Chapter 3 Job Order Costing (Part 1)

Absorption costing all manufacturing cost, both fixed and variable, are accumulate
and summarized on managerial reports. The units fully absorb manufacturing
costs.

Job-order costing used when many different products with individual and unique
features are produced each period.
- Job the production activities for a custom product or service

Measuring Direct Materials:

- Bill of Materials is a document that lists the type and quantity of each type of
direct material needed to complete a unit of product
- Material requisition form document that Production Department uses that
specifies gthe type and quantity of materials to be taken from the warehouse
and identifies the job it will be charged for the cost of materials.
- Job cost sheet records the materials, labor, and manufacturing overhead costs
charged to that job.

Measuring Direct Labor:

- Time tickets hour-by-hour summary of the employees activities throughout
the day
o Computerized approach employee can swipe their badge to a specific
job they are working on, so the labor hours can be tracked

Overhead:
Due to perpetual inventory system, we must predict what overhead costs will be
and assign it to a job so that a jobs total costs can be estimated prior to its
completion.

*Product costs include manufacturing overhead as well as DM and DL, so we have to

record MOH and allocate it based on an allocation base.
- Allocation base measure (such as direct labor-hours or machine hours) that is
used to assign overhead costs to products and services
Predetermined Overhead Rate method for allocating MOH

Predetermined Overhead Rate = Estimated Manufacturing

Overhead Costs
Estimated total allocation base

Overhead application process of assigning overhead cost to jobs

Overhead applied to = Predetermined OH rate X Allocation base

incurred by the job
a particular job