Job costing Each special machine made is unique
and distinct from the other machines
produced to obtain a per-unit cost.
This per-unit
made. Job costing is also used by cost is the average unit cost that
The flow of costs companies to cost multiple identical applies to each of the identical or
units of distinct furniture products. similar units produced
Because the products and services are in that period.
distinct, job-costing systems are used
to accumulate costs separately for
each product
or service.
Terms:
Cost object: anything for which a separate measurement of
costs is desired!!! Includes direct and indirect cost (DM, DL,
Seven-step Job Costing (!)
MOH)
1. Identify the Job that is the Chosen Cost Object
Cost assignment = cost tracing (direct cost) and cost
2. Identify the Direct Costs of the Job
allocation (indirect cost)
3. Select the Cost-Allocation base(s) to use for allocating
Cost pool: grouping of individual indirect cost items
Indirect Costs to the Job
Cost-allocation base: systematic way to link an indirect cost 𝐼𝑛𝑑𝑖𝑟𝑒𝑐𝑡 𝑐𝑜𝑠𝑡 𝑝𝑜𝑜𝑙
1.
or group of indirect costs to cost objects 𝑎𝑙𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 𝑏𝑎𝑠𝑒 (𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝑡ℎ𝑒 𝑐𝑜𝑠𝑡−𝑎𝑙𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 𝑏𝑎𝑠𝑒)
o Also called cost application base when cost object is a 4. Match Indirect Costs (Cost pool) to their respective Cost-
job, product or customer Allocation base(s)
Cost driver: a variable affecting costs over a span of time 5. Calculate an Indirect cost (Overhead) Allocation Rate
Inventoriable cost: asset when incurred and cost of goods 6. Calculate the indirect costs allocated to the job
sold when sold 7. Calculate the total costs of the job by adding up all direct
Periodic cost: all cost in income statement other than inv. and indirect costs assigned to the job
cost
Job costing Process costing Two possible allocation bases for Job order :
In a job-costing system, the cost object In a process-costing system, the cost Direct Manuf. Labor hours: as allocation base $ per hour
is a unit or multiple units of a distinct object is masses of identical or similar Direct manuf. Labor costs: as allocation base %
product or service called a job. Each units of a product or service. In each
Manufacturing Overhead / Total Direct labor hours
job generally uses different amounts of period, processcosting
resources. The product or service is systems divide the total costs of Manufacturing Overhead / Total Direct labor Costs
often a single unit, such as a producing an identical or similar
specialized product or Costing Approaches
machine made, a repair job done. service by the total number of units
and distinct from the other machines
produced to obtain a per-unit cost.
This per-unit
made. Job costing is also used by cost is the average unit cost that
The flow of costs companies to cost multiple identical applies to each of the identical or
units of distinct furniture products. similar units produced
Because the products and services are in that period.
distinct, job-costing systems are used
to accumulate costs separately for
each product
or service.
Terms:
Cost object: anything for which a separate measurement of
costs is desired!!! Includes direct and indirect cost (DM, DL,
Seven-step Job Costing (!)
MOH)
1. Identify the Job that is the Chosen Cost Object
Cost assignment = cost tracing (direct cost) and cost
2. Identify the Direct Costs of the Job
allocation (indirect cost)
3. Select the Cost-Allocation base(s) to use for allocating
Cost pool: grouping of individual indirect cost items
Indirect Costs to the Job
Cost-allocation base: systematic way to link an indirect cost 𝐼𝑛𝑑𝑖𝑟𝑒𝑐𝑡 𝑐𝑜𝑠𝑡 𝑝𝑜𝑜𝑙
1.
or group of indirect costs to cost objects 𝑎𝑙𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 𝑏𝑎𝑠𝑒 (𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝑡ℎ𝑒 𝑐𝑜𝑠𝑡−𝑎𝑙𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 𝑏𝑎𝑠𝑒)
o Also called cost application base when cost object is a 4. Match Indirect Costs (Cost pool) to their respective Cost-
job, product or customer Allocation base(s)
Cost driver: a variable affecting costs over a span of time 5. Calculate an Indirect cost (Overhead) Allocation Rate
Inventoriable cost: asset when incurred and cost of goods 6. Calculate the indirect costs allocated to the job
sold when sold 7. Calculate the total costs of the job by adding up all direct
Periodic cost: all cost in income statement other than inv. and indirect costs assigned to the job
cost
Job costing Process costing Two possible allocation bases for Job order :
In a job-costing system, the cost object In a process-costing system, the cost Direct Manuf. Labor hours: as allocation base $ per hour
is a unit or multiple units of a distinct object is masses of identical or similar Direct manuf. Labor costs: as allocation base %
product or service called a job. Each units of a product or service. In each
Manufacturing Overhead / Total Direct labor hours
job generally uses different amounts of period, processcosting
resources. The product or service is systems divide the total costs of Manufacturing Overhead / Total Direct labor Costs
often a single unit, such as a producing an identical or similar
specialized product or Costing Approaches
machine made, a repair job done. service by the total number of units
