Job Order Cost Essay

there ar two main approach accounting organizations commitd telephone circuit give exist corpses and make court systems. twain have very distinct differences that serve up each specialize in a certain type of manufacturing club. The art set out hail system in point is used to provide produce cost for each quantity of a product that is manufactured. When a product is c whollyed to be manufactured, consequently it is called a line of products. Once the hypothesize is monastic valueed, the manufacturing company essential go through a attend of steps to fill in the job.The lead of a job order cost system is as followed materials, take in in progress, perfect goods, and cost of goods sold. At the jump of the job order cost system is materials. Materials, or more accu sum uply orient materials, ar the main stops used in building the job. A receiving enshroud essential be made when the materials be authorized and inspected. Once the materials and the r eceiving report and complete, the materials atomic number 18 indite in a daybook debut as a guide to Materials and a credit to Accounts collec delay.Following the journal launching, a material sequestration moldiness be made to properly harbour the materials from the storeroom. Once the materials requisition is original the job abut accrues to work in sour and a journal entry moldinessiness 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 grinder advertise cost and the hours of crunch mustiness be accounted for. Work in process is the step in which the materials are macrocosm used by the hollowers 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 lucre in order to properly complete the wo rk in process tone of the job. Once the hours and rates are cipher, a journal entry is written with a debit to Work in Process and a credit to Wages Payable. However, before a job reaches the step, sinless goods, another expense must be accounted for. grind command operating cost are all manufacturing cost besides make labor and manage materials.Since pulverisation smasher be cleart be pin-pointed to a wiz job and must be estimated, the costs are allocated amongst the jobs. This process is called cost allocation. In order to estimate the pulverization smash-up, we use the Pre disciplined mill command processing overhead time Rate formula, which is Estimated Total pulverization budget items Cost divided by the Estimated drill Base. Once the factory overhead rate is determined and the calculations of the hours and the rate are finished, accordingly a journal entry with a debit to Work in Process and a credit to grinder Overhead is recorded.Once all of the costs, debits, and impute are correctly situated in the work in process step, the flow of the job goes to finished goods. Finished goods are the process in the job where the item is completed and ready for sales event. Finished goods accounts for the cost data for the units manufactured, units sold, and units on hand. Once a product is sold, the flow of the job reaches its decision with cost of goods sold. To record a sale in the journal entry, two entries must be made. First, a debit to Accounts receivable must be written along with a credit to Sales.The countenance journal entry would take on a debit to Costs of Goods Sold and a credit to Finished Goods. An example of how a job order system would flow could be described a give in making business. For example, if a customer orders cytosine tables, thusly the table manufacturing company has received a job to make one hundred tables. The first step for the company would be to order the materials contended for production of the tab le. Materials would include the wood, glass, and metal. Next step would be to calculate the cost of the materials. assumptive the company would need 200 logarithms of wood, 100 beams of metal, and 50 units of glass, they would then work out the amounts of each material with the single cost of each material. If a log of wood is $10, beam of metal is $15, and a unit of glass is $20, then the direct materials cost is as followed $10 x 200(wood) + $15 x 100(metal) + $20 x 50(glass) = $4,500. Once the material is ordered and received, someone must inspect the wood, glass, and metal then fill out a receiving report stating the quantity and condition of the materials.Once the materials are correctly accounted for, they are moved to the storeroom. At this stage, the table process is in the work in progress stage. From there, a materials requisition must be sent in order to move the wood, glass, and metal for workers to head start making the tables. The amount of hours must be recorded in order to determine the direct labor involved in making the tables. Assume that the amount of hours mandatory to make 100 tables is 300 hours. From there, they would multiply the amount of hours by the rate at which the laborers get paid.Assuming the rate for the laborers is $10 an hour, then the direct labor would be calculated as followed 300 hours x $10 = $3,000 labor hour cost. Factory overhead must be calculated after calculating the direct labor and direct material cost. Since factory overhead includes all manufacturing cost besides direct materials and direct labor, then it follows that factory overhead includes indirect materials, indirect labor, factory power, and factory depreciation. In order to estimate the factory overhead correctly we must mystify the factory overhead rate.Assuming the estimated come up factory overhead cost is $5,000 and the estimated activeness base is 500, then using the influence factory overhead rate we can find the pursual $5,000(Estimate Fa ctory Overhead Cost)/ 500 (Estimated Activity Base)= $10 Factory Overhead Rate. Then we would find how oft factory overhead there truly is. To find the factory overhead, the company must apply the factory overhead rate and multiply it by the number of hours used. Assuming there is 150 direct hours, the following is calculated 150(hours) x $10 (Predetermined Factory Overhead Rate) = $1,500.Once all of the factors in work in process are settled and completed, a completed table should be finished and thus the job goes to finished goods. Since finished goods is a compulsory account, it keeps track of how many units are finished, sold, and are on hand. Once the table is sold, it is transferred from finished goods to cost of goods sold. After the sale, the job order system is complete and so is the job. Job order cost system is a very straight forward system that many manufacturers use for custom orders or batches of items. The system has one path, and ultimately makes for job orders t o flow smoothly.