CHAPTER 3

JOB
COSTING
BAMBA, MARIA LHEWINE J.
BORBE, MICHELLE L.
COMBATE, KIMBERLY
GAWARAN, KRISTINA ANGELA
MONTEVIRGEN, JACKIE LEANNE O.
PROCESS COSTING
■ Process costing is used by companies that produce large numbers identical units in
continuous flow manufacturing process. A system used in situations where the company
produces many units of a single product for long periods.
■ The basic formula for process costing is:
Unit product cost = Total manufacturing cost
Total units produced
JOB COSTING
■ Job order costing is used by companies with job shop or batch production
manufacturing processes.
■ In job-shop environment products are manufactured in very low volumes or one at a
time.
■ In some batch production environments, multiple units of identical products are
produced in a single production run (batch), after which the production resources are
then used to produced a batch of a different products.
Different between job costing and
process costing
JOB COSTING Process costing
■ heterogeneous product ■ Homogenous product
■ Customized ■ Standardized
■ Can track each expense into the ■ Deals with processes that individual
different job jobs
JOB COST SHEET
■ a form prepared for a job that records the materials, labor, and manufacturing overhead
costs charged to that job.
MEASURING DIRECT MATERIALS
COST
■ Direct material cost is the cost of the raw materials and components used to create a
product.
■ BILL OF MATERIALS
a document that lists the type and quantity of each type of direct material needed to
complete a unit of product.
■ PRODUCTION ORDER
is issued when an agreement has been reached with the customer concerning the
quantities, prices, and shipment date for the order.
■ MATERIAL REQUISITION FORM
a detailed source document that specifies the type and quantity of materials to be
drawn from the storeroom and identifies the job that will be charged for the cost of the
materials.
MEASURING DIRECT LABOR COST
■ Direct labor cost are the wages or salaries paid to employees who physically produce
products. In other words, these expenses are the costs paid to workers who make the
products that manufactures sell.
■ TIME TICKET
an hour-by-hour summary of the employee’s activities throughout the day.
MANUFACTURING OVERHEAD
■ All other costs manufacturing are classified as manufacturing overhead also known as
production overhead. Which includes three types of cost: indirect materials, indirect
labor and other manufacturing costs.
■ Generally accepted accounting principles require that a manufacturer's inventory and
the cost of goods sold shall consist of:
– the cost of direct materials
– the cost of direct labor
– the cost of manufacturing overhead
PREDETERMINED OVERHEAD RATE
■ computed by dividing the total estimated manufacturing overhead cost for the period by
the estimated total amount of the allocation base as follows: