PLANNING AND

MANAGEMENT
CONTROL
SYSTEMS
Maurizio Massaro

Chapter 15
Job Order Costing and Analysis
Chapter 15

Copyright ©2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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Chapter 15 Learning Objectives

CONCEPTUAL
C1 Describe important features of job order production.
C2 Explain job cost sheets and how they are used in job order costing.

ANALYTICAL
A1 Apply job order costing in pricing services.

PROCEDURAL
P1 Describe and record the flow of materials costs in job order costing.
P2 Describe and record the flow of labor costs in job order costing.
P3 Describe and record the flow of overhead costs in job order costing.
P4 Determine adjustments for overapplied and underapplied factory overhead.

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 Learning Objective

C1:
Describe important features of
job order production.

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Cost Accounting Systems

Process Job
Costing Costing

Chapter 16

▪ Used for production of large, unique, or

high-cost items.
▪ Built to order rather than mass produced.
▪ Many costs can be directly traced to each job.
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Learning Objective C1: Describe important features of job order production.
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Job Order Production Exhibit

15.1

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Learning Objective C1: Describe important features of job order production.
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Production Activities in Job

Order Costing Exhibit
15.2

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Learning Objective C1: Describe important features of job order production.
 Cost Flows
Manufacturing costs flow:
1. Raw materials – direct and indirect materials
2. Work in process –job is being produced
3. Finished goods –completed goods
4. Cost of goods sold – goods which are sold

Subsidiary records store information about the

manufacturing costs for each individual job.

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Learning Objective C1: Describe important features of job order production.
 Let’s see if you got it
• Job order costing would be appropriate for:
A. Company that produces invidually designed
products (T)
B. A company that produces pencils

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 Learning Objective

C2:
Explain job cost sheets and
how they are used in job order
costing.

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Job Cost Sheet Exhibit

15.3

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Learning Objective C2: Explain job cost sheets and how they are used in job order costing.
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Let’s see if you got it

• Job order cost sheets:
A. Display the total cost of a job (T)
B. Only raw material costs
C. Onlly raw material plus indirect labor costs

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 Learning Objective
P1:
Describe and record the flow
of materials costs in job order
costing.

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 Materials and Labor Costs
• Materials received recorded in a receiving report
• Receiving report – materials source document
• Materials ledger cards –updated when materials
are purchased and issued for use in production.
Exhibit
15.4

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Learning Objective P1: Describe and record the flow of materials costs in job order costing.
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Exhibit
Materials Ledger Card 15.5

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Learning Objective P1: Describe and record the flow of materials costs in job order costing.
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Materials Requisition Exhibit

15.6

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Learning Objective P1: Describe and record the flow of materials costs in job order costing.
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Materials Requisition (continued)

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Learning Objective P1: Describe and record the flow of materials costs in job order costing.
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Let’s see if you got it

In nearly all job order costs sytems, materials
ledger cards are perpetual records that are
updated each time materials are purchased or
issued for use in production
A. TRUE (T)
B. FALSE

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 Learning Objective

P2:
Describe and record the flow of
labor costs in job order costing.

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Labor Cost Flows Exhibit

15.8

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Learning Objective P2: Describe and record the flow of labor costs in job order costing.
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Labor Time Ticket Exhibit

15.9

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Learning Objective P2: Describe and record the flow of labor costs in job order costing.
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Labor Time Ticket (continued)

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Learning Objective P2: Describe and record the flow of labor costs in job order costing.
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Let’s see if you got it

What do you debit and credit when direct labor
coss are recorded:
A. Debit (work in progress inventory)
B. Credit(Factory wages payable)

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 Learning Objective

P3:
Describe and record the flow of
overhead costs in job order
costing.

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Overhead Costs
Exhibit
15.11

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Learning Objective P3: Describe and record the flow of overhead costs in job order costing.
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Set Predetermined Overhead Rate

Road Warriors uses a predetermined
overhead rate (POHR) based on direct
labor cost to apply overhead to jobs.

Exhibit
15.12

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Learning Objective P3: Describe and record the flow of overhead costs in job order costing.
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Predetermined Overhead Rate

Exhibit
15.13

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Learning Objective P3: Describe and record the flow of overhead costs in job order costing.
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Record Actual Overhead

Indirect Material
Indirect Labor
Other

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Learning Objective P3: Describe and record the flow of overhead costs in job order costing.
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Record Indirect Materials Used

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Learning Objective P3: Describe and record the flow of overhead costs in job order costing.
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Record Indirect Labor Used

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Learning Objective P3: Describe and record the flow of overhead costs in job order costing.
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Record Other Overhead Costs

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Learning Objective P3: Describe and record the flow of overhead costs in job order costing.
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Summary of Cost Flows

Exhibit
15.15

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Learning Objective P3: Describe and record the flow of overhead costs in job order costing.
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Summary of Cost Flows (Pt. 2)

Exhibit
15.16

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Learning Objective P3: Describe and record the flow of overhead costs in job order costing.
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Summary of Cost Flows (Pt. 3)

Exhibit
15.17

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Learning Objective P3: Describe and record the flow of overhead costs in job order costing.
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Schedule of Cost of Goods

Manufactured Exhibit
15.18

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Learning Objective P3: Describe and record the flow of overhead costs in job order costing.
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Let’s see if you got it

The total cost of finished goods has a total of 9,000 (600
units). If the overhead applied to these goods is 3,000
and the overhead rate is 75% of direct labor, how much
direct materials cost was incurred in producing these
units? (Foruma= DM+DL+OH=Total costs):
A. 3,750
B. 2,000 (T) -> DM+3000/0.75+3000 = 9,000
C. 4,000
D. 6,000
E. 9,000

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 Learning Objective

P4:
Determine adjustments for
overapplied and underapplied
factory overhead.

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Adjust Factory Overhead Exhibit

15.19

Exhibit
15.20

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Learning Objective P3: Describe and record the flow of overhead costs in job order costing.
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Adjust Underapplied or
Overapplied Overhead

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Learning Objective P4: Determine adjustments for overapplied and underapplied factory overhead.
 Learning Objective

A1:
Apply job order costing in pricing
services.

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Job Order Costing of Services

Job order costing applies to service companies.
Differences for service firms:
• Service firms do not have raw materials or finished goods
inventory. They have supplies, but these may be
considered overhead.
• Direct labor is used to apply overhead.
• Typically use different account titles such as Services in
Process Inventory and Services Overhead.

Exhibit
15.21

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Learning Objective P4: Determine adjustments for overapplied and underapplied factory overhead.
 Pricing for Services
• Service providers also use job order costing.
• Cost for each individual job are track
separately.
• Total costs include labor and overhead.

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Learning Objective A1: Apply job order costing in pricing services.
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End of Chapter 15

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