ACG 4361

Job Costing Concepts

Prepared by
Diane Tanner
University of North Florida 1-6
 Methods of Tracking Costs
Process Job
Costing Costing

 Homogeneous products  Manufactured to order

manufactured  Costs are traced or allocated
 Costs are traced or to jobs
allocated to each process  Separate cost records for
 Examples: Dog food, each distinct ‘job’ or project
frosted flakes, canned  Examples: Patients, printing
green beans, CocaCola orders, buildings, audit, law
case
Operation  For products with differing materials and similar
Costing processes
 Material costs are traced while conversion costs
are allocated
 Examples: Men’s suits, Cheerios flavors, wine
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 Overview of Job Costing
 Also called job order costing
 Appropriate for production of
 Tangible items/projects—ships,
bridges, cabinets, etc.
 Services—tax returns, lawn care,
criminal law cases, etc.
 Involves accumulating costs by ‘job’
usually for a particular order, project, or
batch
 Normal costing is often used to apply ABC
MOH may be
 Applied using a budgeted overhead used
rate based on actual activity
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 Cost Flows
Flow of costs is the same under all cost accumulation
systems--job costing, process costing, and operation
costing: RM → WIP → FG → CGS

Inventory Accounts
 Raw Materials
 Contains costs of materials acquired to be used on jobs
 Work in process
 Contains costs of partially completed jobs
 Finished goods
 Contains completed jobs, not yet sold or delivered to
customers 4
 Job Cost Accounting
 General ledger
 One WIP ‘control’ account
 Subsidiary ledger
 Used to track individual job costs
 Consists of multiple job cost sheets
 One cost sheet (subsidiary account) for each job
 Month end: Reconcile general ledger account
balance with the subsidiary ledger
WIP Control Account in
WIP Subsidiary ledger the General ledger
Total costs posted to Total costs posted to the
all 'jobs‘ = control account
Total account Balance of the control
balances of all jobs = account
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 Tracking Job Costs
Job cost sheet
The primary document for tracking individual job costs
Direct Job Cost Sheet
Job Number A - 143 Date Initiated March 3
Materials Date Completed
Traced from Department B3 Units Completed
Item Wooden cargo crate
material
Direct Materials Direct Labor Manufacturing Overhead
requisition Req. No. Amount Ticket Hours Amount Hours Rate Amount
forms

Cost Summary
Direct Materials
Direct Labor
Manufacturing overhead
Total Cost
Direct Labor Unit Cost
Traced from
time tickets Manufacturing Overhead
Applied using an overhead rate
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 Journal Entries in Job Costing
• Entries are recorded in the same manner as
basic product costing
 Direct materials recorded as used
 Materials requisition forms
 Direct labor is recorded when incurred
(typically at each payroll date)
 Labor time tickets
 Overhead is applied using an overhead rate
as the activity is incurred

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 Subsidiary Ledger
• Individual costs are posted to each job in the WIP
subsidiary ledger.
• The total of direct material, direct labor, and overhead
applied is posted to each job cost sheet (represented
by subsidiary t-accounts here for simplicity)
WIP Control WIP - Job 27 WIP - Job 28 WIP - Job 30 WIP - Job 31
BB 1,360 800 560
DM 2,110 570 440 780 320
DL 2,265 450 840 600 375
OH 1,812 360 672 480 300

5,687 2,180 2,512 995

1,860 0 0 1,860 0

 The balance of the WIP control account must equal the

balance of the jobs in the WIP subsidiary ledger.
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 Job Costing Example
Sanja Enterprises uses job costing and applies overhead based on machine
hours. Sanja’s budgeted annual information follows:
Direct labor cost 14,800 hours @ $14.60 per hour
Factory overhead $248,492
Machine hours 8,875 machine hours
Actual data for Job 178
Direct materials requisitioned $400
Direct labor hours 70 hours @ $15.20 per hour
Machine hours 42 machine hours
Actual annual direct labor cost for all jobs $220,200
Actual annual manufacturing overhead cost $247,000
Determine the total cost of Job 178.
WIP – Job 178
Direct labor = 70 × $15.20 = $1,064 Direct materials 400
Direct labor 1,064
POHR = MOH ($28 × 42) 1,176
$248,492 = $28.00/MH
8,875 $2,640
The End

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