Quick Notes on Job Costing

After reading this article you will learn about: 1. Source Documents of Job Costing 2. Procedures for Recording and Controlling Job Costing.

Source Documents of Job Costing:

The following are the relevant documents from which information flow:


(1) Job Order or Job Cost Sheet:

This is the basic document used by a job order system to accumulate product costs. The job cost sheets for the uncompleted jobs make up the subsidiary ledger for Work-in-Process Control.

(2) Store requisitions:

Store requisitions are used to charge job cost sheets for direct materials used.

(3) Work tickets:

Work tickets are used to charge job cost sheets for direct labour used for a job.


(4) Clock Card:

Clock Card is used for determining individual worker’s earning. Each worker is required to punch cards for getting his time of attendance recorded. Many auto-machines must account for the worker’s time. From punch cards a worker’s hours of work can be ascertained and his wage bill prepared.

Procedures in a Jobbing Concern:

It is necessary to consider the flow of administrative procedures which ensure a job is manufactured correctly, delivered on time and charged for.


An outline showing the adminis­trative procedures to complete a job is given below:

Administrative Procedures to Complete a Job


Procedures for Recording and Controlling Job Costing:

A specific number is allotted to each job and all costs incurred in connection with that specific job are recorded in job cost sheet along with the estimated cost.


The procedure of recording and accounting for job order as depicted in Figure 6.4 is discussed below:

Job Costing Data Sources

(1) Materials:

The cost of materials for each job is posted in the individual job cost sheet and the total issues for a day or for a week are posted in the work-in-progress ledger control account.

Entry: Work-in-Progress Ledger Control A/c Dr.

To Store Ledger Control A/c.

Excess materials, if any, are returned to stores through the document “Materials Return Note”. If materials are returned to other job they are recorded in ‘Materials Transfer Note’.

(2) Wages or Labour Costs:

Direct labour costs are recorded through the document ‘Job Time Tickets’. Job Time Tickets provide the necessary information to determine the total labour costs since they record the time spent by workers for the completion of the job. Earnings are computed using the workers’ hourly rates.

Overtime Payment:

A distinction is desired to be made between overtime, that is the time worked over and above the normal working hours, and over time premium, which is the additional remunera­tion paid over normal rate for worker’s efficiency.

When the overtime is worked on a special job or when it is due to the insistence of a customer for completing the job within the specified time, the extra payment for overtime premium is logically charged to the job as direct labour. But, if the overtime is for the purpose of increased output, the cost of such overtime is treated as overhead and charged to a standing order number.

The total labour cost of each job is entered in the job cost accounts and the following entries are passed in cost accounts:

(3) Direct Expenses:

Expenses directly chargeable to jobs are analysed and posted in job cost sheet.

(4) Overhead:

Overhead consists of cost of indirect materials, indirect wages and indirect expenses. Overhead expenses are apportioned to production and service departments on some appropriate and logical bases. The expenses of service departments are transferred to production departments.

The total overhead of production departments (after apportionment) is allocated to products on some realistic bases, such as, machine or labour hour rate, as a percentage on direct wages or direct materials. The specific job is debited with the production overhead.

(5) Completed Job:

When the job is completed, its total cost is determined by totalling prime cost and absorbed overhead cost. The cost sheet is then marked ‘completed’ and removed from job ledger.

Worked Out Problems:

 Problem 1:

The following data relate to manufacture of a standard product during the four weeks to July 28, 1996:

Job Costing with Problem 6

(a) You are required to prepare a cost sheet in respect of the above showing therein the cost per unit, each element of cost and the profit for the period. Also show the percentage that the works overhead cost bears to the Manual and Machine Labour Wages and the percentage that the establishment and general expenses bear to the works cost.

(b) What price should the company quote to produce 1,000 units of another product which will require an expenditure of Rs. 8,000 for raw materials and Rs.6,000 for direct wages, so that it will yield a profit of 25% on the cost of sales.



Problem 2:

The following direct costs were incurred on Job No. 100 of an engineering works:

Job Costing with Problem 7

Problem 3:

A factory is engaged in making standard products which pass through three departments.

The Cost figures of the factory for the month of November, 1994 are furnished below:

Job Costing with Problem 8

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