OBJECTIVES

• DEFINE JOB ORDER COSTING AND IDENTIFY TYPES OF INDUSTRIES THAT WOULD BE MOST TO USE THEM
• DEMONSTRATE THE MECHANICS OF JOB ORDER COSTING SYSTEM
• DIFFERENTIATE AMONG THE FORMS USED IN THE PURCHASE AND ISSUANCE OF MATERIALS SUCH AS A
PURCHASE REQUISITION, A PURCHASE ORDER, A RECEIVING REPORT, AND A MATERIALS REQUISITION
• DISTINGUISH BETWEEN THE PERIODIC AND PERPETUAL COST ACCUMULATION SYSTEMS USED TO
ACCOUNT FOR MATERIALS ISSUES TO PRODUCTION AND FOR ENDING MATERIALS INVENTORY
• PREPARE A JOB ORDER COST SHEET
JOB ORDER COST PROCEDURE
• KEEPS THE COSTS OF VARIOUS JOBS OR CONTRACTS SEPARATE DURING THEIR MANUFACTURE OR
CONSTRUCTION
• THE METHOD PRESUPPOSES THE POSSIBILITY OF PHYSICALLY IDENTIFYING THE JOBS PRODUCED AND OF
CHARGING EACH WITH ITS OWN COST
• A VARIATION OF THIS METHOD IS THAT OF COSTING ORDERS BY LOTS
• IN THIS METHOD, EACH JOB IS AN ACCOUNTING UNIT TO WHICH MATERIALS, LABOR, AND FACTORY
OVERHEAD COSTS ARE ASSIGNED BY MEANS OF JOB ORDER NUMBERS
 REVIEW: PERPETUAL INVENTORY VS PERIODIC INVENTORY
ACTIVITY PERIODIC INVENTORY PERPETUAL INVENTORY TYPES OF PERPETUAL
Inventory Beg BI = $250 BI = $250 INVENTORY SYSTEM
50 units @ $5/unit • FIRST IN, FIRST OUT (FIFO) –
Purchase 800 units @ (Dr) Purchases $4000 (Dr) Inventory $4000 ASSUMES OLDEST UNITS
$5/unit (Cash) (Cr) Cash $4000 (Cr) Cash $4000 ARE SOLD FIRST
• LAST IN, FIRST OUT (LIFO) –
Sell 750 units @ (Dr) AR $9000 (Dr) AR $9000
$12/unit (Cr) Sales $9000 (Cr) Sales $9000 NEWEST UNITS ARE SOLD
FIRST
No entry (Dr) COGS $3750 • WEIGHTED AVERAGE COST –
(Cr) Inventory $3750 TOTAL INVENTORY COST
Physical count shows (Dr) COGS $3750 No entry DIVIDED BY THE NUMBER OF
$500 Ending Inventory (Dr) Inventory $250 UNITS IN INVENTORY
(Cr) Purchases $4000

A perpetual inventory system is superior to the older periodic inventory system because it allows for immediate
tracking of sales and inventory levels for individual items, which helps to prevent stockouts. (JAMES CHEN, 2020).