4.3 Job Cost Sheets and Work in Process

Job costing is a crucial method for tracking costs in custom production. It uses job cost sheets to record expenses for specific projects, including materials, labor, and overhead. This system helps businesses accurately price their products and manage profitability.

Work in Process (WIP) represents partially completed goods in production. It's a key concept in job order costing, helping track costs for unfinished jobs. Understanding WIP and related journal entries is essential for accurate financial reporting and cost control in manufacturing.

Job Cost Sheets

Components of job cost sheets

Top images from around the web for Components of job cost sheets

• 

  2.1 Characteristics of Job Order Costing | Managerial Accounting View original

  Is this image relevant?

• 

  Flow of Costs (Job Order Costing) | Accounting for Managers View original

  Is this image relevant?

• 

  2.3 Job Costing Process with Journal Entries | Managerial Accounting View original

  Is this image relevant?

• 

  2.1 Characteristics of Job Order Costing | Managerial Accounting View original

  Is this image relevant?

• 

  Flow of Costs (Job Order Costing) | Accounting for Managers View original

  Is this image relevant?

1 of 3

Top images from around the web for Components of job cost sheets

• 

  2.1 Characteristics of Job Order Costing | Managerial Accounting View original

  Is this image relevant?

• 

  Flow of Costs (Job Order Costing) | Accounting for Managers View original

  Is this image relevant?

• 

  2.3 Job Costing Process with Journal Entries | Managerial Accounting View original

  Is this image relevant?

• 

  2.1 Characteristics of Job Order Costing | Managerial Accounting View original

  Is this image relevant?

• 

  Flow of Costs (Job Order Costing) | Accounting for Managers View original

  Is this image relevant?

1 of 3

• Job cost sheets track specific project costs and provide detailed resource usage records (custom furniture production, construction projects)
• Key components include job number, customer info, start/completion dates, direct materials costs, direct labor costs, applied manufacturing overhead, and total job cost
• Job number uniquely identifies each project for easy tracking and reference
• Customer information helps personalize service and track client preferences
• Start and completion dates measure project duration and efficiency
• Direct materials costs capture expenses for raw materials used directly in production
• Direct labor costs record wages for workers directly involved in manufacturing
• Applied manufacturing overhead allocates indirect costs to jobs
• Total job cost sums all components to determine overall project expense

Recording costs on job sheets

• Direct materials costs recorded from requisition forms or usage reports track raw materials directly used in production (wood for furniture, steel for construction)
• Direct labor costs documented using time cards or labor hour reports capture wages of workers directly involved in production
• Applied overhead calculated using predetermined overhead rate allocates indirect costs to jobs
• $Applied\,Overhead = Predetermined\,Overhead\,Rate \times Allocation\,Base$ formula determines overhead allocation
• Allocation base often uses direct labor hours or machine hours depending on production process

Work in Process and Job Order Costing

Work in process concept

• Work in Process (WIP) represents partially completed goods in various production stages (half-assembled cars, unfinished paintings)
• WIP tracks costs for unfinished jobs, helping value inventory and determine production progress
• Facilitates accurate financial reporting by accounting for all production costs
• Enables managers to monitor production efficiency and identify bottlenecks
• Helps in cost control by highlighting areas of high resource consumption

Journal entries for cost flows

• Materials purchase: debit Raw Materials Inventory, credit Accounts Payable or Cash
• Direct materials usage: debit Work in Process Inventory, credit Raw Materials Inventory
• Direct labor costs: debit Work in Process Inventory, credit Wages Payable
• Manufacturing overhead applied: debit Work in Process Inventory, credit Manufacturing Overhead Applied
• Job completion: debit Finished Goods Inventory, credit Work in Process Inventory
• Cost of goods sold: debit Cost of Goods Sold, credit Finished Goods Inventory
• These entries track cost flow from raw materials through production to final sale
• Ensure accurate valuation of inventory at each stage of production process