Ateneo de Zamboanga University
School of Management and Accountancy
Accountancy Department
LEARNING PACKET
COSMAN1, Session 2, First Semester, SY 2020-21
LEARNING PACKET 4
TOPIC: Accounting for Job Order Costing
I. CONCEPT NOTES
Cost Management and Strategy
As manufacturers, the main concern is the cost incurred in making your products, in order to:
1. Evaluate and possibly minimize
2. For Pricing
3. Valuation of assets
3 Steps in Product Costing:
1. Cost Identification (Those costs that are relevant and related to the product are considered)
2. Cost Measurement (appropriate amount to be used)
3. Cost Assignment (where will it be pooled)
โWe have to evaluate the kind of production the firm has
โ2 Kinds of Cost Assignment methods:
i. Job Order Costing- we assign costs to every job (product itself, a client, engagement,
contract, project) because the nature allows us to assign per product; heterogenous,
specific, customized, few production
ii. Process Costing- we assign costs to processes/departments because it would be very costly
to assign costs to every product because of its number; homogenous, mass production
iii. Hybrid Costing โ mix between job order and process costing
Job Order Costing
Job Order Costing System
โCosts are accumulated by job.
โA โjobโ pertains to a single unit or multiple similar or dissimilar units that has or have been produced to
distinct customer specifications.
โEach job is treated as a unique cost entity or cost object.
Features
โActual direct materials and direct labor costs are fairly easy to identify and associate with particular jobs.
โHowever, overhead costs are usually not traceable to specific jobs and must be applied to production using
a predetermined OH rate multiplied by some actual cost driver (such as cost or quantity of materials used
or number of direct labor hours required).
โAll information pertaining to a job is contained in a Job Cost Sheet which includes a job number, job
description, customer identification, scheduling information, delivery instructions, contract price, as well as
details regarding actual costs for direct materials, direct labor, and applied overhead.
Documentation
โJob Order Sheet- done for every job that contains vital information unique to that job. It is produced by the
Production Department as documentation of their operations. It contains:
โJob number (usually prenumbered)
โDescription of the job
โContract Price
โCosts to be incurred for that job
