Job Order Costing System

In Job order costing system work is done on the basis of customer specifications

Kiya aap har customer k liye alag alag costing karoge ya nahi????

Yes hum har customer k liye alag alag costing karenge.

Customer ka Job

1000 visiting cards

Direct Material ( Paper ) 300

Direct Labor 200

FOH to be estimated or Applied FOH

Zinger

1. Bun 5 X 100 = 500

2. Chicken 100g X 10,000g /1000 = 10Kg X 600 = 6000 ( Direct costs )
3. Oil = Indirect cost
4. Sauces= Indirect cost
5. Salad = Indirect costs

Factory overheads ka pehle se hi aik rate estimate kar k rakhenge

This rate is calculated on the basis of budgeted information

This rate can be calculated on the basis of

1. Direct Labour cost

2. Direct labour hours
3. Machine hours

Budgeted FOH 100,000

Direct labour cost Rs 125,000

FOH Application Rate or FOH Applied Rate

We have to find out FOH Rate on DL Cost

FOH Rate = Budgeted FOH / Budgeted DL Cost *100

FOH Rate = 100,000/125,000 *100 = 80%

Is 80% ka matlab ye hai k agar humara DL 100Rs hai to FOH us k maqable 80Rs hoga

Actual direct labour cost 150,000

Applied FOH = 150,000X 80% = 120,000

Important points
1. Jub value ka rate value per nikala jata ya amount ka rate amount per nikala jata hai to use hum in
term of % nikalte hain
2. Jub kisi value ka rate quantity per nikala jata to us ko in term of that quantity represent kiya jata hai
for example per direct labour hour or per machine hour

FOH Rate

Dep A = Budgeted FOH/Budgeted Machine Hours

Dep A = 1,080,000/72,000 = Rs 15/Machine hour ( is ka matlab agar machine 1 ghanta chalegi to us pe

FOH 15Rs ka charge kiya jaega )

Dep B = Budgeted FOH/Budgeted DL Hours

Dep B = 1,200,000/100,000 = Rs12/DL Hour ( is ka matlab agar workers aik ghanta kam karenge to us pe
12Rs ka FOH charge kiya jaega

Kuch departments machine intensive hote hain aur kuch labour intensive hote hain Total cost
of Job No 250
Particualrs Dep. 1 Dep.2 Total

Direct Materials 46,000 80,000 126,000

Direct Labour Cost 50,000 118,000 168,000
FOH Applied
Dep A = 3600 X 15 54,000 54,000
Dep B = 7,000 X 12 84,000 84,000

Total Cost 150,000 282,000 432,000

Per unit cost = Total cost/No of units

Per unit cost = 432,000/48,000 = Rs 9/unit

How we make entries

Transactions
1. Purchased material on account Rs. 150,000
Material inventory Dr 150,000 Asset Account (Because material is unused)
Accounts Payable Cr 150,000
(Material inventory account includes direct and indirect both materials)

2. Material issued to factory Rs.100,000 of which 20,000 is indirect material.

Work in process Dr 80,000 Direct Materials ( Asset)
Factory overheads Dr 20,000 ( Ye Actual FOH hai )
Material Inventory Cr 100,000
3. Labour cost incurred Rs. 150,000 out of which Rs. 50,000 is indirect labour
Work in process Dr 100,000 Direct Labour ( Asset)
Factory overheads Dr 50,000 ( Ye Actual FOH hai )
Accrued Payroll Cr 150,000
Wages and salaries ko hum payroll kehte hain ( aur agar wages ya salaries unpaid ho to wo accrued
kehlete hain)

4. FOH is applied at the rate of 80% of direct labour cost

Work in process Dr 80,000 FOH Applied ( Asset)

Factory overheads Cr 80,000
Hum FOH Actual aur Applied k liye alag alag account nahi banate matlab dono k liye aik hi account
hota hai is liye ise FOH Controll account kaha jata hai

5. Jobs completed during the period Rs. 200,000.

Finished Goods Dr 200,000

Work in process Cr 200,000
(To record jobs completed )

6.Goods costing Rs. 160,000 sold for Rs. 250,000

Jo maal hum ne becha hai us ki cost 160,000 aur usi maal ko 250,000 mai becha hai

Trading business means jis mai hum ready to sale goods ko market se buy karte aur us ko usi halat mai age
bech daite hain aur un goods ko hum merchandise kehte hain
Aur jo goods hum khud manufacture karte hain use hum finished goods ka nam daite hain aur is business
mai finished goods ko hi becha jata hai

6(a) Accounts Receivable Dr 250,000

Sales Cr 250,000
( To record Sales)
6(b) Cost of goods sold Dr 160,000
Finished Goods Cr 160,000
(To record cost of goods sold )

FOH ko close karne ki entry aur ye entry banana ka maqsad apne profit ko adjust karna FOH
Dr 10,000
Cost of goods sold Cr 10,000

Closing entries banana ka maqsad business ka profit ya loss maloom karna

Income statements hum external users k liye banate hain
Closing entries accounting ka part hai jo k hum internal users k liye karte ( Managers )

Work In Process
1.Direct Materials 80,000 Finished Goods 200,000
2.Direct Labour 100,000
3.Factory overheads 80,000
Bal c/d 60,000
Total 260,000 Total 260,000

Total work in process 260,000 ( is ka matlab hum total 260,000 ka maal bana rahe the, jis mai se
200,000 ka ban gaya isi wajha se hum ne 200,000 WIP se nikal k finished goods mai transfer kar diya
aur wip mai abhi bhi 60,000 ka maal baqi hai jise next period mai complete kiya jaega)

Finished Goods
Work in process 200,000 Cost of goods sold 160,000
Bal c/d 40,000
Total 200,000 Total 200,000

FOH Control Account

Indirect Materials 20,000 Work in process 80,000
Indirect labour 50,000
Cost of goods sold 10,000
Total 80,000 Total 80,000

Cost of goods sold

Finished Goods 160,000 FOH 10,000
Expense & Rev summary 150,000

Total 160,000 Total 160,000

 Direct Material Direct Labour FOH Applied
80,000 100,000 80,000

Box

Work in Process

260,000

Finished
Goods

200,000

Cost of goods
sold

Sales
1. Material inventory Dr 180,000
Accounts Payable Cr 180,000

2. Work in process Dr 90,000

Factory overheads Dr 30,000
Material inventory Cr 120,000

3. Accounts Payable Dr 16,000

Material inventory Cr 16,000
Material inventory
Sep 1, 2016 Bal b/d 45,000 WIP 90,000
1. Accounts Payable 180,000 FOH 30,000
Accounts Payable 16,000
Sep 30 Bal c/d 89,000
Total 225,000 Total 225,000

4. Work in process Dr 90,000

Factory overheads Dr 25,000
Accrued Payroll Cr 115,000

5. Factory overheads Dr 120,000

Accounts Payable Cr 120,000

6. Accounts Payable Dr 76,000

Cash Cr 76,000

7. Cash Dr 110,000
Accounts Receivable Cr 110,000

8. WIP (90,000X110%) Dr 99,000

FOH Cr 99,000

9. Finished Goods Dr 264,000

WIP Cr 264,000
Work in Process
Sep 1, 2016 Bal b/d 70,000 Finished Goods 264,000
Direct material 90,000
Direct Labour 90,000
FOH 99,000 Sep 30 Bal c/d 85,000
Total 349,000 Total 349,000
10.(a) Accounts Receivable Dr 425,000
Sales Cr 425,000

(b) Cost of goods sold Dr 256,000

Finished Goods Cr 256,000

11. Cost of goods sold Dr 76,000

Factory overheads Cr 76,000

Finished Goods
Sep 1, 2016 Bal b/d 57,000 Cost of goods sold 256,000
Work in process 264,000

Sep 30 Bal c/d 65,000

Total 321,000 Total 321,000

FOH Control Account

Indirect Materials 30,000 Work in process 99,000
Indirect labour 25,000 Cost of goods sold 76,000
Accounts Payable 120,000

Total 175,000 Total 175,000

3 jobs in process (10,000)
8 jobs started during the period
Manufacturing cost total 11 jobs pe lagai gai hai
Only one job is in process it means 10 jobs have been completed
Direct material, Direct labour foh is missing
 Work in Process
Bal b/d 10,000 Finished Goods 101,000
Direct material 20,000
Direct Labour 30,000
FOH(30,000x150%) 45,000 Bal c/d (W1) 4,000
Total 105,000 Total 105,000

(W1)Computation for Work in process Ending Inventory

Direct Material Rs. 1000
Direct Labour 1200
(+) FOH (1200x150%) 1800
Work in process ending 4,000

Finished Goods
Work in process 101,000 Cost of goods sold 96,000

Sep 30 Bal c/d 5,000

Total 101,000 Total 101,000

FOH Control Account

FOH Actual 47,000 Work in process 45,000
Cost of goods sold 2,000

Total 47,000 Total 47,000

Cost of goods sold

Finished Goods 96,000
FOH 2,000 Expense & Rev summary 98,000

Total 98,000 Total 98,000

2020 Question 2 (Job Order Costing)
1. Material inventory Dr 96,000
Accounts Payable Cr 96,000

2. Work in process Dr 55,000

Factory overheads Dr 15,000
Material inventory Cr 70,000

3. Accounts Payable Dr 6,000

Material Inventory Cr 6,000

Total
Payroll
100,000

Direct Labour (100,000 X 80%) = 80,000 Indirect Labour (100,000 X 20%) = 20,000

4. Work in process Dr 80,000

Factory overheads Dr 20,000
Accrued Payroll Cr 100,000

5. Factory overheads Dr 26,000

Allowance for depreciation Cr 7,000
Prepaid Insurance Cr 3,500
Accounts Payable Cr 15,500

6. Work in process Dr 72,000

Factory overheads Cr 72,000

7. Finished Goods Dr 185,000

Work in process Cr 185,000

8. (a)Accounts Receivable Dr 200,000

Sales Cr 200,000
(b)Cost of goods sold Dr 160,000
Finished Goods Cr 160,000
 Sales – COGS = GP
Sales = COGS + GP

125% = 100% 25%

Gross profit is 25% of Cost of goods sold

Sales is 125% of Cost of goods sold

Sales = 125% X COGS

200,000 = 125% X COGS
200,000/125% = COGS
160,000 = COGS
Computation For Work in Process Inventory Opening

Particulars Job 18 Job 19 Total

Direct Materials 50,000 18,000 68,000
Direct Labour 36,000 12,000 48,000
Factory overheads
Job 18 = 3,000 x 3 9,000 9,000
Job 19 = 8,000 x 5 40,000 40,000
Total 95,000 70,000 165,000
Computation For Work in Process Inventory Ending(Job23) (W1)
Direct Materials 15,000
Direct Labour 9,000
Factory overheads(9,000/15*10) 6,000
Work in process inventory ending 30,000

Work in Process
Bal b/d 165,000 Finished Goods 217,500
Direct material 37,500
Direct Labour (1,800 X 15) 27,000
FOH(1,800 X 10) 18,000 Bal c/d (W1) 30,000
Total 247,500 Total 247,500

A X 15 = 9,000
A = 9000/ 15
A = 600 hours

Finished Goods
Work in process 217,500 Cost of goods sold 190,250

Bal c/d 27,250

Total 217,500 Total 217,500

Humare pas March 1st pe 2 jobs thi (18 and 19) during March hum ne 4 jobs mazed start ki (20,21,22 and
23) to is tarha hum total 6 jobs pe kam kar rahe the jin mai se 5 jobs complete hogain (18,19,20,21 and
22) aur in ki total cost Rs. 217,500 aur aik job (23) jo abhi tak in process hai us ki cost = 30,000.
Jo 5 jobs complete ki gain un mai se 4 jobs ko bech diya gaya (18,19,20 and 21) jis ki cost 190,250 hai ,is
tarha humare pas sirf aik job aisi hai jo abhi bhi unsold hai (Job 22) jis ki cost 27,250 hai.

Cost of goods sold

Finished Goods 190,250
Expense & Rev summary 190,250

Total 190,250 Total 190,250

Solution 2:
1.Work in process Dr 82,500
Material inventory Cr 37,500
Accrued Payroll Cr 27,000
Factory overheads Cr 18,000
2. Finished Goods Dr 217,500
Work in process Cr 217,500

3. Cost of goods sold Dr 190,250

Finished Goods Cr 190,250

4. Accounts Receivable Dr 228,300

Sales Cr 228,300

Sales = 190,250 X 120% = 228,300