Page 13 Number of Units Completed

Chapter Direct Materials

民 Date
JOB ORDER COSTING Requisition No.
LEARNING OBJECTIVES Quantity
Upon completion of this chapter,you should be able to Unit Price
Define job order costing and identify the types of industries that would be Cost
most to use this system. Direct Labor
Demonstrate the mechanics of a job order costing ssem. Date
Differentiate among the forms used in the purchase and issuance of Time Card No.
materials such as a purchase requisition,a purchase orcer.a receiving Hours
report,and a materiais recuisition. Rate
Distinguish between the periodic and perpetual cost accumulation systems Cost
used to account for materials issued to production and for ending matenals Factory Overhead
inventory. Date
Prepare a job order cost sheet Activity Base
The job order cost procedure keeps the costs of various jobs or contracts Quantity
separate
Application Rate
during their manufacture or construction.The method is applicable to job
Cost
order
Cost Summary
work in factories,workshops,and repair shops as well as to work by builders.
Direct Materials
construction engineers,shipbuilders,and printers.The cost unit is the job.the
Direct Labor
work order,or the contract;and the records will show the cost of each.The
Factory Overhead
method presupposes the possibility of physically identifying the jobs
produced and Total Cost
of charging each with its own cost.
A variation of the job order cost method is that of costing orders by lots.A lot Page 15
is Chapter 5 Job Order Costing
the quantity of product that can conveniently and economically be produced 117
and Several jobs or orders may be going through a factory at the same time,Each
costed.For example,in the shoe manufacturing industry,a contract is divided cost
into sheet is given a job number which is placed on each material requisition and
lots,each lot being from 100 to 250 pairs of one size and style of shoe.The labor
costs time ticket used in connection with the job.These forms used for materials and
are then accumulated for each lot. labor,numbered for the job to which they apply,are totaled daily or weekly
In job order costing,each job is an accounting unit to which and
materials,labor,and entered on the cost sheets.The cost sheet eventually becomes a summary of all
factory overhead costs are assigned by means of job order numbers.The cost the
of costs,including factory overhead,involved in completing a job.The cost sheets
each order produced for a given customer or the cost of each lot to be placed are subsidiary records and are controlled by the work in process account.Jobs
in
performed on the basis of customer specifications allow the computation of a
stock is recorded on a summary sheet called a job order cost sheet,or merely a profit
cost
or loss on each order.If jobs constitute production of a specific quantity for
Sheet.This mater sheet is designed to collect the costs of materials,labor,and
inventory,job order costing permits computation of a unit cost for inventory
factory overhead applicable to a specific job
costing purposes.
MAJOR SOURCE DOCUMENTS FOR JOB ORDER COSTING
Page 14
1.JOB-ORDER COST SHEET
116
a.These records accumulate product costs of specific units or small batches
Cost Accounting
of units for both product costing and control purposes.
Cost sheets differ in form,content,and arrangement in each business.In each
for, b.The file of job-order sheets for uncompleted jobs serves as a perpetual

the upper section provides space for the job number,the name of the book inventory and the subsidiary ledger for Work in Process Control.
customer,a C.A separate cost sheet is prepared for each job.
description of the items to be produced,the quantity,the date started,and the 2.MATERIALS STOCKCARD
date a.These records are the perpetual book inventory of costs and quantities of
completed.The main portion shows the cost of materials,labor,and factory materials on hand.
overhead applied in each department or cost center.An example of a job-cost b.The file of materials stock cards for unused materials is the subsidiary
sheet is shown below. ledger for Materials Control.
EXAMPLE OF A JOB ORDER COST SHEET C.A separate stockcard is prepared for each type of material on hand.
Job Cost Sheet 3.FINISHED GOODS STOCKCARD
Job Number a.These records are the perpetual book inventory of costs and quantities of
Description completed goods held for sale.
Date Started b.The file of finished goods stock cards for unsold goods is the subsidiary
Date Competed ledger of Finished Goods Control.
4.FACTORY OVERHEAD CONTROL COST RECORD Materials
a.These records accumulate detailed manufacturing overhead costs by XXXX
department. An entry is made on the stock card under the Issued section and also on the
b.The file of these records for the accounting period is the subsidiary ledger cost sheet-Materials.
for Factory Overhead Control. The entry to record the issuance of indirect materials is
Factory overhead control
Page 16 XXXX
Cost Accounting Matertals
118 XXXX
5.MATERIALS REQUISITION,TIME TICKET AND CLOCK CARD An entry is made on the stock card under the lssued section and also on the
a.As the source documents for charging costs to jobs and department. overhend analysis sheet.
b.To aid in fixing responsibility for control and usuge of materials and labor Shown below is an illustration of a material stock card.
ACCOUNTING PROCEDURES FOR MATERIALS Description
In manufacturing enterprises.the common practice is to record all inaterials Location in Storeroom
and Maximum
supplies in one control account,Materials or Stores.Procedures that affect the Minimum
materials account involve the: Stores Ledger Acct.No.
1.Purchase of materials and supplies. Date
2.Issuance of materials and supplies. Received
a.Direct materials Issued
b.Indirect materials and supplies Balance
Recording the purchase of materials. Unit
The account debited when materials are purchased is Materials or Unit
Stores(instead
Unit
of Purchases for periodic)and the account credited is Accounts Payable or
Qly.
Vouchers Payable.As materials are purchased,the amount is posted on the
Price
Material control account and at the same time the purchase is also entered on
an Amt.

individual materials ledger card/stockcard(a separate card is used for each Qty.
material Price
item)showing quantity received,unit cost,and total amount. Amt.
The entry to record the purchase of materials is: Qty.
xXXX Price
xxXX Amt.
Materials
Accounts Payable Page 18
An entry is made on the stock card under the Received section. Chapter 5 Job Order Costing
The entry to record the return of materials to vendor is: 121
xxxx ACCOUNTING PROCEDURES FOR LABOR
Accounts Payable The accounting procedures for labor may be divided into two distinct phases:
Materials 1.Collection of payroll data,computation of earnings,calculation of payroll
XXXX taxes,and payment of wages.
An entry is made on the stock card under the Received section enclosed in 2.Distribution and allocation of labor costs to jobs,departments,and other
parenthesis to indicate reduction in quantity. cost classifications.
In most factories,clock cards'time records are used to record the days or hours
Page 17 worked by each employee.These clock cards/time records are used as the
Chapter 5 Job Order Costing basis in

119 computing the gross earnings of empioyees who are paid hourly wages.In

Recording the issuance of materials addition to these clock cards,time tickets are prepared for each worker to

When a job is started,the materials needed for the job are issued based on the determine the time spent for each job as basis in determining the amount to be

matcrials requisitions prepared by the employees A copy of the requisition is charged to direct labor cost and indirect iabor cost.The time tickets for various

given to the storekeeper,which will serve us the basis for the materials to be jobs are sorted,priced,and summarized,and the time ticket hours should be

issued,The job order number is shown on the materials requisition togsther reconciled with the clock card hours.
with Shown below is an illustration of a job time ticket.
the specifics on type and quantity of materials required by ench job.The Employee Name
quantity, Date
unit cosl,and total cost of cach of the materials are entered on the issued Employee Number
section of
Department
the stock card,
Time started
The entry to record the issuance of direct materials is
Time stopped
Work in process
Job number
XXXX
At regular intervals,usually daily or weekly,the labor time and labor cost for vons pavable or cash
each Total amount of wages and salaries
Job are entered on the job order cost sheets.For each payroll period-weekby. due to factory personnel at the same
every two weeks.or monthly-the summary of employees'eamings and the time debiting payroll.
liability for payment is joumalized and posted to the general ledger ACCOUNTINGFOR FACTORY OVERHEAD
There are two accounts used-factory overhead control and factory overhead
Page 19 applied.Factory overhead control is used to accumulate actual overhead
122 incurred.
Cost Accounting while factory overhead applied is used to accumulate estimated factory
The entry to recond the payroll and the incurrence of liability is overhead
rrtr applied to production.
Piroll For factory overhead applied to production,a
Withholing Tar Parable predetennined rate is used and this is computed using mhy of the following as
a
ttrx
base:
rxx
1.Units of production
SSS Premium Pavable
2.Direct material cost
Phil Health Contrioution Pavable
3.Direct labor hours
rrxr
4.Direct labor cost
Accrued Factory Payroll
5.Machine hours
xixr
The predetermined factory overhead rate computed may be used for all
The entry to record the distribution of payroll is
departments in the company(blanket rate)or a rate may be computed for each
Work in process
department to fit the nature of the operations of the
xxtr department(departmentalized
Factory Overhead Control rate).
txtr Estimated factory overhead(Factory overhead applied)is used even if there
Paroll actual factory overhead because at the time the overhead is needed for costing
rxxx of
An entry is made on the cost sheet under the labor section jobs completed,the actual overhead is not yet available(the actual will be
The entry to record the payment of payroll is known
Accrued Factory Payroll
xxxX Page 21
Cash 124
xxtr Cost Accounting
The work in process account is used to charge the jobs with the direct labor only at the end of the month).The computation of the cost of each job will be
cost. done upon the completion of the job and this may be during the first
Factory overhead control is charged for the indirect labor cost incurred.The week,second
tax week,or third week of the month,and at this time,the actual overhead is not yet
withheld is computed based on the table provided by the Bureau of Internal available because some of the items included in the actual overhead will be
Revenue.For the SSS Premiums and Phil Health Contributions,the table is know
provided by the Social Security System. only at the end of the month.
The clearing account for the total wages due to the factory personnel is the As items in the factory overhead control account are incurred,the Factory
payroll Overhead Control account is debited.The applied factory overhead entered on
account summarized as follows: the
PAYROLL Job order cost sheet for each job is the basis for the following entry:
1.Total payroll during the payroll Work in process
period at the same time debiting work XXXX
Total wages and salaries earned by xxXX
in process for direct labor Applied Factory Overhead
and An entry is made on the cost sheet-factory overhead section
factory personnel during the payroll Some actual overhead costs,such as indirect materials,indirect labor,and
payroll
overhead for indirect labor
taxes,are debited to Factory Overhead Control as they are incurred.
period
Other
overhead costs,such as depreciation and expired insurance are debited to
Page 20
Factory
Chapter S Job Order Costing
Overhead Control when adjusting entries are recorded.
123
The controlling account for accumnulating the indirect charges incurred in
The sesmt wa to accamalate the liability for payroll or factory overhead is the
production is:
A.vrel Facton Pavroil summarzed as follows:
MANUFACTURING OVERHEAD CONTROL
ACCRUED FACTORY PAYROLL
and
Total amunt of wages paid to tactory
1.
I.Balancing beginning
Total debit footing at the end of the
personnel at the time erediting
accounting period when closing the Cost of Goods Sold
1.Cost of xX
indirect materials Under/over-applied overhead
books. If the closing is to be done yearly,the entry will be at the end of the year only.
supplies issued from the warehouse at The entry is shown on the next page
the same time crediting materials.
2.Cost of indirect labor at the same Page 23
time crediting payroll. Cost Accounting
3.Cost of indirect expense purchased 126
from outsiders End of the year:
4.Cost Factory Overhead Applied
of XXX
other Cost of Goods Sold
indirect expense Factory Overhead Control
incurred by the company. xx
The variance is computed as follows:
Page 22 Actual factory overhead
Chapter 5 Job Order Costing Less:Applied factory overhead
125 Variance
Manufacturing overhead applied-account used for accumulating the total If actual is bigger than applied,the variance is called under-applied factory
overhead charged to production during period. overhead(unfavorable),and this is taken as an addition to the Cost of Goods
MANUFACTURING OVERHEAD APPLIED Sold
Total credit footings at the end of the in the statement.If applied is bigger than actual,the variance is called over-
1. applied factory overhead(favorable)and this is taken as deduction from the
Cost
Cost of overhead allocated
of Goods Sold in the statement.Whatever method of closing the control and
to
applied account is used,the statement is always adjusted for the under-
accounting period upon closing of
applied/(over-applied)on the statement.For purposes of preparing the Cost of
production
Goods Sold statement,factory overhead applied is used because this is the
and computed amount
by charged to the work in process account.As stated above,the Cost of Goods
the books. Sold
multiplying the actual factor being will be adjusted for the variance only at the end of the year.If the Cost of
used during the period by the Goods
predctermined rate,at the same time, Sold is stated in the problem,then it must be taken as normal,prior to the
debiting work in process. adjustment for the variance.
Over/under applied overhead-the difference between the actual overhead Work in process-controlling account used to record the flow of the elements
incurred of
and the applied overhead. cost through the factory during a given period.
OVER/UNDER APPLIED OVERHEAD WORK IN PROCESS
Difference between the actual 1.Cost of materials,labor,and factory
Difference overhead applied to jobs completed
between 1.Cost of beginning inventory
actual during the period at the same time
manutacturing overhead and the 2.Cost of direct materials issued to
manufacturing overhead and debiting finished goods.
the production at the same time crediting
applied overhead when actual is 2.Cost of direct materials returned t0
applied overhead when the applied is time
more the applied. materials
mnore than the actual. 3.Cost of direct labor applied to
The closing of the Factory Overhead Control account and the Factory the warehouse at the same
Overhead production during the period at the
Applied account may be done at the end of the month or.at the end of the debiting materials.
year.If same
the closing is to be done monthly,the following are the entries: time crediting the payroll
End of the month: account
Factory Overhead Applied 4.Amount
Underlover-applied overhead of overhead applied to
Factory Overhead Control production at the same time crediting
xx applied overhead.
End of the year:
Page 24 2.Adjustment of over-applied facton
127 overhead
Chapter 5 Job Order Costing overhead.
The work in process account is used to accumulate during the month the total 3.Balance of the account at the end of
cost the period at the same time debiting
of materiais placed in process.labor used.and factory overhead applied.The income summary.
amounts entered on the cost sheet should equal the amounts debited to the ILLUSTRATIVE PROBLEM:
work in
2019.
process account during the month.As jobs are completed,the cost sheets for
the The Northern Consolidated Company has the following balances as of
January 1,
corresponding jobs are totaled and the amount is now transferred to the
finished Materials

goods account.The journal entry to record the cost of the jobs completed is: P

Finished goous Work in process

m220 4,900

Work in process Finished goods

xxtr 4,600

When the tinished goods are delivered to customers,the sales and the cost of Accrued factory payroll

goods sold are recorded as follows: 6,000

Aecounts receivable 200

x200 Details of the three inventories are:

Sules Finished goods

m00 Commodity x-2,000 units at P 3.00

Cost of goods sola Work in process-Job No.101

xtrr Materials:

Finishedi goods P6,000

XXXX A-200 units at P 5.00

If a job is delivered directly to a customer,the entries to record the completion U

of B-175 units at P 4.00
the job and the delivery to the customer may be merged into one as follows: 1,000
Cost of goous sold Direct labor:
uxr 700
Work in process P
m27 290 hours at P 5.00
Finished goods-a controlling account used to record the flow of the cost of 1,700
goods Factory ovcrhead-applied at
completed and transferred to the finished goods storeroom during the period. 100%of direct labor cost
FINISHED GOODS 1,450
1.Cost of inventory at the beginning 1,450
I.Cost of finished goods sold during the 4,600
period at same time debiting cost of
2.Factory cost of job order completed Page 26
goods sold. Chapter 5 Job Order Costing
at the same time crediting work in 129
prucess. Materials
3.Cost of goods retumed by the Material A-600 units at P 5.00
customer at the same time crediting P
cost of goods sold. 3,000
Material B-350 units at P 4.00
Page 25 1,400
128 Indirect materials
Cost Accounting 500
Cost of goods sold-an account used to accumulate the cost of finished goods 4.900
disposed through sale to customers. The transactions for the month of January,2019 are as follows:
COST OF GOODS SOLD 1.Purchases for the month of January-Material A-600 units at P5.50;Material
1.Cost of finished goods disposed B-800 units at P5.00;Indirect materials-P700.
1.Cost of finished goods returned by 2.Materials requisitioned and issued on a fifo basis amounted to P 7,000.
through sale to customers at the same Material A,200 units(charged to Job 101);Material A,600 units and Material
customers at the same time debiting B,225 units(charged to Job 102;Material B,425 units(charged to Job 103).
time crediting finished goods. Indirect materials amounted to P 1,000.
the finished goods account. 3.Material B returned to vendors,70 units at P 5.00
2.Adjustment for under-applied factory
4.Payroll during January amounted to P 10,300,of which P 2,000 is for Job Job 103
101; Mat.B-125 units at P 4.00-
P 4,000 is for Job 102;P 2,000 for Job 103,and P 2,300 is indirect labor. 300 units at P 5.00-1,500
Deductions are as follows: 2.000
SSS Premiums 7.000
P 350
412 350
Medicare Contributions- 3.
225 Accounis Payable
Withholding taxes Materials
1,050 Materials rerurned to vendors.
S.Factory overhead is applied on the basis of 100%of direct labor cost. 10,300
6.Jobs completed during the month-Job 101 for 3,000 units of Commodity X 422
and Job 102 for 5,000 units of Commodity Y. 225
7.Sales during January on FIFO basis-4,000 units of Commodity X at P 6.00 1.050
per unit and 4,000 units of Commodity Y at P 4.00 per unit. Payroll
8.Cash collection from customers P 35,000. SSS Premium Payable
9.Recorded the following liabilities:Factory overhead,P 4,800;Selling 8,663
expenses,P 2,100;General expenses,P 1,500. Medicare Contributions Payable
10.Paid accounts-P 9,500;payroll-P 8,500. Withholding Taxes Payable
Accrued Factory Payroll
Page 27 Payroll for the month.
130
Cost Accounting Page 28
Requirements: 131
1. Chapter S Job Order Costing
Journal entries to record the above transactions. 8.000
2.Job Order Cost Sheets. Work in process
3.Stock cards for materials and finished goods. 2.300
4.Cost of goods sold statement for the month of January. Factory overhead Control
000'8 10.300
Journal entries: Payroll
8,000 Classification of payroll
1. 8.000
Materials Work in Process
Accounls Payable 8.000
Materials purchased computed as follows: Factory Overhead Applied
Mat.A-600 units at P 5.50- Factory overhead applied to production.
P 3,300 21.000
Mat.B-800 units at P 5.00- 6.
4,000 Flnished goods
Indirect materials 21.600
700 Work in Process
8.000 Cost of jobs completed computod ns follows:
000'2 Job 101 Job 102
1,000 Materinls-
Work in process 2,700
8,000 4,000
2. Lnbor
Factory Overhead Control 3.450
Materials 4,000
Materials issued to production. Overhend-
1,000 3.450
Job 101 4.000
Mat.A-200 units at P 5.00- 9.600
Job 102 P 12.000
Mat.A-400 units at P 5.00-2,000 7.Accounts Receivable
200 units at P 5.50-1,100 40.000
Mat.B-225 at P 4.00 Sales
900 4,000 40.000
500 Sales computed as follows:
X-4,000 at P 6.00-P 24,000 Cost of Goods Sold Statement
Y-4,000 at P 4.00-16,000 for the month ended January 31,2019
Cost of goods sold P
22,000 4,900
Finished Goods Direct materials:
22.000 Materials,January 1
Cost of units sold for the month: P
X-2,000 at P 3.00-P 6,000 8,000
2,000 at P 3.20-6,400 350
Y-4,000 at P 2.40-9,600 7.650
8. Purchases
Cash 12,550
35.000 Less:Purchase returns
Accounts Receivable Total available for use
35,000 4,550
Collection of accounts. 5.550
9 7,000
Factory Overhead Control Less:Materials,January 31
4.800 1.000
Selling Expense Control 8,000
2,100 Indirect Materials
General Expense Control 8.000
1.500 23,000
Accounts Payable Direct labor
8.400 4.600
Factory overhead
Page 29 27,600
134 Total manufacturing cost
Cost Accounting 6.000
Job 102 Add:Work in process,January 1
Labor 21,600
Overhead Cost of goods put into process
Materials 6.000
4,000 Less:Work in process,January 31
5) 27,600
4,000 Cost of goods manufactured
4) 5.600
2) Add:Finished goods,January
A-400 at P5.00 22,000
2,000 Total goods available for sale
200 at P5.50 100
1,100 Less:Finished goods,January 31
006 P 22100
B-225 at P4.00 Cost of goods sold-normal
4,000 Add:Underapplied factory overhead
4,000 goods sold-actual
4,000
Job 103 Page 30
Labor Chapter 5 Job Order Costing
Overhead 135
5) The under applied factory overhead is compured ai follom
2,000 Actualfactory overhead
Materials 8.100
4) Less:Applied factory overhead
2,000 10
2) Underapplied factory overhead
B-125 at P4.00 The closing of the Factory Overhead Control account and the Facior,Orertea
500 Applied account maybe done on a morthly basis or an annualbesis Whatere
－300 at P5.00 method is used,the statement is ahways adjusted for the
1,500 underapplied(unfavcracle)
NORTHERN CONSOLIDATED COMPANY