JOB ORDER
COSTING
P R O F. M A R K L E S T E R T. B A L A S A , C PA
COSTING:
COMPARISON OF JOB ORDER
COSTING AND PROCESS COSTING
BASIS JOB ORDER COSTING PROCESS COSTING
1. Objectives Accumulate total product Accumulate total product
costs and assign those costs and assign those costs
costs to each unit to each unit manufactured
manufactured
II. Nature Work is performed per Worked is performed on a
customer instruction continuous mass
(customized order)
III. Cost Accumulation Costs are accumulated by Costs are accumulated by
job department or process
IV. Kinds of product Heterogeneous (dissimilar Homogeneous
produced products) (similar products)
V. Reports Job cost sheet for each job Production Cost Report for
each process or department
Illustration : State whether each company below would be more likely to use a job costing system (JC) or a process
costing system (PC).
______ 1. A construction project to build a house from beginning to end
______ 2. Auto repair shop
______ 3. Paint manufacturer
______ 4. Custom jewelry manufacturer
______ 5. Custom furniture manufacturer
______ 6. Manufacturer of pencils
______ 7. Caltex Oil Refinery
______ 8. Lesterrific Advertising Company
______ 9. P & A Auditing Firm
______ 10. Ludy’s Peanut Butter Corporation
______ 11. Architectural firm
______ 12. RC Cola companay
______ 13. Phoenix Publishing Company
______ 14. Huwaei Company
______ 15. Chemical industry
______ 16. Carpet manufacturer
______ 17. Concrete manufacturer
______ 18. Softdrink bottler
______ 19. Refrigerator manufacturer
______ 20. A manufacturer of multivitamins
JOURNAL ENTRIES
•Fra Luca Corp uses job order costing system has the following balances as of January 2, 2021.
Materials P 5,000.00
Work in Process (Job 11) 1,112.50
Finished Goods (Job 10) 12,500.00
The following are transaction occurred in January
1) Purchases of materials P105,000 on account.
2) Materials requisitioned (issued) for production P97,500; indirect materials P5,000, Job 11 P10,250; Job 12
P22,875; Job 13 P28,187.50; Job 14 P8,062.50; Job 15 P16,250 and Job 16 P6,875.
3) Materials returned to storeroom form the factory totaled P3,000 of which P1,000 for
Job 11 and the balance was for indirect materials.
4) P106,750 were incurred for employee services. Of the payroll: direct labor P83,750;
indirect labor P12,000; sales commission P5,000 and administrative salaries P6,000. The
direct labor was distributed as follows: Job 11 P3,437.50; Job 12 P18,125; Job 13
P35,812.50; Job 14 P7,000; Job 15 P15,250 and Job 16 P4,125.
5) Payment of payroll is P90,000.
6) Manufacturing overhead costs are charged to jobs on the basis of P1.50 per direct
labor hour used. The following are the direct labor hours used by each job. Job 11 –
3,250; Job 12 – 9,250; Job 13 – 20,500; Job 14 – 3,750; Job 15 – 8,000 and Job 16 –
2,450. Any over or under-applied manufacturing overhead is charged to cost of goods
sold account.
7) Utility cost incurred in the factory totaled P15,000.
8) Advertising costs paid totaled P20,000.
9) Depreciation was recorded for the year P50,000 (40% for selling and
administrative activities and the balance to factory operations).
10) During the month, Job orders no. 11, 12, 14 and 15 were completed.
11) Job 11 and Job 12 were shipped out the customers were billed for 180%
of costs.
REQUIRED:
1) Prepare the journal entries
II) Prepare T-accounts
III) Prepare the Cost of Goods Sold Statement
IV) Prepare the Income Statement
Carlo Corporation's work in process inventory on February 1 per general ledger is P141,360. The job cost sheet on February is shown
below
Per Job Cost Sheets: Feb 1 Job 21 Job 22
Direct Materials 37,200 49,600
Direct Labor 18,600 15,500
Amount Charged to Production Job 21 Job 22 Job 23 Job 24
in February:
Direct Materials 18,600 12,400 37,200 27,900
Direct Labor 6,200 9,300 16,120 12,400
Factory overhead is charged based on direct labor cost. Job 21 and 23 are completed during the
month.
1. The total amount of cost of goods manufactured is:
a. 158,472
b. 197,160
c. 95,480
d. 133,920
2. The total work in process inventory is:
a. 149,420
b.75,020
c. 27,280
d. 47,740
JC Corporation uses a job order costing system. The following information
was recorded in December:
Cost Added during the Dec.
Direct
Job No. 01-Dec Materials Direct Labor
101 5,500 1,650 1,100
102 7,700 1,375 1,650
103 2,750 8,250 825
104 4,125 22,000 2,200
The direct labor wage rate is 10 per hour. Factory overhead applied at the rate of P5 per direct labor hour. Jobs# 101, 102 and 103 have been a completed and
transferred to finished goods. Job 102 has been delivered to the customer.
The total cost of goods Total amount of work in process
3. manufactured is: 5. end is:
a. 32,587.50 a. 41,662.50
b. 41,937.50 b. 28,325.00
c. 62,012.50 c. 23,787.50
d. 59,125.00 d. 29,425.00
The total cost of goods
4. sold is:
a. 11,550.00
b. 3,850.00
c. 21,037.50
d. 32,587.850
MATERIAL AND
PRODUCTION LOSSES
UNDER JOB ORDER
COSTING
Good Units
Defective
Goods
REWORK
Units Spoiled SALE OR
Produced Bad Units Goods DISPOSE
Scrap SALE
Leftovers
Waste DISPOSE
ACCOUNTING FOR DEFECTIVE GOODS
1) Charged to specific job
WIP P xxx
Materials Pxxx
Payroll xxx
FOH Applied xxx
2) Common to all Jobs
FOH Control P xxx
Materials Pxxx
Payroll xxx
FOH Applied xxx
ILLUSTRATION:
• HAVE FAITH Corp included the following costs on Job 143 for the manufacture of 500 pairs of slacks:
Original Cost
Direct Materials 20,000
Direct Labor 10,000
Factory Overhead (150% of Direct Labor) 15,000
Reworking Costs for 10 pairs of slacks:
Direct materials 500
Direct Labor 200
Required: Prepare journal entries if the costs of rework costs are charged to
A) Specific job
B) Common to all jobs
C) Abnormal Loss
HAVE FAITH Corp included the following costs on Job 143 for the manufacture of 500 pairs of
slacks:
A. SPECIFIC JOB
Original Cost
Direct Materials 20,000
Direct Labor 10,000
Factory Overhead (150% of Direct Labor) 15,000
Reworking Costs for 10 pairs of slacks:
• Before detection of defective goods: Direct materials 500
Direct Labor 200
WIP P45,000
Materials P20,000
Payroll 10,000
FOH Applied 15,000
Accounting for Reworking Costs:
WIP P1,000
Materials P500
Payroll 200
FOH Applied 300 (200x150%)
To record 500 completed units
FG P46,000
WIP P46,000
HAVE FAITH Corp included the following costs on Job 143 for the manufacture of 500 pairs of
B. COMMON TO ALL JOBS slacks:
Original Cost
Direct Materials 20,000
Direct Labor 10,000
Factory Overhead (150% of Direct Labor) 15,000
Reworking Costs for 10 pairs of slacks:
• Before detection of defective goods: Direct materials 500
Direct Labor 200
WIP P45,000
Materials P20,000
Payroll 10,000
FOH Applied 15,000
Accounting for Reworking Costs:
FOH Control P1,000
Materials P500
Payroll 200
FOH Applied 300 (200x150%)
To record 500 completed units
FG P45,000
WIP P45,000
B. ABNORMAL DEFECTIVE GOODS
HAVE FAITH Corp included the following costs on Job 143 for the manufacture of 500 pairs
of slacks:
Original Cost
Direct Materials 20,000
Direct Labor 10,000
• Before detection of defective goods:
Factory Overhead (150% of Direct Labor) 15,000
WIP P45,000
Reworking Costs for 10 pairs of slacks:
Materials P20,000
Direct materials 500
Payroll 10,000 Direct Labor 200
FOH Applied 15,000
Accounting for Reworking Costs:
Loss from Abnormal Rework P1,000
Materials P500
Payroll 200
FOH Applied 300 (200x150%)
To record 500 completed units
FG P45,000
WIP P45,000
ACCOUNTING FOR SPOILED GOODS
NORMAL:
1) Charged to specific job
Spoiled Goods Inventory P xxx
WIP Pxxx
2) Common to all Jobs
Spoiled Goods Inventory P xxx
FOH Control xxx
WIP Pxxx
ABNORMAL
3) Charged to specific job
Loss from abnormal spoilage P xxx
WIP Pxxx
4) Common to all Jobs
Loss from abnormal spoilage P xxx
FOH Control xxx
WIP Pxxx
ILLUSTRATION:
• NEVER SAY DIE Corporation had a production run of 24,000 pairs of shoes during the month of November. The following data are
as follows:
Direct materials 10
Direct Labor 8
Factory overhead (includes a 1 allowance for spoiled work) 4
Final inspection reveals that 1,800 pairs of shoes did not meet the quality standard but can be sold as seconds at a price of P15 a pair.
Required: Prepare journal entries if the costs of spoiled goods are charged to
A) Specific job
B) Common to all jobs
SPECIFIC JOB NEVER SAY DIE Corporation had a production run of 24,000 pairs of shoes during the
month of November. The following data are as follows:
Direct materials 10
Direct Labor 8
Factory overhead (includes a 1 allowance for spoiled work) 4
Final inspection reveals that 1,800 pairs of shoes did not meet the quality standard but can be
sold as seconds at a price of P15 a pair.
• Before detection of spoiled goods:
WIP P504,000
Materials P240,000
Payroll 192,000
FOH Applied 72,000 (3 x24,000)
• Accounting for spoiled goods:
Spoiled Goods P27,000 (1,800 x 15)
WIP P 27,000
• To record the 22,200 completed units:
FG P477,000
WIP P477,000
COMMON TO ALL JOBS NEVER SAY DIE Corporation had a production run of 24,000 pairs of shoes during the month of
November. The following data are as follows:
Direct materials 10
Direct Labor 8
Factory overhead (includes a 1 allowance for spoiled work) 4
Final inspection reveals that 1,800 pairs of shoes did not meet the quality standard but can be sold as
seconds at a price of P15 a pair.
• Before detection of spoiled goods:
WIP P528,000
Materials P240,000
Payroll 192,000
FOH Applied 96,000 (4 x 24,000)
• Accounting for spoiled goods:
Spoiled Goods P27,000 (1,800 x 15)
FOH Control 12,600
WIP P 39,600 (1,800 x 22)
• to record the 22,200 completed units:
FG P488,400
WIP P488,400
Units
Leftovers Scrap
Produced SALE
Units Waste DISPOSE
Leftovers
Produced
ACCOUNTING FOR SCRAP (AT THE TIME OF SALE)
When the value of scrap is relatively low or immaterial.
Cash/AR xxx
Scrap Revenue/Other Income xxx
When the value of scrap is relatively high or material.
Charged to specific job: Common to all jobs:
Cash/AR xxx Cash/AR xxx
WIP xxx FOH Control xxx
ACCOUNTING FOR SCRAP (AT THE TIME OF PRODUCTION)
• The amount of inventory of scrap material will be valued at its estimated
realizable value.
Charged to specific job: Common to all jobs:
Scrap Inventory xxx Scrap Inventory xxx
WIP xxx FOH xxx
