Prepared byDiane TannerUniversity of North Florida

Chapter 4

Job Costing Concepts

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Methods of Tracking Product CostsProcessCosting

JobCosting

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

OperationCosting

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

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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

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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

Totals of all costs posted to each 'job' in the subsidiary ledger

Total amounts posted to the control account in the

general ledger=

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Job Cost Sheet

Job Number A - 143 Date Initiated March 3Date Completed

Department B3 Units CompletedItem Wooden cargo crate

Direct Materials Direct Labor Manufacturing OverheadReq. No. Amount Ticket Hours Amount Hours Rate Amount

Cost Summary Direct Materials Direct Labor Manufacturing overhead Total Cost Unit Cost

Tracking Job Costs

Manufacturing OverheadApplied using a predetermined rate

Direct MaterialsTraced from

materials requisition forms

Direct LaborTraced from time tickets

Job cost sheetPrimary document for tracking individual job costs

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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.

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     1,860      0 

 

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

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Job Cost Example

Direct labor cost 14,800 hours @ $14.60 per hourFactory overhead $248,492Machine hours 8,875 machine hours

Direct materials requisitioned $400Direct labor hours 70 hours @ $15.20 per hourMachine-hours 42 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 hourDM $ 400DL (70 x $15.20) 1,064MOH ($28 x 42) 1,176Total job cost $2,640

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The End