CHAPTER 3 : JOB COSTING

REQUISITION DEPT PRODUCTION DEPT ACCOUNTS DEPT SELLING&MKTG DEPT

a DIRECT MATERIAL g Job Sheet 1 i

WIP Job Sheet 2 FINISHE
DIRECT LABOUR b D GOODS

DIRECT EXP/OH c
j -1 j -2

h COGS
SALES

INDIRECT MATERIAL d
MFTG
INDIRECT LABOUR e OH

INDIRECT OH f

# OH over /under absorbed

Transaction and journal in each step:

(a) when u buy DM either cash /credit from supplier

Journal :- DR RAW MATERIAL CR CASH/AC PAYABLE
(b) when u employ DL
Journal :- DR WIP CR WAGES PAYABLE

( c) when u incur direct expenses either cash/credit

Journal :- DR WIP CR CASH/AC PAYABLE

(d) when u buy indirect material either cash /credit from supplier
Journal :- DR MFG OH CR CASH/AC PAYABLE

(e)when u employ indirect labour

Journal :- DR MFG OH CR WAGES PAYABLE

( f) when u incur indirect expenses eg acc depreciation, prepaid insurance

Journal :- DR MFG OH CR ACC DEPRECIATION/PREPAID INSURANCE

when u incur indirect expenses eg utilities, factory rental

Journal :- DR MFG OH CR AC PAYABLE / CASH

(g) when u transfer direct material to WIP

Journal :- DR WIP CR RAW MATERIAL

(h) when u allocate and transfer manufacturing OH to WIP (using predetermined rate of OH)
Journal :- DR WIP CR MFG OH

(i) when u complete the job cost sheet, this cost will transferred to finished goods a/c

Journal :- DR FINISHED GOODS CR WIP

(j) when goods are sold to customer

Journal :- 1- DR COGS CR FINISHED GOODS
 Journal :- 2- DR AC RECEIVABLES/CASH CR SALES

# OVER/UNDER ABSORBED IN OH
 Arise coz actual OH and absorbed OH (using predetermined OH rate) are usually different.
 Actual OH > Absorbed OH = under absorbed
 Actual OH < Absorbed OH = over absorbed
 Acctg treatment : to eliminate this differences , u either transfer to COGS or Prorate to COGS,FINISHED GOODS &WIP

HOW TO DO?
U ARE GIVEN THE Q AS BELOW. USE THE DIAGRAM ABOVE TO IDENTIFY
WHERE ARE THE STEPS,,THEN LOOK AT THE JOURNALS INVOLVE.. AFTER A
FEW EXERCISES, U WONT NEED TO MEMORISE THE JOURNALS..
IN EXAM HALL,,,THINK OF THE JOURNALS BY VISUALISING THE DIAGRAM
AS AN AID TO IDENTIFY THE STEPS….
TRY IT..PRACTISE TO PERFECTION..

1. Bought direct material from suppliers with the invoice price paid of RM35,000.

2. Utilised indirect material of RM46,000 for the operation in the month of December.

3. The company has involved a total of RM3,100 for labour cost for the month of December 2007. A total of RM1,908 is for
the indirect labour and its balance is for direct labour.

4. Paid the following expenses by cash for the month of December 2007:
RM
Utilities 780
Rental of equipment 110
 Electricity 220

5. During the month of December, the company has utilised 24,500 actual direct labour hours and involved a total of
RM231,500 actual overhead costs in the operation of the month.

6. The ordered clothes that have been sewn of RM9,460 was transferred to the warehouse while waiting for delivery to
customers.

REQUISITION DEPT PRODUCTION DEPT ACCOUNTS DEPT SELLING&MKTG DEPT

1 DIRECT MATERIAL Job Sheet 1 6

WIP Job Sheet 2 FINISHE
DIRECT LABOUR 3 D GOODS

DIRECT EXP/OH

5
COGS
SALES

INDIRECT MATERIAL 2
MFTG
INDIRECT LABOUR 3 OH

INDIRECT OH 4
# OH over /under absorbed