Chapter 15 Job Order Costing
I. Cost Accounting System
a. Accumulates production costs and assigns them to products and services. Managers use this
information to control costs and set selling prices.
b. 2 types of accounting system
i. Job order costing
ii. Process costing
II. Job Order Production
a. Job order production (job order manufacturing) – manufactured customized product for
specific customers
i. Ex. custom home, a factory building, custom jewelry, wedding invitations, tattoos
b. Job – a customized product
c. Job lot – more than one unit of a custom product
III. Process Operations
a. Also called process manufacturing or process production
b. Is the mass production of large quantities of similar products in a continuous flow of steps.
IV. Production Activities in Job Order Costing
a. Job order production requires materials, labor, and overhead costs (manufacturing costs).
i. Direct materials – are key parts of a finished product and are clearly identified with
one job
ii. Direct labor – employee effort to directly convert materials to finished product on
one job
iii. Overhead or factory overhead – includes manufacturing costs that indirectly support
production of more than one job
1. Depreciation on factory buildings and equipment, indirect materials,
supervision and maintenance (indirect labor), factory insurance and
property taxes, factory cleaning, and factory utilities
, V. Cost Flows
a. Manufacturing costs flow through Raw Materials Inventory, Work in Process Inventory,
and Finished Goods Inventory until the related goods are sold.
b. These general ledger inventory accounts do not provide enough cost detail for managers to
plan and control production activities.
c. Managers need to know the costs of each individual job or job lot.
d. Subsidiary records store information about the manufacturing costs for each individual job.
VI. Job Cost Sheet
a. Job order costing system – is used to determine the cost of producing each job or job lot.
b. Job cost sheet – is a cost record maintained for each job.
i. Managers use job cost sheets to monitor costs incurred and to predict costs for each
job.
Need-to-Know
I. Cost Accounting System
a. Accumulates production costs and assigns them to products and services. Managers use this
information to control costs and set selling prices.
b. 2 types of accounting system
i. Job order costing
ii. Process costing
II. Job Order Production
a. Job order production (job order manufacturing) – manufactured customized product for
specific customers
i. Ex. custom home, a factory building, custom jewelry, wedding invitations, tattoos
b. Job – a customized product
c. Job lot – more than one unit of a custom product
III. Process Operations
a. Also called process manufacturing or process production
b. Is the mass production of large quantities of similar products in a continuous flow of steps.
IV. Production Activities in Job Order Costing
a. Job order production requires materials, labor, and overhead costs (manufacturing costs).
i. Direct materials – are key parts of a finished product and are clearly identified with
one job
ii. Direct labor – employee effort to directly convert materials to finished product on
one job
iii. Overhead or factory overhead – includes manufacturing costs that indirectly support
production of more than one job
1. Depreciation on factory buildings and equipment, indirect materials,
supervision and maintenance (indirect labor), factory insurance and
property taxes, factory cleaning, and factory utilities
, V. Cost Flows
a. Manufacturing costs flow through Raw Materials Inventory, Work in Process Inventory,
and Finished Goods Inventory until the related goods are sold.
b. These general ledger inventory accounts do not provide enough cost detail for managers to
plan and control production activities.
c. Managers need to know the costs of each individual job or job lot.
d. Subsidiary records store information about the manufacturing costs for each individual job.
VI. Job Cost Sheet
a. Job order costing system – is used to determine the cost of producing each job or job lot.
b. Job cost sheet – is a cost record maintained for each job.
i. Managers use job cost sheets to monitor costs incurred and to predict costs for each
job.
Need-to-Know
