. A custom yacht builder.2. A golf course designer.3. A potato chip manufacturer.4. A business consultant.5. A plywood manufacturer.6. A soft-drink bottler.7. A film studio.8. A firm that supervises bridge construction projects.9. A manufacturer of fi ne custom jewelry.10. A made-to-order clothing factory.11. A factory making one personal computer model.12. A fertilizer factory.Flow of Documents in a Job-Order Costing System

Sample Job Costing Sheet

Direct Material Cost - Materials Requisition Form

Direct Labor Cost - Employee Time Sheet/ Ticket

Manufacturing Overheads

Assigning overhead to a specific job involves some special considerations:

Manufacturing overhead is an indirect cost. This means that it is either impossible or difficult to trace these costs to a particular product or job.Overhead consists of many different items ranging from the grease used in machines to the annual salary of the production manager.Even though output may fluctuate due to seasonal or other factors, total manufacturing overhead costs tend to remain relatively constant due to the presence of fixed costs.

Given these problems, overhead costs are usually assigned to products using an allocation process.

This allocation of overhead costs is accomplished by selecting an allocation base that is common to all of the companys products and services.

An allocation base is a measure such as direct labor-hours (DLH) or machine-hours (MH) that is used to assign overhead costs to products and services.

Example:Sample Job Costing Sheet

Under-applied and Over-applied Overhead

Underapplied and Overapplied Overhead

Calculation of overhead rateActual dataCalculating underapplied / overapplied overhead

Methods of Support DepartmentCost Allocation Methods of AllocationIn order to calculate departmental overhead rates (as opposed to plantwide overhead rates), it is necessary to allocate support department costs to the producing departments.

The three methods of assigning costs of multiple support departments to producing departments are the direct methodthe sequential methodthe reciprocal method