Revision

Cost objects

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 Revision

Direct costs

Direct Material Direct Labor

Product

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 Revision

Indirect cost

Plant's lease
cost
Quality control

Product

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 Revision

Cost-allocation base

direct labor-hours

Machine

Quality control
direct Machine -hours

Product

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 CHAPTER 3

JOB COSTING

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 LEARNING OBJECTIVES

1. Describe the building-blocks concepts of costing

systems
2. Distinguish job costing from process costing
3. Outline the seven-step approach to Job costing
4. Distinguish actual costing from normal costing

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 CONTENT
3.1. Job costing
3.1.1 Building-blocks concepts of costing systems
3.1.2. Common issues about Job costing system
3.1.3. Distinguish job costing from process costing
3.1.4. Costing Approaches
3.1.5. Seven-Step of Job Costing
3.2. Actual job costing
3.3. Normal job costing

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 3.1.1 Building-blocks concepts
of costing systems
Cost pool: a grouping of individual indirect cost
items

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 3.1.1 Building-blocks concepts
of costing systems
Cost drivers: the reasons why costs are being
incurred

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 3.1.2. Common issues about
Job costing system
4.1.1. Objective:

Cost information timely, Control and decision-making

useful, effective on costs

4.1.2. Characteristics:

Each job uses Accumulate costs

Distinct product different separately for
resources each product

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 3.1.2. Common issues about
Job costing system

Job-costing is likely to be used by________.

• A) oil refining companies
• B) advertising agencies
• C) construction companies
• D) drinking production companies
• E) wedding Cake bakery

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 3.1.3. Distinguish job costing
from process costing

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 3.1.4. Costing Approaches
• Actual costing—allocates

• Normal Costing—allocates

• Both methods allocate direct costs to a cost

object the same way.

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 3.1.4. Costing Approaches

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 3.1.4. Costing Approaches
Actual costing

621
Actual

622
COST OBJECT
Actual

627

Actual

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 3.1.4. Costing Approaches
Normal Costing

621 622
Actual

COST OBJECT
627
Budgeted

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 3.1.5. Seven-Step Job Costing

Distinct product: order job

Cost objects

Sub-ledger Job cost sheet

Material Records

production
Order job requirement Labor Records Job cost sheet

Department
Overhead Records

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 3.1.5. Seven-Step Job Costing
Seven-Step Job Costing
1. Identify the job.

2. Identify the direct costs.

3. Choose Cost-allocation base for Indirect cost.

4. Identify the Indirect costs in Overhead costing.

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 3.1.5. Seven-Step Job Costing
Seven-Step Job Costing
5. Compute the Rate per Unit of each cost-allocate base

6. Compute the indirect costs allocated to the job

7. Compute total job costs by adding all direct and indirect

costs together.

Job Cost Sheet

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 3.1.5. Seven-Step Job Costing
Job Cost Sheet

Customer Date Initiated

Date Completed

Job Number

Direct Materials Direct Labor Manufacturing Overhead

Req. No. Amount Ticket Hours Amount Hours Rate Amount

Cost Summary Date Number Balance

Direct Materials

Direct Labor

Manufacturing Overhead

Total Cost

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 Example Job Costing
Robinson Company manufacture a paper-making machine
for Western Pulp and Paper (WPP) in 2013, is Job WPP 298

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 Example Job Costing
Step 1: Identify the job - WPP 298

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 Example Job Costing
Step 2. Identify the direct costs of the job:
direct materials and direct manufacturing labor

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 Example Job Costing
Materials-requisition record

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 Example Job Costing
Materials-requisition record

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 Example Job Costing
Labor-time sheet

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 Example Job Costing
Labor-time sheet

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 Example Job Costing
Materials-requisition record

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 Example Job Costing
Seven-Step Job Costing
3. Choose Cost-allocation base for Indirect cost in OH costing:
Direct manufacturing labor hours
• In 2013, Robinson’s Budgets 28,000 Direct manufacturing labor
hours.

4. Identify the Indirect costs in Overhead costing:

Single cost pool: manufacturing over head
• In 2013, budgeted manufacturing over head: $ 1,120,000

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 Example Job Costing
Seven-Step Job Costing
5. Compute the Rate per Unit of each cost-allocate base:
Budgeted manufacturing Budgeted Manufacturing Overhead Costs
Overhead rate
= Budgeted total Quantity of Cost-Allocation Base

$1,120,000
$40 = 28,000

6. Compute the indirect costs allocated to the job:

WPP 298 needed 88 hours to completed, manufacturing over head
cost allocated to WPP 298:
 88 x $40 = $3,520

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 Example Job Costing

7. Compute total job costs by adding all

direct and indirect costs together.
• Direct materials: $4,606
• Direct manufacturing labor: $15,79
• Manufacturing overhead cost: $ 3,520
Total manufacturing cost of Job WPP298:
$9,705

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 Example Job Costing

MOH
JOB 1

JOB 2

JOB 3
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32
 3.2. Actual Job Costing
Exersise:
AAA Manufacturing Company have a job order 25 - Job 650 for
custumer (đvt: 1.000đ).
• DRC Job 650: DMC là 50.000; LBC là 19.000
• Manufacturing overhead 65.100. Cost allocation based
machine hours. Job 650 use 500 MH. Factory use total 2.480 HM
for all job in company.
Requiment:
Job costing producting for job 650?

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33
 3.2. Actual Job Costing

Step 1:

Step 2:

Step 3:

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 3.2. Actual Job Costing

Step 4:

Step 5:

Step 6:

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 3.2. Actual Job Costing

Step 7:

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 3.3. Normal Job Costing
4.3.3. Adjusted Allocation – Rate Approach

Accounting for Overhead

• Actual costs will almost never equal budgeted costs.

Accordingly, an imbalance situation exists between the
two overhead accounts.
– If Overhead Control > Overhead Allocated, this is
called Underallocated Overhead
– If Overhead Control < Overhead Allocated, this is
called Overallocated Overhead

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 3.3. Normal Job Costing
4.3.3. Adjusted Allocation – Rate Approach

Adjusted allocation rate approach—all allocations are

recalculated with the actual, exact allocation rate.

Proration approach—the difference is allocated

between cost of goods sold, work-in-process, and
finished goods based on their relative sizes.

Write-off approach—the difference is simply written off

to cost of goods sold.

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 Chapter Summary

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 HOMEWORK

EX 4 - 16, 4- 17, /P 159 – Horngren, C., Datar, S., Rajan,

M., Wynder, M., Maguire, W. and Tan, R., [2015], Cost
accounting a managerial emphasis, 15th ed., Australian
Edition, Pearson Education, Harlow.

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