• It is a system for assigning manufacturing costs to

an individual product or batches of product.

• Used only when the products manufactured are

sufficiently different from each other.
Some companies that use job order costing
include:

•Accounting, consulting and legal firms

•Architects
•Book publishers
•Movie producers
To track:
- Job number
- Customer Information
- Job information
- Individual cost information for: DM, DL, OH
- To assure that materials costs
are properly allocated to jobs in
process.
- Labor costs are allocated to WIP based on the
completion time tickets.

- To identify what job a worker spent on time.

- These costs are allocated to jobs in process using a
predetermined overhead rate.
Example:

Direct Labor = P 250,000

Total Overhead Costs = P 300,000
Predetermined OH rate = ?

If direct labor costs P 10,000 for the month, then

overhead of P 12,000 would be allocated to WIP
inventory.
 Frances Corporation conducted a regression analysis of its factory overhead
costs. The analysis yielded the following cost relationship:

Total factory overhead costs = P 50,000 per month + 5H

Where, H = number of direct labor hours, the selected cost driver for
overhead costs.

Each unit of product requires 6 direct labor hours. The company’s normal
production is 20,000 unites of product per year.

1, What is the total overhead cost for a month’s production of 2,000 units? P 110,000
2. What is the predetermined fixed overhead rate per hour? P 5
3. What is the total predetermined factory overhead rate per hour? P 10