Cost
JOB ORDER COSTING
Job order costing presupposes the possibility of
physically identifying the jobs being manufactured
and charging each job with its own cost. The
detailed records showing the costs of each job
constitute a subsidiary ledger supporting the
general ledger’s work in process account.
Job order costing is useful and widely acceptable
for business engaged in made-to-order work in
factories, workshops, and repair shops,
constructions or construction engineers, printing,
aircraft manufacturing, and for service businesses
such as legal, medical, architectural, accounting
and consulting firms.
Job order costing method is the accumulation of
costs by specific jobs (i.e., physical units, distinct
batches, or job lots) . This costing method is
appropriate if a product can be produced
separately distinct from the other jobs which
require different amount of materials, labor and
overhead.
In job order costing, each job is an accounting unit
which materials, labor and factory overhead costs
are assigned by means of job order numbers.
MAJOR SOURCE DOCUMENTS FOR JOB ORDER
COSTING
1. Job – order cost sheet
2. Materials stock card
3. Finished Goods stock card
4. Factory overhead control cost record
5. Materials requisition, time ticket and clock card
ACCOUNTING PROCEDURES FOR MATERIAL
Procedures that affect the materials account involves:
1. Purchase of materials and supplies
2. Issuance of materials and supplies
a. Direct materials
b. Indirect materials and supplies
RECORDING THE PURCHASE OF MATERIALS
Entry :
Materials xx
Accounts Payable xx
Note : An entry is made on the Material stock card
under the received section -perpetual book inventory of
costs and quantities Of materials on hand subsidiary
ledger for material control (Stock card For unused
materials separate stock card is prepared for each type
of Materials on hand
RECORDING THE RETURN OF MATERIALS TO VENDOR
Entry
Accounts Payable xx
Materials xx
Note: An entry is made on the stock card under the
received section enclosed in parenthesis to indicate
reduction in quantity.
Material Requisition
As a source documents for charging costs job
Aid in fixing responsibility for control and usage
of materials
Job order cost sheet
As a source documents for charging costs job
Aid in fixing responsibility for control and usage
of materials
ACCOUNTING PROCEDURE FOR LABOR
Divide into two distinct phases:
Collection of payroll data, computation of
earnings, calculation of payroll taxes, and
payment wages
Distribution and allocation of labor costs to
jobs, departments, and other cost classifications
Clock cards/time record are used to record the days or
hours worked by each employee. This are used in
computing the gross earnings of employees who are
paid hourly wages.
Time tickets are prepared for each worker to determine
the time spent for each job as basis in determining the
amount to be charged to direct labor cost and indirect
cost.
