JOB ORDER

COSTING
Group 1
Caringal, Hannah Marie
Gayoba, Sherrie Lou
Lao, Dianne
Lastimoso, Francis Loyd
 COST ACCOUNTING
Is a system that records, summarizes, analyzes, and interprets
the details of the costs of materials, labor, and overhead
necessary to produce and sell a product.
 COST ACCOUNTING
The goal of cost accounting is to determine the product cost
which consists of total cost and unit cost. The determination of
unit cost is significant in determining (basis of) the selling price.
 PURPOSE OF COST ACCOUNTING
Cost accounting provides the management with the necessary
accounting tools for planning and controlling activities. The cost
accounting system also provides vital information needed to
plan future operations and budgeting.
 TYPES OF COST ACCOUNTING
JOB ORDER COSTING PROCESS COSTING

accounting system needed to accumulate used when there is a continuous flow of

costs of goods manufactured when goods of identical or similar
products are produced in jobs or lots of characteristics throughout the
varying quantities and types manufacturing process

The company assigns costs to each job or
to each batch of goods (small volume).
Heterogeneous, Unique, Distinct
Examples: buildings, aircrafts, personalized
jewelries, customized furnitures.
Used when a company manufactures a
large volume of similar products (mass
production).
Homogeneous, Similar, Identical
Examples: paper, calculator, automobiles.
 TYPES OF COST ACCOUNTING
a method of accounting that accumulates costs without
PROCESS COSTING allocating them to specific units of goods being
manufactured
the average cost per unit is determined by dividing the
total number of units produced by the total costs
accumulated
commonly used in manufacturing operations like cement
plants and flour mills, where production is standardized and
continuous, and the product remains essentially the same.

JOB ORDER COSTING is a method used by manufacturers to track costs for each
specific job order or lot of similar goods. It assigns a job
number and sets up a job cost sheet
the job order costing system is used when the various
items produced are sufficiently different from each other
and each has a significant cost.
 the job order costing system requires a separate job cost
JOB ORDER COSTING sheet for each item (or each job or special order)
the job order costing system requires a separate job cost
PROCESS COSTING record for each item (or each job or special order)
Several jobs or orders may be going through a factory at
the same time. Each cost sheet is given a job number which
is placed on each material requisition and labor time ticket
used in connection with the job.
Job cost accounting is well-suited for companies that
produce unique or customized products, such as
construction companies, garage repair shops, furniture
manufacturers, service organization stations, printing
presses, and fabricators
PURPOSE OF JOB ORDER COSTING
The primary purpose of job costing is to logically and accurately
assign costs per job. Once the total cost or cost per job is
computed rightfully, it can give assurance that the computation
of total cost and total profit is correct.
 MAIN CHARACTERISTICS OF JOB
ORDER COSTING
The main focus of job order costing is to accurately account for
the accumulation and assignment to specific, customized or
unique jobs. This drives better project pricing and control.
 MAJOR SOURCE DOCUMENTS FOR JOB
ORDER COSTING
These records accumulate product costs of specific units
JOB ORDER COST SHEET or small batches of units for both product costing and
control purposes
The file of job-order sheets or uncompleted jobs serves as
a perpetual book inventory and the subsidiary ledger for
Work in Process Control
A separate cost sheet is prepared for each job

These records are the perpetual book inventory of costs

MATERIALS STOCKCARD and quantities of materials on hand.
The file of materials stock cards for unused materials is the
subsidiary ledger for Materials Control.
A separate stockcard is prepared for each type of material
on hand.
 MAJOR SOURCE DOCUMENTS FOR JOB
ORDER COSTING
These records are the perpetual book inventory of costs
FINISHED GOODS and quantities of completed goods held for sale.
STOCKCARD The file of finished goods stock cards for unsold goods is
the subsidiary ledger of Finished Goods Control.

These records accumulate detailed manufacturing

FACTORY OVERHEAD overhead costs by department.
CONTROL COST RECORD The file of these records for the accounting period is the
subsidiary ledger for Factory Overhead Control.

MATERIALS REQUISITION, As the source documents for charging costs to jobs and
TIME TICKET AND CLOCK departments.
To aid in fixing responsibility for control and usage of
CARD materials and labor.
JOB ORDER COST SHEET
MATERIAL STOCK CARD

MATERIAL REQUISITION
FILE
 JOB ORDER COST FLOW
The flow of costs (direct materials, direct labor, and
manufacturing overhead) in job order cost accounting parallels
the physical flow of the materials as they are converted into
finished goods.
 JOB ORDER COST FLOW
Accumulating the manufacturing costs incurred; these costs
are accumulated in three accounts:
Raw Materials Inventory
Factory Labor
Manufacturing Overhead

Assigning the accumulated costs to Work in Process

Inventory (WIP) and eventually to Finished Goods Inventory
(FG) and Cost of Goods Sold (COGS)
 WORKFLOW
The steps in a typical cycle of operations of a firm using Job Order Costing System
are outlined below:

2 4

1 PRODUCTION 3 SELLING
Materials are transferred from Merchandise is shipped from the
the storeroom to the factory. warehouse. Sales to customers
are recorded.
PROCUREMENT
WAREHOUSING
Materials and supplies needed
for manufacturing are ordered, Finished goods are moved from
received, and stored. the factory to the warehouse to
be held until they are sold.
 RECORDING COSTS AS INCURRED
As each cost is incurred, it must be recorded in an appropriate general ledger account.
Different accounts are needed at different points in the operating cycle. The following
information includes usual account titles and numbers:

PROCUREMENT PRODUCTION WAREHOUSING SELLING

Accounts must be An account is required An account must be The cost of the

provided to record the to gather procurement set up to record the completed goods that
purchase of materials, costs as they become cost of goods that have been sold must
labor, and overhead. chargeable to have completed the be recorded. An
These costs will later manufacturing manufacturing account, Cost of
be charged to operations. This process. This account Goods Sold, is
production. account is Work in is Finished Goods. provided in the
Process. general ledger for this
purpose.
MATCHING COST FLOW AND WORK FLOW
The provision for special cost accounts sets the stage of charging costs in accordance
with the flow of work. The process can best be understood if analyzed step by step as
follows:

PROCUREMENT PRODUCTION WAREHOUSING SELLING

Purchases of Costs of materials, The cost of finished As finished goods are

materials, labor, and labor, and overhead goods transferred sold and shipped from
overhead are transferred into from Work in Process the warehouse, their
recorded as debits to production are is recorded as a debit cost is debited to
Raw Materials, Factory debited to Work in to Finished Goods. Cost of Goods Sold.
Payroll and process.
Manufacturing
Overhead Control.
 ACCOUNTING
FOR MATERIALS
Record all purchase and
issuance of materials in one account.
ILLUSTRATION

JENJEN
PRINTERS
INC.
 MATERIALS

DIRECTLY RELATED TO
FINISHED PRODUCTS
CREATION

DIRECT MATERIALS

SMALL AMOUNTS USED

IN PRODUCTION

INDIRECT MATERIALS
MATERIAL STOCK CARD
PURCHASE

ISSUANCE
MATERIAL REQUISITION SLIP
BEFORE AFTER
ACCOUNTING
ACCOUNTING
FOR
FOR LABOR
LABOR
Collection and computation of payroll data.
Distribution and allocation of labor costs to jobs.
JOB TIME TICKETS
 LABOR

MAIN WORKERS
INVOLVED IN PRODUCT
CREATION

DIRECT LABOR

ASSISTING PERSONNEL
OR SUPERVISORS

INDIRECT LABOR
COLLECTION &
COMPUTATION
DISTRIBUTION
& ALLOCATION
 ACCOUNTING
ACCOUNTING
FOR FACTORY
FOR FACTORY
OVERHEAD
OVERHEAD
Application of overhead to jobs
 Manufacturing
Overhead

FACTORY Real
OVERHEAD Measurement
CONTROL

FACTORY Predetermined
OVERHEAD overhead rate
APPLIED
MANUFACTURING
OVERHEAD
COSTS

In addition to the indirect materials and indirect labor,

other overhead costs, such as utilities , insurance, and
depreciation, totaling P23,500 were incurred during the
month
MANUFACTURING
OVERHEAD APPLIED
TO PRODUCTS

It is estimated that 80% of the direct labor cost is

chargeable to jobs worked on during the month of June.
An estimate of overhead applicable to each job must be
made because it is impossible to determine the exact
amount applicable at this point of the process.
Over/under applied
overhead - the difference
between the actual
overhead incurred and
the applied overhead.
 CLOSING ENTRIES FOR FACTORY
OVERHEAD CONTROL AND APPLIED

END OF MONTH

Factory Overhead Applied xx END OF THE YEAR

Under/over-applied overhead xx Cost of Goods Sol xx
Factory Overhead Control xx Under-over applied o xx
TRANSFER OF
FINISHED GOODS

During the month, some jobs were completed and

transferred to the finished goods warehouse. These jobs
cost P225,100.
SALE OF
FINISHED
GOODS
During the month, finished goods costing
P221,500 were sold to various customers.
 FINANCIAL
STATEMENTS
 FINANCIAL
STATEMENTS
 FINANCIAL
STATEMENTS
ANOTHER ILLUSTRATIVE PROBLEM
 ILLUSTRATIVE PROBLEM
The following information pertains to August operations:
1. Materials purchased on account, P 56,000
2. Materials issued for production, P 50,000. Of this amount, P 6,000 was for indirect materials, the difference was
distributed: P 11,000 to Job 301; P 14,000 to Job 402; and P 19,000 to Job 403
3. Materials returned to the warehouse from the factory, P 1,600 of which P 600 was for indirect materials, the balance
from Job 403.
4. Materials returned to vendors, P 2,000
5. Payroll after deducting P 6,050 for withholding taxes, P 3,200 for SSS Premiums, P 750 for Philhealth Contributions,
and P 2,400 for Pag-ibig, was P 65,600. The payroll due the employees was paid during the month
6. The payroll was distributed as follows: P 20,800 to Job 401; P 25,000 to Job 402, P 21,000 to Job 403 and the
balance represents indirect labor.
7. The share of the employer for payroll was recorded - P 4,000 for SSS Premiums, P 750 for Philhealth Contributions,
and P 2,400 for Pag-ibig Funds.
8. Factory overhead, other than any previously mentioned, amounted to P 30,000. Included in this figure were P 6,000
for depreciation of factory building and equipment, and P 1,900 for expired insurance on the factory. The remaining
overhead was unpaid at the end of August.
9. Factory overhead was applied to production at the rate of 80% of direct labor cost.
10. Jobs 401 and 402 were completed and transferred to the finished goods warehouse.
11. Job 401 was shipped and billed at a gross profit of 40% of the cost
12. Cash collections from accounts receivable during August were P 70,000
 ILLUSTRATIVE PROBLEM

Requirements:
1. Journal entries to record the above transactions
2. Job order cost sheets
3. Statement of Cost of Goods Sold.
 JOURNAL ENTRIES

1. Materials purchased on account, P 56,000

 JOURNAL ENTRIES

2. Materials issued for production, P 50,000. Of this amount,

P 6,000 was for indirect materials, the difference was
distributed: P 11,000 to Job 301; P 14,000 to Job 402; and P
19,000 to Job 403
 JOURNAL ENTRIES

3. Materials returned to the warehouse from the factory, P 1,600

of which P 600 was for indirect materials, the balance from Job
403.
 JOURNAL ENTRIES

4. Materials returned to vendors, P 2,000

 JOURNAL ENTRIES
5. Payroll after deducting P 6,050 for withholding taxes, P 3,200
for SSS Premiums, P 750 for Philhealth Contributions, and P 2,400
for Pag-ibig, was P 65,600. The payroll due the employees was
paid during the month
 JOURNAL ENTRIES

6. The payroll was distributed as follows: P 20,800 to Job 401;

P 25,000 to Job 402, P 21,000 to Job 403 and the balance
represents indirect labor
 JOURNAL ENTRIES

7. The share of the employer for payroll was recorded - P

4,000 for SSS Premiums, P 750 for Philhealth Contributions,
and P 2,400 for Pag-ibig Funds.
 JOURNAL ENTRIES

8. Factory overhead, other than any previously mentioned,

amounted to P 30,000. Included in this figure were P 6,000 for
depreciation of factory building and equipment, and P 1,900 for
expired insurance on the factory. The remaining overhead was
unpaid at the end of August.
 JOURNAL ENTRIES

9. Factory overhead was applied to production at the rate of

80% of direct labor cost.
 JOURNAL ENTRIES

10. Jobs 401 and 402 were completed and transferred to the
finished goods warehouse.
 JOURNAL ENTRIES

11. Job 401 was shipped and billed at a gross profit of 40% of
the cost.
 JOURNAL ENTRIES

12. Cash collections from accounts receivable during August were

P 70,000.
STATEMENT OF
COST OF
GOODS SOLD
 REFERENCES

De Leon, N. D., De Leon, E. D., & De Leon, G. M. (2019).

Cost Accounting and Control. GIC Enterprises & Co., Inc.

Guerrero, P. P. (2018). Cost Accounting, Principles and

Procedural Applications. GIC Enterprises & Co., Inc.
THANK YOU