Job Order

Costing
• Rodriguez • Mahor • Del Rosario • Consorte
ice breaker
 QUESTION 1

It contain all the technical and

production details regarding the
operation
answer

DOCUMENT
 QUESTION 2

A stated intention, either spoken or

written, to engage in a commercial
transaction for specific products or
services.
answer

ORDER
 QUESTION 3
refers to something that is one of a
kind, distinct, or unparalleled in its
characteristics, qualities, or attributes.
It suggests that there is only one of its
kind, making it special or exceptional in
some way.
answer

UNIQUE
 QUESTION 4

refers to a group or collection of items,

products, or tasks that are processed
or completed together, typically within
a specific timeframe or under similar
conditions
answer

BATCH
 QUESTION 5

These units fails to meet the required

specifications and required an
additional reworking to make them a
good unit.
 answer

DEFECTIVE UNITS
 QUESTION 6

When making a product, these are the

left-over materials that are usually
sold, reuse, or discarded.
answer

SCRAP
 QUESTION 7

Units of product that have been

completed but not yet sold to
customers.
 answer

FINISHED GOODS
 QUESTION 8

Any materials that go into the final

product.
 answer

RAW MATERIALS
 QUESTION 9

Used for manufacturing processes that

produce products in batches where all
units in the same batch are identical
 answer

JOB ORDER COSTING

 QUESTION 10

A system of accounting for a

production process that produces
products in batches or dissimilar units
 answer

JOB ORDER COST SYSTEM

 Job Order
Costing
• Rodriguez • Mahor • Del Rosario • Consorte
Overview

Rodriguez, Princess Hencie

 JOB ORDER COSTING

is a system that takes place when customers order small,

unique batches of products. This system determines the price of each
individual product and ensures that the cost for each product is
reasonable enough for a customer to purchase it while still allowing the
company to make a profit.
Each job is prepared by batch or by order in accordance with the
customers' specifications. The cost of materials used, labor incurred
and overhead applied is smmarized in WIP account while maintaining a
job cost sheet for each job.
JOB ORDER Costing vs. Process COSTING

Job Order Costing Process Costing

used by companies with

used by companies producing
continuous mass production
unique products or job
of similar or identical products
through several processes or
department
 INFORMATION TRACKED BY
JOC SYSTEM

Job order costing systems can gain and track

information from financial resources like material
costs, payroll records, supplier invoices and overhead
allocations. An accountant will use these resources to
gather the data and calculate or track it using a job
cost sheet. They may also use a job order database to
track each product using a specific identifying number
for each product.
 OBJECTIVES OF JOC

Each item tracked in the job order costing system should

have a job cost record that lists the materials used to
create that item, the number of people that worked to
make that item, how long it took to make the item and the
manufacturing overhead amount for that product. This
helps an accountant keep better track of the money spent
on each item and the current inventory to prevent
unexpected losses from occurring.
 JOB ORDER COSTING
IN MANUFACTURING COMPANIES

Manufacturing companies incorporate

job order costing as a means of
controlling usage of raw materials,
production equipment and labor
hours. These businesses consider
each customer order a separate job
for the purposes of job order costing.
Alternatively, manufacturers may
group smaller value projects together
under a single job heading.
 WHITE COLLAR BUSINESSES

Companies in the white collar sector of

business, including law firms, accounting
businesses and private investment
companies, can utilize job order costing to
manage individual client accounts. For
example, accounting firms can consider
each individual client a job. Firms complete
job order cost sheets each business day,
detailing how accountants are handling
client accounts and how many hours a
client's needs consume each day. This
generates daily costs that businesses can
use to measure how much money firms
bring in each day versus the costs
associated with job activities.
 MEDICAL BUSINESSES

Medical businesses, including hospitals, small

doctor's offices and medical billing companies,
can use job order costing to consider each patient
or bill as an individual job. Record-keeping for job
order costing in service industries, including the
medical field, can be more complex than in other
industries because these businesses offer a wide
array of services. This requires medical service
businesses and other service companies to keep
detailed records of each specific job to determine
costs correctly. For example, a doctor's office
may order patients based on the purpose of visits
and the cost of treatments administered.
 FILM AND STUDIOS AND
PRODUCTION COMPANIES

Job order cost sheets for film

companies contain actor salaries,
director payments and crew wages as
direct labor. costs. Direct material
costs can include props, costumes,
utility costs for sound stages and set
design fees.
 Elements of
PRODUCT COST

Del Rosario, Kristel Ann A.

ELEMENTS OF JOC

MATERIALS

LABOR

FACTORY OVERHEAD
PRODUCt
flow

Del Rosario, Kristel Ann A.

MAJOR SOURCE DOCUMENTS FOR
JOB ORDER COSTING
Job Cost Sheet
This sheet is the main source for
tracking an item to keep pricing
and inventory accurate.
Each of the job information
details will have its own section
to clearly show the reader what
information is needed and what
is currently being tracked.
MAJOR SOURCE DOCUMENTS FOR
JOB ORDER COSTING
Materials Requisition Form
A form that is used as a basis for the
recording of raw materials issuance.

This form facilitates the transfer of

materials from storage to
production.
MAJOR SOURCE DOCUMENTS FOR
JOB ORDER COSTING
Time Ticket
As an employee works
on a unique order, they
are often required to fill
out a timesheet
recording the work they
have completed.
basic cost accounting entries in
job order costing
Raw Materials Raw Materials
Purchased Used
Materials XXX Work-in-Process XXX
Accounts Payable XXX *Manufacturing OH Control XXX
Materials XXX

* for Indirect Materials

basic cost accounting entries in
job order costing
Factory Wages Labor Charged
Earned to Production
Factory Payroll XXX Work-in-Process XXX
Salaries Payable XXX *Manufacturing OH Control XXX
Factory Payroll XXX

* for Indirect Labor

basic cost accounting entries in
job order costing
Manufacturing Manufacturing OH
OH Cost Applied to Products
(Actual Cost)
*Manufacturing OH Control XXX Manufacturing OH Control XXX
**Accounts Payable XXX *Various Credits XXX

* Depreciation, Utilities, Insurance, * Depreciation, Utilities,

Rent Expense Insurance, Rent Expense
** Acc. Dep., Utilities Payable,
Insurance Payable, Rent Payable
basic cost accounting entries in
job order costing
Manufacturing OH Applied to Products
(Normal Cost)
(Closing Entry)
Work-in-Process XXXManufacturing OH Applied XXX
Manufacturing OH Applied XXX Manufacturing OH Control XXX
*Difference XXX

This entry used for Predetermined * Balancing figure depends on

Overhead Rate which is higher/lower between
OH Applied and OH Control
basic cost accounting entries in
job order costing
Underapplied OH Overapplied OH

A debit balance means that less If the applied overhead is

overhead was applied to jobs than greater than the actual cost
actual cost incurred. incurred, Manufacturing
Overhead Control account will
have a credit balance.
(OH Applied < OH Control) (OH Applied > OH Control)
basic cost accounting entries in
job order costing
Transfer of Sales of
Finished Goods Finished Goods
Finished Goods XXX Accounts Receivable XXX
Work-in-Process XXX Sales XXX

Cost of Goods Sold XXX

Finished Goods XXX
 JOB ORDER COSTING cycle
Procurement Production Warehousing Selling
Materials and Materials are Finished goods Customers are
supplies needed transferred from are moved from found.
for manufacturing the storeroom to the factory to the Merchandise is
are ordered, the factory. Labor warehouse to be shipped from the
received and tools, machines, held until they are warehouse. Sales
stored. Direct and power, and other sold. to customers are
Indirect labor are costs are applied recorded.
obtained to complete the
product.
 JOB ORDER COSTING cycle
Procurement Production Warehousing Selling
Materials Work-in-Process Finished Goods Cost of Goods Sold

IN OUT IN OUT IN OUT IN OUT

Factory Payroll

IN OUT Income Summary

Manufacturing OH
Control IN OUT
IN OUT
 JOB ORDER COSTING cycle
Materials Work-in-Process Finished Goods
Beginning returned to suppliers Beginning Cost of Goods Beginning Cost of Goods Sold
Purchases Used Direct Material Manufactured COGM
Freight-in Direct Material Direct Labor Materials returned
Excess from factory Indirect Material Overhead to warehouse
Ending Ending Ending

Manufacturing OH
Factory Payroll Control Cost of Goods Sold
Direct Labor Actual Applied
Indirect Labor Indirect Material Actual Activity Cost of Goods Sold
Indirect Labor x predetermined rate
Other Overhead XXX Underapplied
Underapplied
 JOB ORDER COSTING cycle
Materials Work-in-Process Finished Goods
Beginning returned to suppliers Beginning Cost of Goods Beginning Cost of Goods Sold
Purchases Used Direct Material Manufactured COGM
Freight-in Direct Material Direct Labor Materials returned
Excess from factory Indirect Material Overhead to warehouse
Ending Ending Ending

Manufacturing OH
Factory Payroll Control Cost of Goods Sold
Direct Labor Actual Applied
Indirect Labor Indirect Material Actual Activity Cost of Goods Sold
Indirect Labor x predetermined rate
Other Overhead XXX Overapplied
Overapplied
JOB COST SHEET

Mahor, Lean Erica R.

JOB ORDER COST SHEET
A document used to record manufacturing costs and is
prepared by companies that use job-order costing system
to compute and allocate costs to products and services
Each job sheet breaks the costs down in terms of direct
materials, direct labor, and manufacturing overhead
assigned to individual jobs
"How much the business spent on each unit per product
produced?"
 JOB ORDER COST SHEET
This sheet is the main source for tracking an item to keep pricing
and inventory accurate. To maintain this accuracy, this job cost
sheet needs to track information including:
The date the job was started.
The date employees completed the job.
The date the order was shipped to the customer.
Customer information, usually their address
Job records information, including overhead cost,
materials used, and labor information.
The summary of the final cost of the job.
 JOB
ORDER
COST
SHEET
STOCK CARD

Mahor, Lean Erica R.

FINISHED GOODS stock card
Perpetual book inventory of costs and quantities of
completed goods held for sale
Works best with the FIFO method and can track finished
products, goods sold, and balance
A separate stock card is prepared for each kind of product
 MATERIAL stock card
Perpetual book inventory of costs and quantities of
materials on hand
Works best with the FIFO method and can track purchases,
issuances, and balance
A separate stock card is prepared for each type of material
 last IN, FIRST OUT

Inventory method that assumes the recent goods

purchased/finished are the first goods sold/issued.

Banned by IFRS due to potential distortions on a

company's profitability and financial statements.

May result in inventory valuations that are outdated and

obsolete
 FIRST IN, FIRST OUT
Inventory method that assumes the first goods
purchased/finished are the first goods sold/issued.
EXAMPLE:
Beginning Balance - 500 units of material at P 3.5 per unit.

Purchased 1000 units of material at P 3 per unit.

Issued 400 units of material to production

PERPETUAL INVENTORY SYSTEM
Keeps track of inventory balances continuously, with updates made
automatically whenever a product/material is received or sold
PERIODIC INVENTORY SYSTEM
Uses an occasional physical count to measure the level of
inventory and the cost of goods sold
PERIODIC INVENTORY SYSTEM
Uses an occasional physical count to measure the level of
inventory and the cost of goods sold
 TRY TO SOLVE!
08/01 - Inventory 400 units at P10
08/12 - Purchase 600 units at P12
08/16 - Issue 500 units
08/18 - Purchase 300 units at P15
08/20 - Issue 200 units
08/25 - Purchase 400 units at P14
08/28 - Issue 400 units
periodic inventory system
perpetual inventory system
comprehensive problem
comprehensive problem
comprehensive problem
comprehensive problem
comprehensive problem
comprehensive problem
comprehensive problem
The transactions for the month of January, 2023 are as follows:
Purchases for the month of January - Material A 600 units at P5.50;
Material B – 800 units at P5.00', Indirect materials - P700.
comprehensive problem
comprehensive problem
The transactions for the month of January, 2023 are as follows:
Materials requisitioned and issued on a FIFO basis amounted to
P7,000. Material A, 200 units (charged to Job 101);Material A, 600 units
and Material B, 225 units (charged to Job 102 );Material B, 425 units
(charged to Job 103).Indirect materials amounted to P 1,000.
comprehensive problem
The transactions for the month of January, 2023 are as follows:
Materials requisitioned and issued on a fifo basis amounted to P 7,000.
Material A, 200 units (charged to Job 101);Material A, 600 units and
Material B, 225 units (charged to Job 102 );Material B, 425 units
(charged to Job 103).Indirect materials amounted to P 1,000.
comprehensive problem
comprehensive problem
comprehensive problem
comprehensive problem
The transactions for the month of January, 2023 are as follows:
Material B returned to vendors, 70 units at P 5.00.
comprehensive problem
The transactions for the month of January, 2023 are as follows:
Material B returned to vendors, 70 units at P 5.00.
 comprehensive problem
The transactions for the month of January, 2023 are as follows:
Payroll during January amounted to P 10,300, of which P 2,000 is for
Job 101; P 4,000 is for Job 102; P 2,000 for Job 103, and P 2,300 is
indirect labor. Deductions are as follows:
1. SSS Premiums P 412
2. Medicare Contributions 225
3. Withholding taxes 1,050
comprehensive problem
comprehensive problem
comprehensive problem
 comprehensive problem
The transactions for the month of January, 2023 are as follows:
.Factory overhead is applied on the basis of 100% of direct labor cost.
comprehensive problem
 comprehensive problem
The transactions for the month of January, 2023 are as follows:
.Jobs completed during the month - Job 101 for 3,000 units of
Commodity X and Job 102 for 5,000 units of Commodity Y.
comprehensive problem
 comprehensive problem
The transactions for the month of January, 2023 are as follows:
Sales during January on FIFO basis - 4,000 units of Commodity X at P
6.00 per unit and 4,000 units of Commodity Y at P 4.00 per unit.
 comprehensive problem
The transactions for the month of January, 2023 are as follows:
Sales during January on FIFO basis - 4,000 units of Commodity X at P
6.00 per unit and 4,000 units of Commodity Y at P 4.00 per unit.
comprehensive problem
 comprehensive problem
The transactions for the month of January, 2023 are as follows:
Cash collection from customers P 35,000.
 comprehensive problem
The transactions for the month of January, 2023 are as follows:
Recorded the following liabilities: Factory overhead, P 4,800; Selling
expenses, P 2,100; General expenses; P 1,500.
 comprehensive problem
The transactions for the month of January, 2023 are as follows:
Recorded the following liabilities: Factory overhead, P 4,800; Selling
expenses, P 2,100; General expenses; P 1,500.
 comprehensive problem
The transactions for the month of January, 2023 are as follows:
Paid accounts - P 9,500; payroll - P 8,500.
comprehensive problem
The transactions for the month of January, 2023 are as follows:
Paid accounts - P 9,500; payroll - P 8,500.
PERPETUAL - PERIODIC
PERPETUAL - PERIODIC
 AVERAGE METHOD
Moving Average (Perpetual) - Under this method, a new weighted average
unit cost must be computed after every purchase. Such new weighted
average unit cost is then multiplied by the units on hand to get the inventory
cost.
Weighted Average (Periodic) - The weighted average unit cost is multiplied by
the units on hand to derive the inventory value. The weighted average unit cost
is computed by dividing the total goods available for sale and the total number
of units available for sale.
Weighted Average Unit Cost = TGAS (pesos) / TGAS (units)
Ending Inventory = Weighted Average Unit Cost * Ending Inventory (Units)
 MOVING AVERAGE
Moving Average (Perpetual) - Under this method, a new
weighted average unit cost must be computed after every
purchase. Such new weighted average unit cost is then
multiplied by the units on hand to get the inventory cost.
MOVING AVERAGE
MOVING AVERAGE

2,840,000 divided by 20,000 = 142

 MOVING AVERAGE

--------------------------
MOVING AVERAGE

3,750,000 divided by 24,000 = 156.25

MOVING AVERAGE
 MOVING AVERAGE
Cost of Sales
= Beginning Inventory + Net Purchases - Ending Inventory
 weighted AVERAGE
Weighted Average (Periodic) - The weighted average unit cost is
multiplied by the units on hand to derive the inventory value. The
weighted average unit cost is computed by dividing the total goods
available for sale and the total number of units available for sale.
weighted AVERAGE
weighted AVERAGE
weighted AVERAGE
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