1. Universidad Cuauhtémoc
Campus Aguascalientes
Job Order Cost Systems
Análisis de Costos
Maestría en Administración

2. Job Order Cost Systems
1 Manufacturing Cost Terms
2 Cost Accounting System
3 Flow of Manufacturing Cost

3. Manufacturing Cost
Terms

4. Factory
Overhead
Direct
Materials
Direct
Labor
Product
Costs
The cost of materials
that are an integral
part of the product.
The cost of labor directly
involved in converting
material into the product.
Manufacturing costs other
than direct materials and
direct labor.

5. Cost Accounting Systems
Job order cost system Provides a separate
record for the cost of each quantity of product that
passes through the factory.
Process cost system System in which costs are
accumulated for each of the departments or
processes within the factory.
*Note that the examples in this presentation
use the job order cost accounting system.

6. The costs of converting the materials
into finished products consists of
direct labor and factory overhead.
These two costs combined are often
referred to as conversion costs.

7. Flow of Manufacturing Costs
PRINTING PLANT
Job 73
Work in Process
Inventory
•Direct Labor
•Factory Overhead
MATERIALS STOREROOM
Materials
Inventory

8. Flow of Manufacturing Costs
CAMPUS BOOKSTORE
Cost of Goods
Sold
Finished Goods
Inventory
WAREHOUSE
Job 69
Job 70

9. Flow of Manufacturing Costs
Materials received are
inspected by the
Receiving Department.
Once inspected, a
receiving report is
prepared showing the
quantity received and
its condition.
Receiving
Report
No. 196

10. Flow of Manufacturing Costs
Invoice
The receiving report and the invoice are used
to record the receipt of the merchandise and
to control the payment.
Receiving
Report
No. 196

11. Flow of Manufacturing Costs
Invoice
a. Materials 10 500 00
Accounts Payable 10 500 00
Materials purchased during
December.
Receiving
Report
No. 196

12. Flow of Manufacturing Costs
The Materials account is a controlling
account. A separate account for each
type of material is maintained in a
subsidiary materials ledger.
Invoice
Receiving
Report
No. 196

13. MATERIALS LEDGER ACCOUNT
MATERIAL: No. 23 Paper ORDER POINT: 1,000 lbs.
RECEIVED ISSUED BALANCE
Rec. Mat.
Report Req. Unit
No. Quantity Amount No. Quantity Amount Date Quantity Amount Price
Dec. 1 1,200 $ 6,000 $5.00
672 400 $ 2,000 4 800 4,000 5.00
Receiving
Report
No. 196
196 1,500 $10,500 8 800 4,000 5.00
1,500 10,500 7.00
First-in, first-out
Direct Materials

14. MATERIALS LEDGER ACCOUNT
MATERIAL: No. 23 Paper ORDER POINT: 1,000 lbs.
RECEIVED ISSUED BALANCE
Rec. Mat.
Report Req. Unit
No. Quantity Amount No. Quantity Amount Date Quantity Amount Price
Dec. 1 1,200 $ 6,000 $5.00
672 400 $ 2,000 4 800 4,000 5.00
196 1,500 $10,500 8 800 4,000 5.00
1,500 10,500 7.00
Later, Materials Requisition Number 704 is prepared for
Job No. 72 requisitioning 1,800 units of No. 23 paper.
to Materials Requisition
Direct Materials
704 1,800 11,000 12 500 3,500 7.00

15. MATERIALS REQUISITIONS
REQUISITION NO. 704
JOB NO. 72
Quantity Unit
Description Issued Price Amount
No. 23 paper 800 $5.00 $ 4,000
1,000 7.00 7,000
Total issued $11,000
from Materials Ledger Account
to Job Cost
Sheet
Direct Materials

16. Job 72
4,000 units of Algebra
Direct materials
Direct Labor
Factory Overhead
from Materials Requisition
$11,000
The receiving report and the invoice are
used to record the receipt of the
merchandise and to control the payment.
b. Work in Process 11 000 00
Materials 11 000 00
Materials requisitioned to
Job 72.
Direct Materials

17. Direct Labor
TIME TICKET
Job 72 Time Tickets
No. 6311
Employee Name S. Andrews
Date Dec. 26, 2006
Work Description Printing
Job No. 72
Start Finish Hours Hourly
Time Time Worked Rate Cost
9:00 12:00 3 $15.00 $45.00
1:00 6:00 5 15.00 75.00
Total Cost $120.00
Approved by _____________________________A. M.
December Job
72 (500 hours)
for a total cost
of $7,500
to Job Cost
Sheet

18. Direct Labor
Job 72
4,000 units of Algebra
Direct materials $11,000
Direct Labor
Factory Overhead
from Time Tickets
7,500
The receiving report and the invoice are
used to record the receipt of the
merchandise and to control the payment.
c. Work in Process 7 500 00
Wages Payable 7 500 00
Factory labor used in
production of Job 72.

19. When indirect material is used or depreciation of
factory equipment is recorded, a cost account
(rather than an expense account) needs to be
charged. All manufacturing costs except direct
materials and direct labor fall into this category.
d. Factory Overhead 4 600 00
Factory overhead incurred.
Materials 500 00
Wages Payable 2 000 00
Utilities Payable 900 00
Accumulated Depreciation 1 200 00
Factory Overhead

20. A firm can’t wait until the end of the
fiscal year to price a product, so overhead
must be estimated (or applied) using this
formula.
Estimated total
factory overhead costs
Estimated activity
base
Predetermined
factory overhead
rate
=
Factory Overhead

21. An activity base is chosen for the
denominator of the formula that is relevant
to overhead and can be realistically
measured. There are several possibilities
for Goodwell Printers.
Activity base possibilities
1. Direct labor hours
2. Direct labor dollars
3. Machine hours
4. Direct materials
Factory Overhead

22. Goodwell Printers estimates
factory overhead costs to be
$50,000 and chooses direct labor
hours as its activity base.
Factory Overhead

23. Management estimated that 10,000 direct
labor hours would be used during the fiscal
period. This allowed for a predetermined
factory overhead rate to be calculated.
Estimated total factory overhead costs
Estimated direct labor hours
$50,000
10,000 direct labor hours
= $5 per direct labor hours
Factory Overhead

24. TIME TICKET
Job 72 Time Tickets
No. 6311
Employee Name B. Andrews
Date Dec. 26, 2006
Work Description Printing
Job No. 72
Start Finish Hours Hourly
Time Time Worked Rate Cost
9:00 12:00 3 $15.00 $45.00
1:00 6:00 5 15.00 75.00
Total Cost $120.00
Approved by _____________________________A. M.
Job 72 required 500
direct labor hours.
December
Job 72 (500
hours) for a
total cost of
$2,500
Factory Overhead

25. Job 72
4,000 units of Algebra
Direct materials
Direct Labor
Factory Overhead
500 hours x $5
$11,000
7,500
The receiving report and the invoice are
used to record the receipt of the
merchandise and to control the payment.
d. Work in Process 2 500 00
Factory Overhead 2 500 00
Factory overhead applied to
Job 72.
2,500
Total job cost $21,000
Factory Overhead

26. Completion of Jobs
The receiving report and the invoice are
used to record the receipt of the
merchandise and to control the payment.
g. Finished Goods 10 250 00
Work in Process 10 250 00
Job 71 completed in
December.
Job 71
1,000 units of American History
Direct materials
Direct Labor
Factory Overhead
2,000
3,500
1,750
Total job cost $10,250
Balance $ 3,000
Job 71 was
started in
November and
competed in
December.

27. FINISHED GOODS LEDGER
ITEM: American History
Manufactured Shipped Balance
Job Ship
Order Order Unit
No. Quantity Amount No. Quantity Amount Date Quantity Amount Price
Sale of Product
Sold 2,000 American History
textbooks on account, $28,000.
Dec. 1 2,000 $ 20,000 $10.00

28. Completion of Jobs
The receiving report and the invoice are
used to record the receipt of the
merchandise and to control the payment.
g. Finished Goods 10 250 00
Work in Process 10 250 00
Job 71 completed in
December.
Job 71
1,000 units of American History
Direct materials
Direct Labor
Factory Overhead
2,000
3,500
1,750
Total job cost $10,250
Balance $ 3,000
Job 71 was
started in
November and
competed in
December.

30. The receiving report and the invoice are
used to record the receipt of the
merchandise and to control the payment.
h. Cost of Goods Sold 20 000 00
Finished Goods 20 000 00
Cost of 2,000 American
History textbooks sold.
Entry to remove books from inventory.
The receiving report and the invoice are
used to record the receipt of the
merchandise and to control the payment.
i. Accounts Receivable 28 000 00
Sales 28 000 00
Revenue received from
textbooks sold.
Entry to record sale on account.
Sale of Product

31. FINISHED GOODS LEDGER
ITEM: American History
Manufactured Shipped Balance
Job Ship
Order Order Unit
No. Quantity Amount No. Quantity Amount Date Quantity Amount Price
Dec. 1 2,000 $ 20,000 $10.00
643 2,000 $20,000 9 --- --- ---
71 1,000 $10,250 31 1,000 10,250 10.25
Transfer to Finished Goods
Job 71 is transferred to finished goods.

32. EXAMPLES OF PERIOD COSTS
SELLING EXPENSES
 Advertising expenses
 Sales salaries expenses
 Commission expenses

33. EXAMPLES OF PERIOD COSTS
ADMINISTATIVE EXPENSES
 Office salaries expenses
 Office supplies expenses
 Depreciation expense—
office buildings and
office equipment

34. Goodwell Printers
Income Statement
For the Month Ended December 31, 2006
Sales $28,000
Cost of goods sold 20,000
Gross profit $ 8,000
Selling and admin. expenses:
Sales salaries expense $2,000
Office salaries expense 1,500
Total selling and admin.
expenses 3,500
Income from operations $ 4,500

35. Overview of Job Order Costing
Product Costs
Costs & Expenses
Balance Sheet
Direct
Labor
Direct
Labor
Factory
Overhead
Factory
Overhead
Finished
Goods
Inventory
Cost of goods
manufactured
Work in
Process
Inventory
Materials
Inventory
Materials
Purchases

36. Cost of
Goods Sold
Product Costs
Period Costs
Costs & Expenses
Balance Sheet
Direct
Labor
Direct
Labor
Factory
Overhead
Factory
Overhead
Finished
Goods
Inventory
Work in
Process
Inventory
Income Statement
Selling and
Administrative
Selling and
Administrative
Period costs flow
directly to the
income statement
Overview of Job Order Costing
Materials
Inventory
Materials
Purchases

37. Universidad Cuauhtémoc
Campus Aguascalientes
Questions?
Maestría en Administración