Job order costing – a cost allocation system for companies who make one of a kind or unique

products.
1. In this cost system, the DM, DL, and OH are assigned to a specific job order or batches.
2. An example of companies who use job order system are:
a. Construction
b. Ship building company
c. Companies who make airplanes
d. Companies who make large machines
e. Companies who take special orders
3. In this system, a job order cost sheet is necessary to keep track of all unfinished and
finished products.
4. Job order cost sheet or cost sheet – This is where the cost of each lot or order is
recorded
5. Cost sheet or job order cost sheet is designed to collect the cost of DM, DL, and OH for
each specific job.
6. Major source document for job order costing
a. Job order cost sheet
i. Accumulate the product cost of a specific unit or batches
ii. Track unfinished jobs. This serve as a book inventory and subsidiary
ledger for work in process
iii. A separate cost sheet is prepared for each job
b. Material stock card
i. Record the cost and quantities of material on hand
ii. Material stock cards for unused materials is the subsidiary ledger in
material control.
iii. A separate stock card is prepared for each type of material on hand
c. Finished goods stock card
i. Record the cost and quantities of finished goods held for sale
ii. Finished goods stock card for unused goods is subsidiary ledger for
finished goods control
d. Factory overhead control cost record
i. Accumulate detailed manufacturing overhead cost by department
ii. Subsidiary ledger for factory overhead control
e. Material requisition form
i. A form that is used as a basis for issuance of raw material
f. Time ticket
i. Use to record the amount of hours spent by a laborer on a specific job.
This is prepared for each worker to determine what is to charge against
direct labor cost and indirect labor cost. The time ticket for each job
should reconcile with clock card hours.
 g. Clock card
i. Use as a basis to compute the gross earnings of employee who are paid
hourly wages.
7. Procedure that affects material account:
a. Purchase of materials
b. Issuance of materials
i. Direct
ii. Indirect
8. Entry to record purchase of materials:
Materials xxxx
Account payable xxxx
An entry is made to the material stock card under the received section
9. Entry for return of materials
Account payable xxxx
Materials xxxx
An entry with an enclosed parenthesis is made on the material stock card under
received section

10. Entry for issuance of direct materials

Work in process xxxx
Materials xxxx
An entry is made on material stock under issued section and also on cost sheet -
material
11. Entry for issuance of indirect materials
Factory overhead control
Materials
An entry is made on material stock card and on overhead analysis sheet
12. Factory overhead – control
a. Used to accumulate actual overhead incurred
13. Factory overhead – applied
a. Used to accumulation estimated factory overhead applied to production
14. Recording of applied factory overhead
Work in process xxxx
Applied factory overhead xxxx
An entry is made on the cost sheet – factory overhead section

15. Under/Over applied overhead

a. Difference between actual and applied overhead
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