Job order costing involves tracking costs by individual jobs or orders. Materials, labor, and overhead costs are assigned directly to each job using documents like job cost sheets. Journal entries are made for purchasing materials, issuing materials for production, paying labor costs, allocating overhead to jobs, completing jobs, and selling completed jobs. Sample problems provide data on inventory balances, costs incurred, and overhead rates to practice calculating costs under job order costing.
Job order costing involves tracking costs by individual jobs or orders. Materials, labor, and overhead costs are assigned directly to each job using documents like job cost sheets. Journal entries are made for purchasing materials, issuing materials for production, paying labor costs, allocating overhead to jobs, completing jobs, and selling completed jobs. Sample problems provide data on inventory balances, costs incurred, and overhead rates to practice calculating costs under job order costing.
Job order costing involves tracking costs by individual jobs or orders. Materials, labor, and overhead costs are assigned directly to each job using documents like job cost sheets. Journal entries are made for purchasing materials, issuing materials for production, paying labor costs, allocating overhead to jobs, completing jobs, and selling completed jobs. Sample problems provide data on inventory balances, costs incurred, and overhead rates to practice calculating costs under job order costing.
Job order costing involves tracking costs by individual jobs or orders. Materials, labor, and overhead costs are assigned directly to each job using documents like job cost sheets. Journal entries are made for purchasing materials, issuing materials for production, paying labor costs, allocating overhead to jobs, completing jobs, and selling completed jobs. Sample problems provide data on inventory balances, costs incurred, and overhead rates to practice calculating costs under job order costing.
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TOPIC 3 – JOB ORDER COSTING AND JOURNAL ENTRIES IN A MANUFACTURING SET UP
Two basic types of costing system in assigning cost:
1) Job order costing 2) Process costing
Job Order Costing
- The cost unit is the a distinct “job” or a “work order” or a “contract”. - This method assumes that there is a possibility of physically identifying the jobs produced and of charging each with its own cost. - Can be used by “job” or by “lots”. - LOT – quantity of product that can be economically produced or costed. - Materials, labor and overhead can be assigned by means of job order number. - Cost of each product or cost of each lot is recorded on a summary sheet, the Cost Sheet.
Documents used in Job Order Costing
- Job Order Cost Sheet - Materials Requisition - Materials Stockcard - Time Ticket - Finished Goods Stockcard - Clock Card - Factory Overhead Control
Accounting Procedure and Journal Entries
1) Purchase of Materials
2) Issuance of Material for production
3) Issuance of Indirect Material
4) Incurrence of Labor
5) Assigning Labor cost to each job
6) Payment of Payroll
7) Incurrence of actual overhead (already recorded from indirect labor and indirect materials)
8) Recording of assigned overhead on a completed job (while actual overhead not yet entirely available)
9) If Job is completed
10) Sale of goods
11) Entry upon availability of the actual overhead (monthly)
12) Closing entry at the end of the year
Problem 1 The following are transactions of Robina Corporation for the month of February 2020. Provide the corresponding journal entries for each transaction:
1. Purchase of materials (direct and indirect), on credit, P89,000
2. Usage of direct materials, P81,000, and indirect materials, P4,000 3. Manufacturing payroll for February: Direct labor, P39,000, and indirect labor, P15,000 paid in cash. 4. Other manufacturing overhead costs incurred during February, P75,000, consisting of supervision and engineering salaries, P44,000 paid in cash for plant utilities, repairs, and insurance, P13,000 and plant depreciation, P18,000 5. Allocation of manufacturing overhead to jobs, P80,000 6. Completion and transfer of individual jobs to finished goods, P188,800 7. Cost of goods sold, P180,000 8. Marketing costs for February, P45,000 and customer service costs for February P15,000, paid in cash 9. Sales, all on credit, P270,000
Problem 2 The following data is available for Justin Corporation for the year ending December 31, 2020: January 1 December 31 Inventories Materials P120,000 P180,000 Work in process P190,000 P158,000 Finished Goods P102,000 P130,000
Direct labor cost P300,000
Materials Purchased P380,000 Factory Overhead applied at 150% of Direct labor cost 1. Direct materials used 2. Total manufacturing cost 3. Cost of goods manufactured 4. Cost of goods sold
Problem 3 At the end of 2019, Alonzo Company’s manufacturing inventory and expense accounts held the following costs. Work in Process Inventory Finished Goods Inventory Cost of Goods Sold Direct Materials P120,000 P190,000 P350,000 Direct Labor P100,000 P250,000 P580,000 Factory Overhead P60,000 P300,000 P480,000
Alonzo’s accountant applied overhead during the year using a budgeted rate of P8.40 per hour. At year end, they computed the actual rate of P10.00 per machine hour. The beginning balances of both work in process inventory and finished goods inventory were zero. 5. How many machine hours worked during 2019? 6. Was a factory overhead over or under applied for year? By how much? 7. Prorate the over or under applied overhead to the appropriate accounts.
Problem 4 Assume the following information related to the Alexis Company for the month of November 2019: Job No. 105 Job No. 106 Job No. 107 In process, Nov. 1 Materials P40,000 P20,000 0 Labor P60,000 P40,000 0 Overhead P75,000 P50,000 0 Cost added in November Materials P70,000 P40,000 P60,000 Labor P80,000 P60,000 P100,000 Overhead ? ? 0
Actual overhead incurred in November amounted to P350,000. Job No. 105 and 106 were completed in November. Overhead is applied using a predetermined overhead rate. The overhead variance is allocated to Cost of Goods sold and the appropriate inventories.
Given the following information, compute the following:
8. The cost of the Nov. 1 Work in process inventory 9. The amount of overhead applied to production in November assuming no change in the overhead rate used 10. The cost of the goods completed and transferred to finished goods inventory 11. The cost of Goods sold (Job No. 105) 12. The cost of the finished goods inventory 13. The cost of the November 30 work in process inventory
