Job Order Cost

Topics: Cost accounting, Manufacturing, Mathematics Pages: 3 (1179 words) Published: June 4, 2013
Job Order Cost System
There are two main cost accounting systems used: Job order cost systems and Process cost systems.  Both have very distinct differences that help each specialize in a certain type of manufacturing company.  The job order cost system in particular is used to "provide product costs for each quantity of a product that is manufactured." When a product is called to be manufactured, then it is called a job.  Once the job is ordered, the manufacturing company must go through a flow of steps to complete the job.  The flow of a job order cost system is as followed: materials, work in progress, finished goods, and cost of goods sold.  At the start of the job order cost system is materials.  Materials, or more accurately direct materials, are the main items used in building the job.  A receiving report must be made when the materials are received and inspected.  Once the materials and the receiving report and complete, the materials are written in a journal entry as a debit to "Materials" and a credit to "Accounts Payable".   Following the journal entry, a material requisition must be made to properly obtain the materials from the storeroom.  Once the materials requisition is received the job process flows to work in process and a journal entry must be made with a debit to "Work in process" and a credit to "Materials".  Once the job is in the Work in process stage, the factory labor cost and the hours of labor must be accounted for.  Work in process is the step in which the materials are being used by the laborers in order to complete the job.  Some companies choose to use clock cards, in-and-out cards, or electronic badges in order to monitor the amount of labor hours have been clocked in.  Regardless of the method, the hours must be clocked and multiplied by the rate of pay in order to properly complete the work in process aspect of the job.  Once the hours and rates are calculated, a journal entry is written with a debit to "Work in Process" and a...
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