CHAPTER 7 (LECTURE)

JOB ORDER COSTING

ACCOUNTING
 Course Framework

7.1 Definition of Job order costing: CLO1

7.2 Charateristics of Job order costing: CLO1

7.3 Determine of Job order costing: CLO1,CLO3

7.4 Journal Entries: CLO3

 CONCEPT OF PRODUCT COSTING

PRODUCT
COSTING

JOB ORDER COSTING PROCESS COSTING

Itsdepends on:
 PRODUCT
 MANUFACTURING PROCESSES
 7.1 Definition of job order costing (JOC)

Costs are assigned to each job or to each batch of

goods to fill a specific customer order.

Each job(batch) has its own distinguishing

characteristics.

The objective is to compute the cost of per job.

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 7.2 Characteristics of JOC

1)Job or batches may be completed to fill

a specific customer order.
2)The job and its associated cost can be
identified.
3)A job order costing measures costs for
each completed job.
4)Each job (batch) has its distinguishing
characteristics and different.
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 Characteristics of JOC

CHARACTERISTICS JOB ORDER COSTING

PRODUCT TYPES PRODUCT IS HETEROGENOUS (VARIETY) –
product produce more than one type
PRODUCT CAN BE IDENTIFIED & DIFFERENCIATE
FOR EACH PRODUCT by customer
specification / order
COST FOR EACH JOB / ORDER
ACCUMULATION
DOCUMENTATION JOB COST SHEET
COST FLOW BY ORDER / JOB
 COST FLOW IN JOB ORDER COSTING

Raw materials inventory Work in process inventory Finished goods inventory

(Purchases) (DM) (DM) (Finished (Finished (Goods sold)
(IDM) (DL) good) good)
(Applied
overhead)

Wages payable Cost of Goods Sold

(DL) (Goods sold)
(IDL)

Manufacturing Overhead
(IDM) (Applied overhead)
(IDL)
(Actual overhead)
 JOB ORDER COST FLOW

Basic overview of the flow of costs in a manufacturing

setting for production of a fire truck.
 COST FLOW

WIP Inventory

Job 101

Direct Material
Direct labour Job 102 Finished Goods COGS
Manufacturing Inventory
Overhead
Job 103
 DOCUMENTATION

2 main source documents

Material requisition Time ticket

slip

to record raw materials used to record direct labour incurred

posting to

Job order sheet

 7.3 Determination of cost per job

Source documents used to record the cost

chargeable to a specific jobs.

a)Materials requisition slip

b)Time ticket
 Materials requisition slip

 To achieve effective internal control over

issuance of materials, the storekeeper
should receive authorization before
materials are released to production.
 Its indicate the quantity and type/cost per
unit of materials withdrawn.
 Source documents for posting requisitions
direct materials from materials inventory
account to work in progress inventory.
 Materials Requisition Slip

Wallace Manufacturing Company

Materials Requisition Slip

Date: Jan 1, 2016 Job No: KAW 123

Department: Cutting Req No:1222

Description Quantity Cost per unitAmount

A 115 250 RM150RM37 500

A 225 100 RM120RM12 000

Requested by…………………………

Approved by…………………………..
 Time ticket

• Job assigned by direct labour record to

time ticket.
• Time ticket is prepared when the work is
performed by direct labour.
• The account work in progress inventory is
debited for direct labour. .
 Time ticket

Wallace Manufacturing Company

Time Ticket
Employee: Sugiman b Mahat Ticket no: 20/100
Employee no: 11018 Date: Jan 1 2016
Job: Cutting
Start Stop Hours Rate Amount
7.00 12.00 5 RM10 RM50
2.00 5.00 3 RM10 RM30
Total 8 RM10 RM80
Prepared by…………………………..
Approved by…………………………..
 7.3 Determination of job costing

 Accumulates the costs of each job

produced

 When the job completed, cost per

unit will calculate

 Cost per unit=

total costs production
total units produced
 Job Costs Sheet
A form used to record the costs chargeable to a job and
to determine the total and unit costs of the completed
job.
 One job cost sheet is assigned to each job or batch.
 Constitutes the subsidiary ledger for the work in
process account.
 Each entry to Work in Process Inventory must be
accompanied by a corresponding posting to one or
more job cost sheets.
Costs involved are :
 direct material,
 direct labour &
 applied overhead.
 JOB COST SHEET FORMAT

Customer name : Job No. :

Address : Date started :
Product description : Date completed :

Direct materials Direct labour Manufacturing overhead

Date Requisition no. Cost Date Ticket Cost Hour/ Cost Rate Cost
(RM) (RM) (RM)

Total XX Total XX Total XX

Cost summary : RM
Direct material XX
Direct labour XX
Overhead XX
Total cost YY
Completed unit UU
Cost per unit ZZ
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