4.2 Describe and Identify the Three Major Components of Product Costs under Job Order Costing
3 min read•june 18, 2024
is a crucial method for tracking production costs in manufacturing. It involves three key components: , , and . These elements allow businesses to accurately calculate and allocate costs to specific jobs or batches.
Calculating in requires careful tracking of direct costs and application of . and labor are straightforward to calculate, while overhead is applied using predetermined rates. This system helps managers make informed decisions about pricing and profitability for individual jobs.
Components and Calculation of Product Costs in Job Order Costing
Components of job order costing
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2.3 Job Costing Process with Journal Entries | Managerial Accounting View original
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2.1 Characteristics of Job Order Costing | Managerial Accounting View original
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2.3 Job Costing Process with Journal Entries | Managerial Accounting View original
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2.1 Characteristics of Job Order Costing | Managerial Accounting View original
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2.3 Job Costing Process with Journal Entries | Managerial Accounting View original
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Flow of Costs (Job Order Costing) | Accounting for Managers View original
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Direct materials
Raw materials easily traced to a specific job (wood, steel, plastic, fabric)
Labor costs easily traced to a specific job
Includes wages, salaries, benefits of workers directly involved in production (assembly line workers, machine operators)
Indirect costs not easily traced to a specific job
(glue, nails, lubricants)
(supervisors, maintenance workers, quality control inspectors)
Other indirect costs (factory rent, utilities, equipment depreciation)
Cost Accounting in Job Order Costing
: The process of collecting and organizing cost data for each job
: Assigning indirect costs to specific jobs using predetermined rates
: Factors that cause changes in cost behavior (e.g., direct labor hours, machine hours)
: Groups of individual costs from which overhead costs are allocated to products
: A method that tracks costs for each job or batch of goods produced
Calculation of direct costs
Direct materials calculation
Quantityofmaterialsused×Costperunitofmaterials
Direct labor calculation
Numberoflaborhoursworked×Hourlywagerate
Example
Job A requires 100 units of material X at 5perunitand20laborhoursat15 per hour
Direct materials cost = 100units×5 \space per \space unit = 500
Direct labor cost = 20hours×15 \space per \space hour = 300
Total direct costs for Job A = 500+300 = 800
Application of manufacturing overhead
Estimatedtotalmanufacturingoverheadcosts÷Estimatedtotalallocationbase (direct labor hours, machine hours, direct labor costs)