A power-point presentation slide based on the topics named "Job Order costing". This is a course material for Introduction to cost accounting..

1. Department Of Accounting &
Information Systems
Assignment on Introduction to Cost Accounting (ACCT-
3102)
Topic: Job Order Costing Systems
Presented to:
Maksuda Begum
Lecturer,
Department of AIS
Presented By:
Group: Dynamic
Group no: 3
Group Leader: Sakib
Ahmed Anik

2. Name Roll No
Md. Kawser Ahmed B-130201097
Sakib Ahmed Anik B-130201022
Md. Jashim Uddin B-130201101
Piarul Islam B-130201102
Afia Washima B-130201064
Tanay Datta B-130201065
Md. Asad B-130201030
Gopal Karmaker B-130201108
Md. Ashraful Islam B-130201017
Shariful Islam B-130201079
Sagir Mahbub B-130201124
Group Members

3. Job Order
Costing

4. Types of Costing Systems Used to
Determine Product Costs
Process
Costing
Job-order
Costing
 Many different products are produced each period.
 Products are manufactured to order.
 Cost are traced or allocated to jobs.
 Cost records must be maintained for each distinct
product or job.

5. JobOrder
Costing
A job order costing system
accumulates manufacturing
costs by job. Such a system
is used when separate jobs
are identifiable. Such as a
furniture manufacturer,
Unit costs in a job order
system are calculated by
dividing the total
manufacturing costs of the
job by the number of units
produced in the job.

6. Job Order Costing Vs Process costing:
Job Order Costing Process Costing
Here, wide variety of distinct
products are produced.
Here, homogeneous products
are produced.
Here, Cost accumulated by job. Here cost accumulated by
process or department.
Unit Cost is calculated by-
Unit cost = Job Cost ÷ Units
produced
Unit cost calculated by-
Unit cost = Process cost of the
period ÷ Unit produced in the
period

7. In a job-order costing system, jobs are accounted for using the job-order cost
sheet. The process involves the following steps:
• Identification of the job
• Tracing direct costs to the job
• Identifying the indirect costs i.e. manufacturing overheads and finding the
cost allocation base for each cost.
• Applying the indirect costs to the job using the pre-determined allocation rate.
• Finding total cost by summing up all the cost components.
• Closing the under/over-applied manufacturing overheads to cost of goods
sold/income statement.
• Calculating revenue and profit.
Steps in job-order costing process:

8. Sequence of Events in a Job-Order
Costing System
Receive
orders from
customers
Schedule
jobs
Order
materials
Begin
production

9. Advantages of Job order Costing
Assigning Costs: One advantage of job order
costing is that it allows managers to calculate the
profit earned on individual jobs, helping them to
better ascertain whether specific jobs are
desirable to pursue in the future. This is best for
businesses that do highly custom work, such as
construction contractors and consultants.
Reporting: Job order costing gives managers
the advantage of being able to keep track of
individuals' and teams' performance in terms of
cost-control, efficiency and productivity.

10. Disadvantages of Job order
Costing
Record Keeping:
A disadvantage of job order costing is that employees are required to
track all materials and labor used during the job.
As an example, consider a construction contractor using a job order
costing system. The contractor has to keep track of all the wood, nails, screws,
electrical fixtures, paint and other materials used on the job, as well as tracking
workers' lunch breaks and hours worked. In a factory setting, on the other hand,
materials are calculated using an average of units produced, and salaries
expenses are often relatively consistent between pay periods.

11. Job-Order Costing
THE JOB
Direct
material
Direct
labor
Manufacturing
overhead (OH)
Applied to each
job using a
predetermined
rate

12. Cost Flows in a Manufacturing Firm
DM
DL
MOH
DM Inv.
WIP Inv.
FG Inv.
WIP
Manufacturing Costs
COGS
S&A
Sales
-
= Gross Margin
-
Net Income=
Balance Sheet
Income
Statement
Unfinished
Unused
Used

13. Job Order Sheet
A job order cost sheet is used to
accumulate the manufacturing
costs ( direct materials, direct
labor and overhead) associated
with a job. The order cost sheet
are the subsidiary ledgers to the
WIP (Work-in-Process) account.

14. ABC costing
ABC establishes activity base O/H rates by estimating – a
budgeted costs for activity pool and expected demand for
the activity driver for each pool. Examples of such activity
Drivers is labor hours, machine hours, purchase orders etc.
ABC based rate =
𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝐶𝑜𝑠𝑡 𝑓𝑜𝑟 𝑎𝑐𝑖𝑣𝑖𝑡𝑖𝑒𝑠 𝑝𝑜𝑜𝑙
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑑𝑒𝑚𝑎𝑛𝑑 𝑓𝑜𝑟 𝑎𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝑑𝑟𝑖𝑣𝑒𝑟

15. Predetermined Overhead rate
It is a rate established at the beginning of the period based
on estimation used to calculate actual overhead.
Predetermined Overhead =
𝑩𝒖𝒅𝒈𝒆𝒕 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝒄𝒐𝒔𝒕𝒔
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝒂𝒄𝒕𝒊𝒗𝒊𝒕𝒊𝒆𝒔
Using that rate –
Applied Overhead = Predetermined overhead rate × Actual Activity
Under Predetermined overhead rate –
Overhead can also be applied using a plant rate and departmental rates.

16. Companiesthatusejob-ordercosting:
Some of the companies that use job-order costing include:
• Accounting, consulting and legal firms
• Architects
• Manufacturers of ships and airplanes
• Book publishers
• Movie producers
The nature of their work is such that they are interested in finding profitability
of different jobs and hence they accumulate costs with reference to different
jobs like audit engagement, consulting projects, books, movies, etc.