Job Order Costing

Midterm
Job order costing
Each job is an accounting unit to which materials,
labor, and FOH (applied) costs are assigned by means
of job order number.
Cost Sheet
Material Stockcard
Finished Goods Stockcard
Factory Overhead Control Cost Record (Actual Costs)
Materials Requisition, Time ticket
Review of Accounting for costs of Materials
Recording of Purchases – Materials
Monitoring thru – Material Stock Card
Issuance of Direct Materials to Production units
Material stock Card
Issuance of Indirect Materials to Production units
Materials Requisition Form/Slip- going to Warehouse
Accounting for labor
Recording of Payroll
Reclassification or allocation of labor costs to
production units or departments ( direct and indirect).
Basis – Time ticket
Accounting of FOH
FOH-Control
Recording of actual cots of indirect labor, materials, etc.
FOH-Applied
Closing of over and under applied FOH
Take note of
WIP per Job
Finished Goods per Job
COGS for ALL
Cost Sheet JOB 101
Materials Labor Overhead (applied)
xxx xxx xxx

JOB 102
Materials Labor Overhead (applied)
xxx xxx xxx
Additional considerations for:
Defective units – with imperfections needing reworks with
additional costs for all or either materials, labor and Foh A.
After reprocessing this will REMAIN part of the total
production units.
Spoiled units – with imperfections that cannot be
economically corrected hence, deducted from total
production units. Might have resale value.
Scrap Materials – consists of recycle materials, remaining
material cut-outs and does DECREASE nor INCREASE the
total production units. Might have monetary value.
Waste Materials – do not affect the number of
proproduction units.
Treatment for Defects and Spoilages in Job
Order Costing)
Main issue is how to charge
(1) additional costs incurred for defective units
(2) unrecovered costs resulting from spoiled units
(3) Both may either be charged to:
 Specific Job(Customer’s Fault or Specification) or beyond the
normal limits for defective units
 Or charged to ALL production ( Internal Failure) or within the
normal limits for defective units.
Question?
What account should be debited or charged for
additional cost of reworks, scrap or waste materials

Under Specific Job Method

Work-in-Process

Under Charged to all production

FOH - Control
Question?
 If the problem is silent, as to what method must be used to account for
defects, spoiled, scrap, and waste materials but the NORMAL number
of defective units, spoiled units, scrap and waste materials was
MENTIONED or GIVEN

Actual Defects, spoiled, scrap, and or waste materials

ANSWER? Specific Job

ARE BELOW the NORMAL OR EXPECTED UNITS use :

ANSWER?
Charged to all production
FOH Applied – include or exclude the allowance for
defective units or the allowance for spoiled units.
IF FOH Rate is 50 which includes P5 allowance for defective units/spoiled
units

 Charged to specific job (Customer’s fault) –

“FOH Applied excludes allowance for spoiled work”
“ FOH Applied excludes allowance for defective units”
IF FOH Rate is P45/unit

 Charged to all production – caused by internal failure account being debited.

“ FOH Applied includes allowance for spoiled work “
“ FOH Applied includes allowance for defective units “

IF FOH Rate is P50/unit

Solve: 8points
 April Fools Corp incurred the following cost for Job 14344.

Original cost accumulation for 100 production units:

Direct Materials unit cost 100
Direct Labor unit cost 150
FOHA 150% of DL
(which already includes allowance of P10 for reworks ) 235

Direct cost of reworking 10 units:

Direct materials P 2,000
Direct labor 4,000
Provide the following
Using Charged to all production and Specific job.
Journal Entry to record the original costs
Journal Entry to record the cost of reworks
Compute the unit cost before reworks
Compute the unit cost after reworks
Journal Entries (under Specific Job)

WIP 47,500

Materials (100 x 100u) P 10,000

Payroll (150xx 100u)
FOH A (225 100u ) 15,000
22,500

Reworks

WIP 6,000
Materials 2,000
Payroll 4,000
Journal Entries
(under Charged to all production)

WIP P48,500

Materials (100 x 100u) P10,000

Payroll (150x 100u ) 15,000
FOH A (235 x 100u) 23,500
Reworks
FOH C 6,000
Materials 2,000
Payroll 4,000
Journal Entries
 UNIT COST under Specific Job Charging

Materials (100 x100u)

Payroll (150x 100u ) Unit Cost if w/out reworks (100+150+225) =475
FOH A (225 x 100u)
If with reworks (100+150+225)100+6000/100
 Reworks
=595
Materials 2,000
Payroll 4,000

Entry to Record Cost of Reworks/Defective units under Charged to all production

WIP
Materials (100 x100u) Unit Cost if w/out reworks (100+150+235) =485
Payroll (150x 100u ) If with reworks (100+150+225)100+ =485
FOH A (235 x 100u)

 Reworks
FOH C 6,000
Materials 2,000
Payroll 4,000
Accounting for Scrap work
 During April, Fools Corp incurred the following cost of Job 14344
for the 100 tanks:
Original cost accumulation:
Direct Materials 100
Direct Labor 150
FOH Applied 150% of DL (plus allowance of P10 for reworks ) 235

Direct cost of reworking 10 units:

 Direct materials 2,000
 Direct labor 4,000
 The rework costs were attributable to the extracting specification
of job, full rework cost were charged to this specific job. The cost
per finished unit of Job 14344 is….
Journal Entries
 Entry to Record Cost of Reworks/Defective units under Specific Job Charging
WIP 47,500
Materials (100 x100u) 10,000
Payroll (150x 100u ) 15,000
FOH A (225 x 100u) 22,500 Unit Cost if w/out reworks (100+150+225) =475
If with reworks (100+150+225)100+6000/100
 Reworks =595
WIP 6,000
Materials 2,000
Payroll 4,000

Entry to Record Cost of Reworks/Defective units under Charged to all production

WIP 48,500
Materials (100 x100u) 10,000 Unit Cost if w/out reworks (100+150+235) =485
Payroll (150x 100u ) 15,000 If with reworks (100+150+225)100+ =485
FOH A (235 x 100u) 23,500

 Reworks
FOH C 6,000
Materials 2,000
Payroll 4,000