Job Order Costing

Job Order Costing

1. Direct material cost measurement

   • Material requisition
   • The cost sheet

2. Direct labor cost measurement

   • Time cards

3. Application of indirect manufacturing costs

   • Predetermined manufacturing overhead rate

4. Cost flow

   • Purchase and shipment of materials
     • Dispatch of direct materials
     • Dispatch of direct to indirect materials
   • Labor costs
   • Indirect manufacturing costs
   • Costs other than manufacturing costs
   • Cost of finished goods
   • Cost of products sold

5. Problems in the application of indirect manufacturing costs

   • Indirect manufacturing costs underapplied
     • applied < actual
   • Overapplied indirect manufacturing costs
     • applied > actual
   • What should be done with the balance of the indirect manufacturing cost variation account at the end of the period?
     • Close against cost of goods sold.
     • Prorate it between work-in-process inventory, finished goods inventory and cost of goods sold.