Job Order Costing

Job-Order Costing and

Process Costing
Job-order costing allocates costs
to products that are identified by
individual units or batches.

Process costing averages costs

over large numbers of nearly
identical products.
 JOB ORDER
 is used in those manufacturing situations where many
different products, jobs, or batches of production are being
produced each period.

 It collects all manufacturing costs and assigns them to

specific jobs or batches of product.

 It measures costs for each completed job, rather than for set
time period.

 It uses just one Work in Process Inventory Control account in

the general ledger.
 Job-Costing System Example
Job-Order Costing, General Flow of Costs (in 000)
Problem 1
1. Materials 84,000
Accounts Payable 84,000

2. Work in process 66,000

Factory OH Control 9,000
Materials 75,000

3. Materials 2,400
Work in process 1,500
Factory OH Control 900

4. Accounts Payable 3,000

Materials 3,000

5. Payroll 117,000
WT Payable 9,075
SSS Premiums Payable 4,800
PH Premium Payable 1,125
PAG-IBIG Premium Payable 3,600
Accrued Payroll 98,400
 Accrued Payroll 98,400
Cash 98,400

6. Work in process 100,200

Factory OH Control 16,800
Payroll 117,000

7. Factory OH Control 10,725

SSS Premiums Payable 6,000
PH Premium Payable 1,125
PAG-IBIG Premium Payable 3,600

8. Factory OH Control 45,000

Accum. Depr – Factory B & E 9,000
Prepaid Insurance 2,850
Accounts Payable 33,150

9. Work in Process 80,160

Factory OH Applied 80,160
100,200 x 80%
10. Finished Goods 216,660
Work in Process 216,660

Job 401 Job 402 Total

WP beg. 22,500 33,000 55,500
Added
DM 16,500 21,000 37,500
DL 31,200 37,500 68,700
FOA 24,960 30,000 54,960
Total 95,160 121,500 216,660

11. Accounts Receivable 133,224

Sales 133,224

Cost of Goods Sold 95,160

Finished Goods 95,160

12. Cash 105,000

Accounts Receivable 105,000

13. Factory overhead applied 80,160

Cost of Good sold 465
Factory overhead control 80,625
 Job 401
DM DL FO
9,000 7,500 6,000
16,500 31,200 24,960
25,500 38,700 30,960 95,160

Job 402
DM DL FO
16,800 9,000 7,200
21,000 37,500 30,000
37,800 46,500 37,200 121,500

Job 403
DM DL FO
28,500 31,500 25,200 83,700
( 1,500)
3 Statement of Cost of Goods Manufactured and Sold

Materials, beginning 66,000

Add Net purchases (84,000-3,000) 81,000
Total Available 147,000
Less: Materials, ending 7 4,400
Materials Used 72,600
Less Indirect Materials Used ( 9,000- 900) 8,100
Direct materials used 64,500
Direct labor 100,200
Factory overhead applied 80,160
Total manufacturing cost 244,860
Work-in-process,beginning 55,500
Total Goods put into process 300,360
Less work-in-process, ending 83,700
Total cost of goods manufactured 216,660
Finished goods, beginning 75,000
Total available 291,660
Less Finished goods, ending 196,500
Cost of good sold-normal 95,160
Add under applied overhead 465
Cost of good sold, actual 95,625
Problem 2
1. FOH rate = FO 1,920 3,900
DL 3,200 6,500
= 60% of DLC = 60% of DLC

2. Job No.1 Job No.2 Total

DM 8,000 15,000 23,000
DL 3,200 6,500 9,700
FO 1,920 3,900 5,820
TOTAL 13,120 25,400 38,520

3. JOB No. 1 1,200 x 60% = 720

JOB No. 2 3,150 x 60% = 1,890
JOB No. 3 7,500 x 60% = 4,500
JOB No. 4 2,700 x 60% = 1,620
Total factory overhead applied 8,730

4. Job 1 Job 2 Job 3 Total

WP beg. 13,120 25,400 38,520
DM 3,000 8,500 18,000 29,500
DL 1,200 3,150 7,500 11,850
FO 720 1,890 4,500 7,110
CofGM 18,040 38,940 30,000 86,980
5. Cost of Jobs sold - Job No. 1 18,040
Job No. 3 30,000
Share – Under -applied OH
5,220/8,730 x 2,910 1,740
Cost of goods sold – actual 49,780

6. Job No. 2 38,940

Share – Under-applied OH
1,890/8,730 x 2,910 630
Finished goods inventory 39,570

7. Job No. 4
DM 9,500
DL 2,700
FO 1,620
Share – Under-applied OH
1,620/8730 x 2,910 540
Work in process inventory 14,360
Problem 3

1. Raw and In Process 1,050,000

Accounts Payable 1,050,000

2.` Finished Goods ` 1,050,300

Raw and In Process 1,050,300

Mat. Purchased 1,050,000

Mat cost in RIP beg. (42,000-18,600) 23,400
Mat cost in RIP end (67,200-44,100) ( 23.100)
Mat. cost of units completed 1,050,300
3. Cost of goods sold 1,047,900
Finished Goods 1,047,900

Mat. cost of units comp. 1,050,300

Mat cost in FG beg. (54,000-28,500) 25,500
Mat cost in FG end (59,400-31,500)( 27,900)
Material cost of units sold 1,047,900

4. Cost of goods sold 891,000

Payroll 375,000
FO Applied 516,000

5. Raw and In Process 25,500

Finished Goods 3,000
Cost of goods sold 28,500

RIP FG
Balance end 44,100 31,500
Balance beg. (18,600) (28,500)
Increase (decrease) 25,500 3,000
Problem 4

1) Original costs:
Direct materials (50 x P 240) P 12,000
Direct labor (50 x P 582) 29,100
Factory overhead (29,100 x 100%) 29,100 P 70,200
Additional cost
Direct materials 291
Direct labor 375
Factory overhead 375 1,041
Total costs P 71,241
Less: Proceeds from spoiled (4 x 1,200) 4,800
Cost of completed units P 66,441
Unit cost 66,441/46 P1,444.37
2) ENTRIES

a) Work in process 70,200

Materials 12,000
Payroll 29,100
Factory OH Applied 29,100

b) Work in process 1,041

Materials 291
Payroll 375
Factory OH Applied 375

c) Cash 4,800
Work in process 4,800

d) Finished goods 66,441

Work-in-process 66,441
3) Original cost
Direct materials P 12,000
Direct labor 29,100
Factory overhead applied 29,100
Total cost 70,200
Less: Cost of spoiled (4 x 1,404) 5,616
Cost of completed units P 64,584

ENTRIES
a) Work in process 70,200
Materials 12,000
Payroll 29,100
Factory overhead applied 29,100
b) Factory OH Control 1,041
Materials 291
Payroll 375
Factory overhead applied 375
c) Cash 4,800
Factory overhead control 816
Work in process 5,616
d) Finished goods 64,584
Work-in-process 64,584
Problem 5
a) Direct method
Producing_ Service
P1__ P2__ S1__ S2__
Budgeted FO P564,000 P510,000 P135,000 P105,600
Allocated S1 60,000 75,000 (135,000)
S2 66,000 39,600 (105.600)
Total P690,000 P624,600
Base 20,000DLHrs 15,000MHrs.
FO rate P34,50/DLH P41.64/MHr.

b) Step method
Producing_ Service
P1__ P2__ S1__ S2__
Budgeted FO P564,000 P510,000 P135,000 P105,600
Allocated
S1 54,000 67,500 (135,000) 13,500
S2 74,438 44,662 (119,100)
Total P692,438 P622,162
Base 20,000DLH 15,000MH
FO rate P34.62/DLH P41.48/MHr.
c) Algebraic method

S1 = 135,000 + 20%S2
S2 = 105,600 + 10%S1

S1 = 135,000 + 20% (105,600 + 10%S1)

= 135,000 + 21,120 + .02S1
= 156,120/.98
= 159,306

S2 = 105,600 + 10%(159,306)
= 121,530
Producing_ Service
P1__ P2__ S1__ S2__
Budgeted FO P564,000 P 510,000 P 135,000 P105,600
Allocated
S1 63,723 79,653 (159,306) 15,930
S2 60,765 36,459 24,306 (121,530)
Total P688,488 626,112
Base 20,000DLHrs. 15,000MHrs.
FO rate P34.42/DLH P41.74/MHr
Problem 6

Product A Product B
1. DM (50x 120) P 6,000 (100x120) P 12,000
DL 2,000 8,000
FO (100 x 25) 2,500 (400 x 25) 10,000
Total cost P10,500 P 30,000
Cost per unit P 210 P 300
Factory overhead rate = 200,750/8,030 = P25/DLHr.
2. Product A Product B
DM 6,000 12,000
DL 2,000 8,000
FO- MH (20xP50) 1,000 (50 x P50) 2,500
S&S ( 5 x P200) 1,000 ( 8 x P200) 1,600
DC ( 2 x P107.50) 215 ( 5 x P107.50) 537.50
NofP(10 x P100) 1,000 (15 x P100) 1,500
Total costs 11,215 26,137.50
Cost per unit P224.30 P 261.38
Multiple Choice
1. A

Materials cost in RIP, Materials cost in

beg P 26,250 FG, beg P 20,000
Materials Materials cost of
purchased/processed 562,500 unts completed 561,250
Materials cost in RIP, Materials cost in
end (27,500) FG, end (17,500)
Materials cost of Materials cost of
completed units P561,250 sold units P 563,750

2. A
Raw Materials purchased P1,290,000
Increase in materials inventory (45,000)
Materials used P1,245,000
3. B
MSU : P 20,000 / 200 su = P100 per isu (100 X 4) P 400
INSP : P130,000 / 6,500 insp = P 20 per insp ( 20 x 30 600
MH : P 80,000 / 8,000 moves = P 10 per move ( 10 x 50) 500
ENG : P 50,000 / 1,000 eng hrs = P 50 per eng hr ( 50 x 10) 500
Total 2,000

4. D
Prime cost : P 90,000 + P 60,000 P 150,000
Conversion cost : P 60,000 + P 80,000 140,000
Total Mfg Cost : P 90,000 + P 60,000 + P 80,000 230,000
COGM : P 230,000 + P 18,000 – P 12,000 236,000

5. C
Indirect Materials (P120,000 x 20%) P 24,000
Indirect labor 33,000
Other overhead items 36,000
Total actual factory overhead P 93,000

6. C
Direct materials (120,000 x 25%) P 30,000
Direct Labor (4,200 direct labor hours x P8.50) 35,700
FO Applied (P 35,700 direct labor cost x 120%) 42,840
Total Cost P 108,540
Sales 200,000 25,000/ 12.5%
COGS, actual 149,800
Gross Profit 50,200
OPEX 25,000
Net Income 25,200

Cost of GS normal 150,000

Adj: over applied OH (200)
Cost of GS, actual 149,800
7. D
Materials, beginning 41,000
Add Net purchases 46,000
Total Available 87,000
Less: Materials, ending 50,000
Materials Used 37,000
Less Indirect Materials Use 1,000
Direct materials used 36,000
Direct labor 84,000 ( 63,000/ 75%)
Factory overhead applied 63,000
Total manufacturing cost 183,000
Work-in-process,beginning 80,000
Total Goods put into process 263,000
Less work-in-process, ending 95,000
Total cost of goods manufactured 168,000
Finished goods, beginning 60,000
Total available 228,000
Less Finished goods, ending 78,000
Cost of good sold-normal 150,000
8. C
Original Cost (9,000 + 4,800 + P 3,750) P 17,550
Additional rework cost (P1,500 + P800 + P60) 2,360
Total cost after rework p 19,910
Divided by units produced 5,000
Unit cost P 3.982

9. D
FO Applied (P 22,800 less total direct cost of P19,500) P 3,300
Divided by direct labor cost (P 3,000 + P 2,500) 5,500
FOR 60% of DLC
Total Mfg cost DM (3,000 + 2,000 + 6,000 + 4,500) P 15,500
DL (1,000 + 1,500 + 2,600 + 2000) 7,100
FO (P 7,100 X 60%) 4,260
26,860
add: work in process, beg 22,800
total goods put into process P49,660
10. C
Total goods put into process (see item 9) P 49,660
Less Work-in-process, end
#102 (8,000 + 2,500 +1,500 +2,000 +1,500 +900) P 16,400
#104 (4,500 + 2,000 + 1,200 ) 7,700 (24,100)
COGM P 25,560

11. C
Work-in-process, 12/31/14 P 9,000
Less: FO P 2,250
Direct Labor (2,250 / 90%) 2,500 ( 4,750)
Direct material cost P 4,250

12. A
Overhead Rate (180,000 + 215,000 + 38,000) / 80,000 mh P5.4125/mh
FO applied (74,000 mh x P 5.4125) P 400,525
FO actual 387,875
Overapplied P 12,650