Job Order Costing & Process

Costing
Pereja, Robert Marlon T.
Taguba, Ressie
Vega, Randee R.
Yap, Mark Gregory A.
Topics for Discussion:

• Costing Concepts
• Job Order Costing Concepts
• Job Order Application
• Process Costing Concepts
• Process Costing Application
THE COSTING CONCEPT
THE COSTING CONCEPT

What is the
importance of
COSTING?
 •Direct Materials

•Direct Labor

•Manufacturing Overhead
 •Selling Costs

•Administrative Costs
Costing Concepts

3 Types of Costing
What is
it?
• Units produced fully
absorb all
manufacturing costs
associated with the
product.
Absorption Costing

Two Costing Systems:

– Job Order Costing

– Process Costing
JOB ORDER COSTING
CONCEPTS
RESSIE’S
FLOWER
SHOP

We deliver.

Anywhere.

Everywhere!!!
Job Order Costing Concepts

Direct Materials Costs:

Bill of Materials
Production Order
Materials Requisition Form

•Job Cost Sheet

Job Order Costing Concepts

Direct Labor Costs:

Time Ticket
Job Order Costing Concepts

Manufacturing Overhead Costs:

Allocation Base
Predetermined Overhead Rate
Normal Cost System

•Computation of Unit Costs

Job Order Costing Flow
Job Order Costing Flow
Job Order Costing Flow
Job Order Costing Flow
Job Order Costing Flow
Job Order Costing Flow
Job Order Costing Flow
Job Order Costing Flow
Job Order Costing Flow
Job Order Costing Flow
Job Order Costing Flow
Job Order Costing Flow
Job Order Costing Report
Job Order Costing Report
Job Order Costing Report
Job Order Costing Report
Job Order Costing Report
Job Order Costing Application
• Ressie’s Flower Shop
– Accepts orders of flower arrangements

• Lets follow 2 orders using Job Order costing

– Job Order # 001
20 pcs bouquet for beauty pageant
– Job Order # 002
25 pcs bouquet for wedding entourage
Measuring Materials Cost
Measuring Labor Cost
Measuring Overhead Cost
• How about Overhead?
Applying Overhead Cost
• Overhead Cost includes
– Indirect Labor
– Indirect Materials
– Fixed costs associated to production
• Ressie’s Flower shop
Applying Overhead Cost
• Predetermined Overhead Rate
– a rate used to charge overhead to jobs which is
identified at the beginning of the year
– Using a predetermined rate makes it
possible to estimate total job costs sooner.
– Actual overhead for the period is not
known until the end of the period.
Estimated total manufacturing
overhead cost
POHR =
Estimated total amount of
allocation base
Applying Overhead Cost
• Allocation Based
– a measure such as Direct Labor or Machine Hours that is
used to assign overhead cost to products and services

• For Ressie’s Flower shop

– Direct Labor: 240 hours estimate working hours
– PHP25,000 / 240 hours = PHP104.17
Overhead Cost
– PHP25,000 / 240 hours = PHP104.17
Job Cost Sheet
Job Cost Sheet
Job Cost Sheet
Job Cost Sheet
Underapplied and Overapplied
Overhead
Application of Over/Under Applied OH
PROCESS COSTING
Process Costing: Definition
• A costing system commonly used when
converting raw materials into homogeneous
products.
• Examples of products are: gas, oil, paper,
aluminum, flour, etc.
• Assigns material, labor, and manufacturing
overhead costs to products to provide a
system for computing unit costs.
Process vs. Job Order Costing
Process costing
system
•Mass Produce
• A product is indistinguishable from
other units of product
•The identical nature of each unit of
product enables assigning the same
average cost per unit.
Job-Order costing
system
•Specialized
• manufactured to order.
• The unique nature of each order
requires tracing or allocating costs to
each job, and maintaining cost
records for each job.
 Process Costing Flow
• Still assign material, labor and mfg overhead
cost
• Cost traced to processing department
 Process Costing Flow
• Still assign material, labor and mfg overhead
cost
• Cost traced to processing department
Process Costing Flow
Process Costing Report

4
Process Costing Application
• Roberts Coffee
– Background
• Let’s follow costing using two Process Costing
Methods
– Weighted Average Method
– FIFO
• Roberts Coffee basic process
ROUND 1: EQUIVALENT
UNITS OF PRODUCTION
Equivalent Units
ROUND 2: COST PER
EQUIVALENT UNITS
Cost Per Equivalent Unit
ROUND 3: APPLYING COST
Applying Cost
ROUND 4: COST
RECONCILIATION
Cost Reconciliation
Process Costing Report
It doesn’t end there
• We’ve only just done 1 process
END!
Saw this flow online. This the
costing flow.