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Chapter 5

Job Order Costing

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- Cost system:
1. Job Order Cost System (JOCS)
2. Process Cost System (PCS)

- Implemented by:
1. Job order production
2. Mass production

1. Job order:
CPA firm,construction, catering, dll
2. Process cost:
Sugar, fertilizer, writing book industries,etc
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-Characteristics of JOCS company:

1. Product output is unique and expensive.

2. Produce to fulfill order (s)
3. Costs are traceable to each order
4. Product volume is very small; might be
only once in a time.

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- Calculation of JOCS is based on assumptions:
1. Order is identifiable easily / differ for
each product
2. Costs could be accumulated easily
- Costs are accumulated to calculate product
costs for each product.
- Source of document: Job Cost Sheet
- Factory Overhead is calculated based on
rate estimation.

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- To calculate the rate of FOH (est):

Est. of total FOH

Rate of FOH =
Activity base

- The estimation of FOH will create

Variance FOH

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- FOH Variance:

1. Over-applied
2. Under-applied

Estimated FOH = 250

Actual FOH = 200
Over-applied FOH 50

Estimated FOH = 250

Actual FOH = 275
Under-applied FOH 25

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Reasons to estimate FOH:
1. FOH cannot be measured precisely
2. The distribution of some FOH is un-
unequally within 1 year.
3. Most of utility bills are known at the end
of month
4. The buyer wants to know the selling price
at once, before the product is produced.

The actual FOH will be known at the end

of the period.

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Job-Order Cost Flow
Work in Process
Material (WIP)
Purchase of Direct Direct
material Material material

Factory Overhead

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Job-Order Cost Flow
Work in Process
Salary Payable (WIP)
Direct Direct
payroll material
Indirect Direct
payroll payroll
Factory Overhead Applied to
Work in
Indirect Overhead Process
material Applied to Work in
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Job-Order Cost Flow
Work in Process
(WIP) Finished Goods
material Cost of Cost of Cost of
Goods Goods Goods
Direct Manufact Manufact Sold
payroll ured ured
Cost of Goods Sold
Cost of

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