JOB ORDER -

DIRECT LABOR

LESSON OBJECTIVES:
1. EXPLAIN THE DIFFERENT WAGE PLANS.
2. 2. ACCOUNT FOR LABOR COSTS AND
SPECIAL PAYROLL COST PROBLEMS.
 DEFINITION: a costing method that is used to determine the cost of manufacturing each product.
This costing method is usually adopted when the manufacturer produces a variety of products that
are different from one another and needs to calculate the cost of doing an individual job.

• Determine the price of each

JOB individual product.
ORDER • Ensures cost is reasonable enough for
COSTING customers to purchase and company
to profit.
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 1 2
DIRECT LABOR INDIRECT LABOR
- The labor cost of employees directly - The cost of work not directly traceable to
involved in the manufacturing process. the production of the product but is still
-Machine operators, assembly line workers. related to the production process.
- Factory supervisor, inventory clerks,
timekeepers, janitor

PAYROLL COSTS

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 01
EXPLAIN THE
DIFFERENT WAGE
PLANS
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 COMMON WAGE PLANS
HOURLY RATE PLAN
• The employee’s wages are
calculated by multiplying the
established rate per hour by the
number of hours worked.
• This plan does not provide an
incentive for the employee to
achieve a high level of
productivity.
PIECE-RATE PLAN
• Employees’ wages are based
on the employer’s quantity of
production.
• The number of units produced
is multiplied by a
predetermined rate.
• May be referred to as
incentive wage plan or piece-
rate plan.
MODIFIED WAGE PLAN
• Minimum hourly wage is set
even if an established quota is
not attained.
• If quota is exceeded, a bonus is
added to the minimum wage
level.
• On days when the quota is not
met, The difference (make-up
guarantee) would be charged to
factory overhead.
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HOURLY RATE PLAN

Mr. Ricky is a construction worker that Established rate per hour x Number of hours worked =
earns $15 per hour. If Mr. Ricky works $15 per hour x 10 hours x 5 days =
10 hours a day for five days, How much $15 per hour x 50 Hours =
is his wage for the week? $750 total earnings

PIECE-RATE PLAN

Meredith is paid on a per-piece basis at

the rate of $1.50 per piece. For the
week,
Meredith finished the following Number of units produced x Predetermined rate =
quantities:
43+59+65+72+81 x $1.50 =
MONDAY - 43 320 x $1. 50 =
TUESDAY - 59 $480 total earnings
WEDNESDAY - 65
THURSDAY - 72
FRIDAY – 81

How much is her total earnings? 6

MODIFIED WAGE PLAN

Under a modified wage plan, an employee earns 2.40 for each finished unit and is
guaranteed 120 per hour. The daily quota is 400 units.

DAYS HOURS UNITS HOURLY RATE GUARANTEE 2.4 PER EACH MAKEUP
WORKED PRODUCED WAGE UNIT GUARANTEE

01 8 400 120 960 960  

02 8 360 120 960 864 96
03 8 420 120 960 1008  

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 LABOR TIME RECORDS PAYROLL FUNCTION

- Given the magnetic card reading technology available - Primary responsibility is to compute the wages
today, the time record typically takes the form of a and salaries earned by the employees.
computer file.
- Forms should include a payroll record and
- The labor hours recorded should be reviewed by a employee’s earning records.
production supervisor for accuracy.
- A summary of payroll is sent to accounting to
record the payroll in the accounting records.

-The payroll record is sent to the treasurer’s

department for making payments to employees.

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 02
ACCOUNT FOR LABOR COSTS
AND
SPECIAL PAYROLL COST
PROBLEMS
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 • Basic salaries of workers
INCLUSION • Overtime pay
TO • Bonuses for exemplary
LABOR performance
COST • SSS, PhilHealth, PAG
IBIG
• Medical Benefits
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PROPER COSTING OF LABOR
TIME CARD TIME TICKET

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PRODUCTION REPORT
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 SUMMARY OF PAY INFORMATION

Payroll - a calculation of Pay slip - a document

all employees’ that explains the
compensation, taxes, components of an
deduction, and net individual’s pay for a
payment for a certain certain time period.
time period. The formal
document to present
payroll is called a payroll
register.
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 SPECIAL CONSIDERATIONS
1. A standard minimum wage can be paid to an employee but can increase if
a worker can produce more units.

2. When the job is rushed, overtime pay is normally encountered to cover the
extra hours the workers have rendered. Normally, overtime premium is
charged to overhead. However, if because of rush jobs, it is inevitable, the
whole overtime pay is charged to production.

3. Workers in a shift different from the normal 8 AM – 5 PM shift are paid a

special premium rate charged to the factory overhead.

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Journal entry to record payroll

Payroll xx
Income Tax Payable (employees) xx
SSS Payable xx
PhilHealth Payable xx
PAG-IBIG Payable xx
Other Employee Deductions xx
Wages Payable xx

Payroll will be distributed to different accounts that is applicable for the incurrence

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 FUNDAMENTALS OF PAYROLL
STEP 1: STEP 3:

Basic pay xx SSS Contribution xx

Less: Lates and absences (xx) PhilHealth Contribution xx
Add: Overtime pay xx Pag-Ibig Contribution xx
Add: Other taxable income xx Withholding tax xx
Add: Other non-taxable income xx Other deduction xx
GROSS PAY xx TOTAL DEDUCTION xx

STEP 2: STEP 4:

Gross Pay xx Gross pay xx

Less: SSS Contribution (xx) Less: Total deduction (xx)
PhilHealth Contribution (xx) NET PAY xx
Pag-Ibig Contribution (xx)
Other nontaxable income (xx)
TAXABLE INCOME xx 16
 PAYMENT OF EARNINGS TO EMPLOYEES

ACCOUNTING TREASURER’S EMPLOYEES

DEPARTMENT DEPARTMENT

Payroll xx
Wages Payable xx
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SUBSIDIARY RECORDS TO
GENERAL LEDGER

LABOR – TIME RECORDS

 JOB COST SHEETS
 FACTORY OVERHEAD SHEETS
 LABOR COST SUMMARY
 GENERAL JOURNAL AND
GENERAL LEDGER

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LABOR COST SUMMARY
 Hourly workers should be recording their time on a labor time record.
 Labor costs are recorded on a labor cost summary.
 This summarizes the direct labor and indirect labor charges to the
department for the period.
 Salaried employees are often not required to prepare labor time records.

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The labor cost summary becomes the source for making a general journal entry, shown below, to
distribute payroll to the appropriate accounts.

PAYROLL ACCRUAL
Payroll xx
Wages Payable xx
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  SHIFT PREMIUMS

 EMPLOYEE PENSION
SPECIAL
LABOR COST  BONUSES
PROBLEMS
 VACATION AND HOLIDAY
PAY
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WORK IN PROCESS XX
FACTORY OVERHEAD (BONUS) XX
FACTORY OVERHEAD (VACATION) XX
FACTORY OVERHEAD (HOLIDAY) XX

PAYROLL XX
BONUS LIABILITY XX
VACATION PAY LIABILITY XX
HOLIDAY PAY LIABILITY XX

Incurred payroll and bonus, vacation, and holiday pay.

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 MEMBERS:
COROÑA, MA. FRANCHESCA
ANTONIO, JOY-ANN
ELIZABETH
GASPAR, ELIEZER
PACYAAN, ANGELICA
VALMADRID, MARIA RAVEN
JOY
REFERENCES:
PAGUINTO, CRISTIAN KARL
https://www.zoho.com/inventory/guides/what-is-job-order-costing.html#:~:text=Job%20order%20costing%20is%20a,for%20doing%20an%20individual%20job.
https://www.youtube.com/watch?v=UxtC0duAYBs
https://www.youtube.com/watch?v=_Yg6yPqgmbQ&t=225s