Next

Page
Click

Manufacturing Cost Flows

Here

Income
Balance Sheet Statement
Costs Inventories Expenses
Material Purchases Raw Materials

Direct Labor Work in

Process
Manufacturing
Overhead Cost of
Finished
Goods
Goods
Sold

Selling and Selling and

Period
Administrative Administrative
Costs Expenses
 Comparing Job-Order and Process
Costing

Direct Materials

Direct Labour Work in Finished

Process Goods

Manufacturing Cost of
Overhead Goods
Sold

LO 1
 Comparing Job-Order and Process
Costing
Costs are traced and
applied to individual
Direct Materials jobs in a job-order
cost system.

Finished
Direct Labour Jobs
Jobs Goods

Manufacturing Cost of
Overhead Goods
Sold

LO 1
 Comparing Job-Order and Process
Costing
Costs are traced and
applied to departments in
Direct Materials a process cost system.

Direct Labour
Processing Finished
Department Goods

Manufacturing Cost of
Overhead Goods
Sold

LO 1
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Page

Basics
Basics of
of Job-Order
Job-Order Costing
Click

Costing
Here

Job-Order Process
Costing Costing

 Many different products are produced each period.

 Products are manufactured to order.
 Costs are traced or allocated to jobs.
 Cost records must be maintained for each distinct
product or job.
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Applications
Applications of
of
Page
Click
Here

Job-Order
Job-Order Costing
Costing
Job-Order
Costing

 Typical job order cost applications:

 Special-order printing
 Building construction
 Also used in the service industry
 Hospitals
 Law firms
 Next

Sequence
Sequence ofof Events
Events
Page
Click
Here

in
in aa Job-Order
Job-Order Costing
Costing System
System

Direct
DirectMaterials
Materials Charge
Charge
Job
JobNo.
No. 11 direct
direct
Direct
material
material and
and
DirectLabor
Labor Job
JobNo.
No. 22 direct
direct labor
labor
costs
costs to
to
Job each
each job
job as
as
JobNo.
No. 33
work
work isis
performed
performed
 Next

Sequence
Sequence ofof Events
Events
Page
Click
Here

in
in aa Job-Order
Job-Order Costing
Costing System
System

Direct Materials Apply

Job
JobNo.
No. 11 Apply
overhead
overhead toto
Direct Labor Job
each
each job
job
JobNo.
No. 22
using
using the
the
predetermined
predetermined
Job
JobNo.
No. 33
Factory
Factory rate
rate
Overhead (covered
(coveredseparately).
separately).
Overhead
 Next
Page

Materials
Materials Requisition
Requisition Form
Form Click
Here

Production managers use materials requisition forms to request

materials for manufacturing. This source document is used to
assign materials costs to specific jobs (or to overhead).

Total cost is
transferred to
Type, quantity, and total cost of job cost sheet
material charged to jobWill
A-143.
E. Delite for job A-143
 Next
Page

Employee
Employee Time
Time Ticket
Ticket Click
Here

A worker uses a time ticket to record the time spent on each job
(or overhead activity). This source document determines
the amount of direct labor that is charged to a job (or
the amount of indirect labor that is charged to overhead).

Information is
transferred to
job cost sheet
for job A-143
Job
Job Cost
Cost Sheet
Sheet ––
Next
Page
Click
Here

Recording
Recording Materials
Materials and
and Labor
Labor
The primary document for tracking the costs associated
with a given job is the job order cost sheet.
From the
From the materials
time ticket
requisition form
Job
Job Cost
Cost Sheet
Sheet ––
Next
Page
Click
Here

Recording
Recording Overhead
Overhead
Assume that the company applies (or allocates) overhead
to jobs using a predetermined overhead rate of $4 per
direct labor hour.
 Next

Job-Order
Job-Order Costing
Costing ––
Page
Click
Here

Flow
Flow of
of Materials
Materials Costs
Costs
Materials used Record on
may be either Direct each Job
direct or materials Order Cost
indirect. Sheet and
add to Work
Materials in Process
Requisition Account

Record in
Indirect
Manufacturing
materials
Overhead
Account
 Next

Job-Order
Job-Order Costing
Costing
Page
Click
Here

Flow
Flow of
of Labor
Labor Costs
Costs
An employee’s Record on
time may be either Direct each Job
direct or indirect. Labor Order Cost
Sheet and
add to Work
Employee Time in Process
Ticket Account

Record in
Indirect
Manufacturing
Labor
Overhead
Account
 Next

Job-Order
Job-Order Costing
Costing
Page
Click
Here

Document
Document Flow
Flow Summary
Summary

Employee Indirect
Time Ticket Labor Record on
each Job
Other Record in Applied Order Cost
Actual Manufacturing (or allocated) Sheet and
Overhead Overhead Overhead add to
Charges Account Work in
Process
Account
Materials Indirect
Requisition Material
 Next

Entry
Entry to
to Record
Record Cost
Cost Flows
Flows ––
Page
Click
Here

Material
Material Purchases
Purchases
Raw materials purchased are recorded
in an inventory account.
 Next

Entry
Entry to
to Record
Record Cost
Cost Flows
Flows ––
Page
Click
Here

Use
Use of
of Materials
Materials
Direct materials issued to a job
increase the Work in Process account and
decrease the Raw Materials account.
Indirect materials that are used in the factory
increase the Manufacturing Overhead account and
decrease the Raw Materials account.
 Next

Entry
Entry to
to Record
Record Cost
Cost Flows
Flows ––
Page
Click
Here

Labor
Labor
The cost of direct labor incurred
increases the Work in Process account and
decreases the Salaries and Wages Payable account.
The cost of indirect labor incurred
increases the Manufacturing Overhead account and
decreases the Salaries and Wages Payable account.
 Next

Entry
Entry to
to Record
Record Cost
Cost Flows
Flows ––
Page
Click
Here

Application
Application of
of Overhead
Overhead
The Work in Process account is increased and the
Manufacturing Overhead account is decreased
when overhead is applied (or allocated) to jobs.
 Next

Entry
Entry to
to Record
Record Cost
Cost Flows
Flows ––
Page
Click
Here

Transfer
Transfer to
to Finished
Finished Goods
Goods
As a job is completed, the cost of goods
that were completed for that job is transferred
from the Work in Process account
to the Finished Goods account.
 Next

Entry
Entry toto Record
Record Cost
Cost Flows
Flows ––
Page
Click
Here

Sale
Sale of
of Job
Job to
to Customer
Customer
When a job is sold to a customer on account:
(1) the sale is recorded; and
(2) the cost of the job is transferred
from the Finished Goods account
to the Cost of Goods Sold account.