Job Order Costing
Module 4:
Inventory & Costing
Duration:
45-60 minutes
Level:
Beginner to Diploma-Level
Lesson Objectives
➛ Define job order costing
➛ Identify businesses that use job order costing
➛ Understand the components of job cost
➛ Prepare a job cost sheet
➛ Calculate total and unit cost of a job
➛ Distinguish job order costing from process costing
Key Vocabulary
➛ Job Order Costing
➛ Job
➛ Job Cost Sheet
➛ Direct Materials
➛ Direct Labor
➛ Manufacturing Overhead
➛ Total Job Cost
➛ Unit Cost
What Is Job Order Costing?
Job order costing is used when
➛ Each product or service is customized or unique
Costs are tracked per job, not per process.
Businesses That Use Job Order Costing
➛ Construction companies
➛ Printing companies
➛ Custom furniture makers
➛ Repair services
➛ Consulting firms
Components of Job Cost
Each job includes
1. Direct Materials
➛ Raw materials used in the job
2. Direct Labor
➛ Wages of workers directly involved
3. Manufacturing Overhead
➛ Indirect costs | rent, utilities, etc.
Job Cost Formula
Total Job Cost = Direct Materials + Direct Labor + Overhead
Unit Cost Formula
Unit Cost = Total Job Cost รท Number of Units
Job Cost Sheet
Job No: 101
Direct Materials
Direct Labor
Overhead
Total Cost
Direct Materials
Direct Labor
Overhead
Total Cost
Amount
5,000
3,000
2,000
10,000
5,000
3,000
2,000
10,000
➛ Unit Cost = $100
Job Order vs Process Costing
Feature
Production
Cost Tracking
Example
Production
Cost Tracking
Example
Job Order Costing
Custom
Per job
Furniture
Custom
Per job
Furniture
Process Costing
Mass production
Per process
Soft drinks
Mass production
Per process
Soft drinks
True or False
➛ Job order costing is used for mass production
➛ Each job has its own cost record
➛ Direct labor is an indirect cost
➛ Overhead includes indirect costs
Fill in the Blanks
1. Job order costing is used for __________ production
2. Costs are recorded on a __________ cost sheet
3. Total job cost includes materials, labor, and __________
4. Unit cost is calculated by dividing total cost by __________
Calculation Practice
A job has
Direct Materials =
Direct Labor =
Overhead =
Units produced =
Direct Labor =
Overhead =
Units produced =
$4,000
$2,500
$1,500
50
$2,500
$1,500
50
➛ Calculate total job cost
➛ Calculate unit cost
Identify the System
State whether the business uses Job Order Costing or Process Costing
➛ A custom house builder
➛ A soft drink factory
➛ A printing company
➛ A car repair shop
Mini Case Study
A company produces custom-made desks for clients. Each order differs in size and materials.
Questions
➛ Which costing system should be used?
➛ Why is this system appropriate?
➛ What costs must be tracked?
➛ How does this system help pricing decisions?
Quick Quiz
➛ What is job order costing?
➛ Name two components of job cost
➛ What is a job cost sheet?
➛ How is unit cost calculated?
➛ Name one business that uses job order costing
Answers ➧ Here
Process Costing ➧ Here