Preliminaries

I. Course Code CAC 102

II. Course Title COST ACCOUNTING AND CONTROL

III. Module Number 1 (Prelim)

IV. Module Title Cost Accounting and Job Order Costing

V. Overview of the Module The introduction to cost accounting, cost accounting cycle and job order costing
will be discussed.

VI. Module Outcomes Cost of goods manufactured and sold statement, job order cost sheets and
related journal entries.

Lesson 1: Introduction to Cost Accounting and Cost Concepts

Lesson Objectives: At the end of the lesson the students are expected to:
1. Differentiate manufacturing activity from service and merchandising
2. Identify the product costs – direct materials, direct labor and overhead
3. Present in the financial statement the manufacturing business inventories –
Raw materials, work in process and finished goods

Getting Started

There are three types of business activities namely: service, merchandising and manufacturing. The
accounting cycle used service and merchandising activity during Financial Accounting and Reporting. This
lesson will introduce cost accounting for manufacturing activity.

Discussion and Application

Cost Accounting is defined as a systematic set of procedures for recording and reporting measurements of
the cost of manufacturing goods and performing services in the aggregate and in detail. It is also a method
of managerial accounting which aims to capture the total production cost of a business by measuring
variable costs of each production phase as well as fixed cost.

Merchandising versus Manufacturing Operations

A merchandising company buys a product that is ready for resale when it is purchased. The product
will not be changed to make it salable except for special packaging or display. It has only merchandise
inventory in the financial statements.

A manufacturing company buys raw materials and processes it in to finished goods to be sold.
In processing, direct labor and overhead are incurred. It has three kinds of inventories namely – raw
materials, work in process and finished goods.
Manufacturing Inventories:

1. Materials inventory – upon purchased of raw materials, the costs are charged to materials inventory
account. Any unused raw materials at the end of the period will be the ending balance of the said
account.
2. Work in process – when the materials are processed, labor and overhead are incurred. Hence, the
materials, labor and overhead will be charged to work in process account. Any unfinished work at
the end of the period will be the ending balance of the said account.
3. Finished Goods - when the goods are completely processed, the cost incurred to complete the goods
are charged to finished goods account. Any unsold goods at the end of the period will be the ending
balance of the said account.

Product Costs/Manufacturing Costs

1. Direct Materials are the basic ingredients that are transformed into finished products through the
use of labor and factory overhead in the production process. Direct materials are those that can be
traced to the finished product. All manufactured products are made from basic direct materials. The
basic materials for bread is flour, wood for tables and chairs, and meat for hamburger.
2. Direct Labor represents the amount paid as wages to those working directly on the product. The
direct labor for table and chair is the wages paid to carpenter, for bread the bakers’ wages, and
chef’s wages for cooked meals/products.
3. Factory Overhead costs are other manufacturing costs that cannot be classified as direct material or
direct labor. Examples are indirect materials, indirect labor, depreciation of plant building and
machineries, repairs and maintenance.

Prime Costs equals direct materials and direct labor

Conversion costs equals direct labor and factory overhead

Non Manufacturing Costs/Period Costs

1. Marketing or selling expenses include all costs necessary to secure customer orders and get the
finished product or service into the hands of the customer. Examples are advertising, shipping, sales
travel, sales commissions, sales salaries and expenses associated with finished goods warehouse.
2. Administrative or general expenses include all executive, organizational and clerical expenses that
cannot logically be included under either production or marketing. Examples are executive
compensation, general accounting, secretarial and similar expenses having to do with the overall
administration of the organization as a whole.

Costs classified as to Variability

 1. Fixed costs remain constant in total, irrespective of the volume of production. Fixed costs are not
related to activity within the relevant range. Fixed costs are assignable to department based on
different allocation methods. Examples are salaries of production executives, depreciation of
equipment computed on a straight line method, periodic rent payments and insurance. Cost per unit
decreases as volume increases, and increases as volume decreases.
2. Variable costs are items of cost which vary directly, in total, in relation to volume of production.
Examples are: direct materials, direct labor, royalties and commission of salesmen. Cost per unit
remains constant as volume changes within a relevant range.
3. Mixed cost are items with fixed and variable components. Mixed costs vary with the level of
production, though not in direct relation to it, probably because part of the cost is fixed while the
rest is variable.

Summary of the Lesson

 Cost Accounting is defined as a systematic set of procedures for recording and reporting
measurements of the cost of manufacturing goods and performing services in the aggregate and in
detail. It is also a method of managerial accounting which aims to capture the total production cost
of a business by measuring variable costs of each production phase as well as fixed cost.
 A manufacturing company buys raw materials and processes it in to finished goods to be sold.
In processing, direct labor and overhead are incurred.
 Manufacturing business has three inventories: raw materials, work in process and finished goods
 Product costs are direct materials, direct labor, overhead
 Non manufacturing costs are marketing and administrative expense
 Costs related to variability are fixed, variable and mixed costs

Enrichment Activity

Problem 1 The financial statements of Big Mom Company included these items:

Marketing Costs P160,000

Direct Labor costs 245,000
Administrative costs 145,000
Direct Materials used 285,000
Fixed Factory Overhead 175,000
Variable Factory Overhead 155,000

Required: Compute for the following:

1. Prime Costs
2. Conversion costs
3. Product cost
4. Period Cost
Assessment Activity

Problem 1 Presented below is a list of costs and expenses usually incurred by a manufacturer of furniture in
its factory.
1. Metal used in manufacturing of tables
2. Insurance on factory machines
3. Leather used in manufacturing furniture
4. Wages paid to machine operators
5. Depreciation of factory machinery
6. Salaries of factory supervisors
7. Wood used in manufacturing furniture
8. Sand paper, bolds and nails
9. Property taxes on factory building
10. Rent of factory building

Required: Classify the above items into the following categories (a) direct materials (b) direct labor and (c)
manufacturing overhead

Problem 2 Classify the following items if manufacturing or non manufacturing costs:

1. Wood used in book cases

2. Machine depreciation
3. Fire insurance on factory equipment
4. Wiring used in radios
5. Indirect materials
6. Sales commissions
7. Bottles used to package liquid
8. Gasoline for delivery truck
9. Salary of president
10. Wages of factory operators

References
1. De Leon (2019), Cost Accounting and Control 2019 Edition: Manila GIC Enterprise & Co., Inc (Text Book). 2.
Rante (2013) Cost Accounting 2013 Edition : Manila: Millenium Books Inc.
3. Cabrera, M. E. B. (2019) Cost Accounting and Control 2019 Edition) Manila: GIC Enterprise & Co. Inc.
Lesson 2: COST ACCOUNTING CYCLE

Lesson Objectives: At the end of the lesson the students are expected to:
1. Prepare journal entries for manufacturing and non manufacturing transactions
2. Prepare cost of goods manufactured and sold statement
3. Prepare income statement and statement of financial position of a manufacturing business

Getting Started

After having the knowledge of cost accounting and different kinds of inventories and costs
classifications, we now have the transactions incurred by a manufacturing firm. These transactions are to be
recorded and summarized for financial statement preparations.

Discussion and Application

The manufacturing company buys raw materials to be charged to Materials account. For these
materials to be processed Direct Labor and Factory overhead will be incurred. Thus, these three cost
elements will be charged to work in process account. After the goods are completely processed, the cost of
goods to manufactured will be transferred to Finished Goods. When the goods have been sold, the cost of
goods sold will be charged to the Cost of Goods Sold account, which is deducted from Sales to get the gross
profit.

Manufacturing Cost:
Raw  Raw Materials Finished Cost of Goods
Materials  Direct Labor Goods Sold
Figure 1: Cost of Accounting Cycle—Flow of Manufacturing Cost
 Factory Overhead
Work-in Process

Illustration:
The records of XYZ Manufacturing Company show the following accounts and its balances on March 1 of the
current year:
Materials P 10,000
Work in Process 50,000
Finished Goods 75,000

The following are the transactions incurred in March:

a) Materials purchased on account P50,000.

b) Materials issued to production P 45,000.
c) Indirect materials issued to production P2,000.
d) Payroll data:
Total Payroll P100,000
Deductions: SSS 2,000
Philhealth 1,000
Pagibig 1,000
Witholding tax 10,000

e) Payroll is allocated as follows: 50% Direct Labor, 2% indirect labor, 30% marketing,
18% administrative
f) Employers contribution for SSS P2,000, Philhealth P1,000 and Pagibig P1,000.
The employer’s contribution is allocated 50% factory overhead, 30% marketing,
20% administrative
g) Factory overhead expenses: Depreciation P10,000, Insurance P5,000,
Accrued factory overhead expenses, P26,000
h) Factory overhead is applied at 100% of direct labor.
i) Cost of goods completed during the period P155,000.
j) Cost of goods sold during the month P 200,000.
k) The goods were sold on account with 100% mark up on cost.
l) The under or over applied overhead is closed to cost of goods sold.

Required: (a) Journal entries to record the foregoing transactions (b) statement of cost of goods
manufactured and sold statement (c) Schedule of Factory Overhead (d) gross profit

(a) Journal entries

Accounts Subsidiary Debit Credit

Ledger
 For FOC
(a) Materials 50,000
Accounts Payable 50,000
(b) Work in Process 45,000
Materials 45,000
(c) Factory Overhead Control 2,000
Materials 2,000
Indirect Materials 2,000
(d) Payroll 100,000
SSS Contribution Payable 2,000
Philhealth Contribution Payable 1,000
Pagibig Contribution Payable 1,000
Witholding Tax Payable 10,000
Accrued Payroll 86,000

Accrued Payroll 86,000

Cash 86,000
(e) Work in Process 50,000
Factory Overhead Control 2,000
Marketing Expense Control 30,000
Administrative Expense Control 18,000
Payroll 100,000
Indirect Labor 2,000
(f) Factory Overhead Control 2,000
Marketing Expense Control 1,200
Administrative Expense Control 800
SSS Contribution Payable 2,000
Philhealth Contribution Payable 1,000
Pagibig Contribution Payable 1,000
SSS Contribution Expense 1,000
Philhealth Contribution Expense 500
Pagibig Contribution Expense
500

(g) Factory Overhead Control 41,000

Accumulated Depreciation 10,000
Prepaid Insurance 5,000
Factory Overhead Payables 26,000
DepreciationExpense 10,000
Insurance Expense 5,000
Other Factory Expenses 26,000
(h) Work in Process 50,000
Factory Overhead Applied 50,000
(i) Finished Goods 155,000
Work in process 155,000

(j) Cost of Goods Sold 200,000

Finished Goods 200,000
(k) Accounts Receivable 400,000
Sales 400,000
(l) Factory Overhead Applied 50,000
 Cost of Goods Sold 3,000
Factory Overhead Control 47,000
FO Applied P 50,000
FO Control (Actual) 47,000
*Over applied FO P 3,000

*Deduction from Cost of goods sold

Note: If there is no given factory over applied, the total factory overhead control amount will be charged
to work in process.

Below are the posting to T accounts for selected accounts for the cost of goods manufactured and sold
statement.
Materials Work in Process Finished Goods
March 1 10,000 (b) 45,000 March 1 50,000 (i) 155,000 March 1 75,000 (j)200,000
(a) 50,000 (c) 2,000 (b) 45,000 (i) 155,000
March 3 13,000 (e) 50,000 March 31 30,000
(h) 50,000
March 31 40,000

Factory Overhead Control Factory Overhead Applied Cost of Goods Sold

(c) 2,000 (l) 47,000 (l) 50,000 (h) 50,000 (j) 200,000 (l) 3,000
(e) 2,000 March 31 197,000
(f) 2,000
(g) 41,000
47,000

(b)
XYZ Manufacturing Company
Cost of Goods Manufactured and Sold
 For the month ended, March 31, 202A

Materials Inventory, March 1, 202A P10,000

Purchases 50,000
Materials available for use P60,000
Less: Indirect Materials P2,000
Materials Inventory, March 31, 202A 13,000 15,000
Materials used P 45,000
Direct Labor 50,000
Factory Overhead Applied 50,000
Total Manufacturing Cost P145,000
Add: Work in Process Inventory, March 1, 202A 50,000
Total cost put into process P195,000
Less: Work in Process Inventory, March 31, 202A 40,000
Total Cost of Goods manufactured P155,000
Add: Finished Goods Inventory, March 1, 202A 75,000
Total Goods available for sale P230,000
Less: Finished Goods Inventory, March 31, 202A 30,000
Cost of Goods Sold P200,000
Less: Over applied Factory Overhead 3,000
Net Cost of Goods Sold P197,000

(c )
XYZ Manufacturing Company
Schedule of Factory Overhead Expenses
For the month ended, March 31, 202A

Depreciation Expense P10,000

Insurance Expense 5,000
Indirect Materials 2,000
Indirect Labor 2,000
SSS Contribution Expense 1,000
Philhealth Contribution Expense 500
Pagibig Contribution Expense 500
Other Factory Expenses 26,000
Total P 47,000
Factory Overhead Applied 50,000
Over Applied Factory Overhead P 3,000

(d) Sales P400,000

Less: Cost of Goods Sold (net) 197,000
Gross Profit P203,000

Summary of the Lesson

  The manufacturing company buys raw materials to be charged to Materials account. For these materials to
be processed Direct Labor and Factory overhead will be incurred. Thus, these three cost elements will be
charged to work in process account. After the goods are completely processed, the cost of goods to
manufactured will be transferred to Finished Goods. When the goods have been sold, the cost of goods sold
will be charged to the Cost of Goods Sold account, which is deducted from Sales to get the gross profit.


Manufacturing Cost:
Raw  Raw Materials Finished Cost of Goods
Materials  Direct Labor Goods Sold
Cost
 Factory Overhead
Work-in Process
Accounting Cycle – Flow of Manufacturing Cost

Enrichment Activities

Problem 1 The following pertain to manufacturing operations:

a) Materials were issued as follows: Direct materials, P24,500; indirect materials P4,500.
b) Payroll of P44,000 paid was recorded. Withheld are the following:Income tax P7,000, SSS contribution
P3,000, Phil health contribution P2,000 and Pagibig contribution P1,000.
c) The payroll consisted of P30,000 direct labor, P6,000 indirect labor, P5,000 marketing and P3,000
administrative.
d) Accrued miscellaneous factory expenses P7,500.
e) Factory overhead applied to production P22,932.
f) Cost of production completed during the month P60,000.
g) Materials purchased totaled P50,000.
h) Goods costing P20,000 were sold on account to customers at a sales price of P30,000.

Required: Prepare the necessary journal entries.

Problem 2 Mina Manufacturing Company purchases of materials during March totaled P110,000 and cost of goods
sold for March was P345,000. Factory overhead was 50% of direct labor cost. Other information pertaining to Mat’s
inventories and production for March is as follows:

Inventories: March 1 March 31

Finished Goods P102,000 P105,000
 Work in process 40,000 36,000
Materials 20,000 26,000

Required: Prepare the cost of goods manufactured and sold statement.

Assessment

A manufacturing company shows the following amounts in the cost of goods sold statement and the statement
of comprehensive income for September of the current.

Inventories: September 1 September 30

Finished Goods P80,000
Work in process P 87,000
Materials 100,000 150,000
Materials used 590,000
Cost of goods sold 750,000
Cost of goods manufactured 800,000
Total manufacturing costs 790,000

Required: 1. Work in process, September 1

2. Finished goods, September 30
3. Amount of materials purchased in September

References
1. De Leon (2019), Cost Accounting and Control 2019 Edition: Manila GIC Enterprise & Co., Inc (Text Book). 2.
Rante (2013) Cost Accounting 2013 Edition : Manila: Millenium Books Inc.
3. Cabrera, M. E. B. (2019) Cost Accounting and Control 2019 Edition) Manila: GIC Enterprise & Co. Inc.

Lesson 3: JOB ORDER COSTING

Lesson Objectives: At the end of the lesson the students are expected to:
1. Define Job Order Costing
2. Enumerate the characteristics of job order costing
3. Prepare journal entries for manufacturing for job order costing
 4. Prepare cost of goods manufactured and sold statement
5. Prepare job order cost sheet

Getting Started

After having the knowledge and skills in recording transactions and preparing the related financial
statements involving the cost accounting cycle, we now to keep tract of these data using the job order
costing system.

Discussion and Application

In job order costing, the cost of each order produced for a given customer or the cost of each lot to
be placed in stock is recorded on a job order cost sheet, sometimes called simply a cost sheet. The cost
sheets are subsidiary records which are controlled by the work in process account. Although several jobs or
orders may be going through a factory at the same time, each cost sheet is designed to collect the cost of
materials, labor and factory overhead (usually estimated rather the actual factory overhead cost) to a
specific job. Each cost sheet is assigned a job number, which is placed on each material requisition and
labor time ticket in connection with the job. These forms for materials and labor are totaled daily or weekly
by job number, for summary journal entries, and the details are entered on the cost sheets.

Sample of Job Order Cost Sheet

https://www.google.com/search?
q=job+order+cost+sheet+format&tbm=isch&source=iu&ictx=1&fir=BtZZht1sjOMP3M
%252ClzLvkM4ylnsh6M%252C_&vet=1&usg=AI4_-
kSbRbeLvhMfij1Yhsily4BJZrWTtQ&sa=X&ved=2ahUKEwjbytj14ePuAhVozYsBHXP-
BH0Q9QF6BAgPEAE&biw=1396&bih=686#imgrc=BtZZht1sjOMP3M

Sample of Material Requisition Form

https://www.google.com/search?q=material+requisition+form+example&tbm=isch&ved=2ahUKEwjg2-n-
4ePuAhUHvZQKHawTAIoQ2-
cCegQIABAA&oq=material+requi&gs_lcp=CgNpbWcQARgEMgIIADICCAAyAggAMgIIADICCAAyAggAMgIIADIC
CAAyAggAMgIIADoECAAQQzoFCAAQsQM6CAgAELEDEIMBOgcIABCxAxBDUJi4AljwqQNg8ecDaABwAHgCgAHi
BYgBqBmSAQ4xOC4yLjAuMS4wLjEuMZgBAKABAaoBC2d3cy13aXotaW1nsAEAwAEB&sclient=img&ei=bSYmY
KDxFof60gSsp4DQCA&bih=686&biw=1396#imgrc=X1fo3doPLq5CKM
https://www.google.com/search?q=labor+ticket&tbm=isch&ved=2ahUKEwjrlPLi4uPuAhUXyosBHXKgCzgQ2-
cCegQIABAA&oq=labor+tic&gs_lcp=CgNpbWcQARgAMgQIABAYOgIIADoGCAAQBRAeOgYIABAIEB46BAgAEE
M6BQgAELEDOggIABCxAxCDAToHCAAQsQMQQzoKCAAQsQMQgwEQQzoECAAQHlCT5QtYmbMMYN_JDGgB
cAB4AIABgwGIAY8akgEEMzguNZgBAKABAaoBC2d3cy13aXotaW1nsAEAwAEB&sclient=img&ei=PycmYKv5DZ
eUr7wP8sCuwAM&bih=686&biw=1396#imgrc=oOrlzuhmN7qb-M
 Illustration:

The records of XYZ Manufacturing Company show the following accounts and its balances on March 1 of the
current year:
Finished Goods P 75,000
Materials 10,000
Work in Process ( Jobs 101 and 102) 50,000
Cost of Jobs in process as of March 1:
Job 101 Job 102
Materials P15,000 P7,000
Labor 10,000 4,000
Factory Overhead Applied 10,000 4,000
Total P35,000 P15,000

The following are the transactions incurred in March:

a) Materials purchased on account P50,000.

b) Materials issued to production P 45,000 for Job 101 P15,000, Job 102 P20,000 and Job 103 P15,000.

c) Indirect materials issued to production P2,000.

d) Payroll data:

Total Payroll P100,000

Deductions: SSS 2,000

Philhealth 1,000

Pagibig 1,000
Witholding tax 10,000

e) Payroll is allocated as follows: 50% Direct Labor for Job 101 P15,000, Job 102, P20,000 and Job 103 P15,000,
2% indirect labor, 30% marketing and 18% administrative

f) Employers contribution for SSS P2,000, Philhealth P1,000 and Pagibig P1,000.

The employer’s contribution is allocated 50% factory overhead, 30% marketing, 20%
administrative
g) Factory overhead expenses: Depreciation P10,000, Insurance P5,000,

Accrued factory overhead expenses, P26,000

h)Factory overhead is applied at 100% of direct labor.

i) Jobs 101 and 102 were completed during the period.

j) Job 101 was sold during the month on account with 100% mark up on cost.
k) The under or over applied overhead is closed to cost of goods sold.
Required: (a) Journal entries to record the foregoing transactions (b) statement of cost of goods
manufactured and sold statement (c) Job Order Cost Sheets (d) Reconcile Work in Process March 31 to the
job order cost for the unfinished job.

(a) Journal entries

Accounts Subsidiary Debit Credit

Ledger
For Work in
Process/
Factory
Overhead
(a) Materials 50,000
Accounts Payable 50,000
(b) Work in Process 45,000
Materials 45,000
Job 101 10,000
102 20,000
103 15,000
(c) Factory Overhead Control 2,000
Materials 2,000
Indirect Materials 2,000
(d) Payroll 100,000
SSS Contribution Payable 2,000
Philhealth Contribution Payable 1,000
Pagibig Contribution Payable 1,000
Witholding Tax Payable 10,000
Accrued Payroll 86,000
Accrued Payroll 86,000
Cash 86,000
(e) Work in Process 50,000
Factory Overhead Control 2,000
Marketing Expense Control 30,000
Administrative Expense Control 18,000
Payroll 100,000
Indirect Labor 2,000
Job Order 101 15,000
102 20,000
103 15,000

(f) Factory Overhead Control 2,000

Marketing Expense Control 1,200
Administrative Expense Control 800
SSS Contribution Payable 2,000
Philhealth Contribution Payable 1,000
Pagibig Contribution Payable 1,000
SSS Contribution Expense 1,000
Philhealth Contribution Expense 500
500
Pagibig Contribution Expense
 (g) Factory Overhead Control 41,000
Accumulated Depreciation 10,000
Prepaid Insurance 5,000
Factory Overhead Payables 26,000
DepreciatioExpense 10,000
Insurance Expense 5,000
Other Factory Expenses 26,000
(h) Work in Process 50,000
Factory Overhead Applied 50,000
Job Order 101 15,000
102 20,000
103 15,000
(i) Finished Goods 150,000
Work in process 150,000
Job Order 101 (75,000)
102 (75,000)
(j) Cost of Goods Sold 75,000
Finished Goods 75,000

Accounts Receivable 150,000

Sales 150,000
(k) Factory Overhead Applied 50,000
Cost of Goods Sold 3,000
Factory Overhead Control 47,000
FO Applied P 50,000
FO Control (Actual) 47,000
*Over applied FO P3,000
*Deduction from Cost of goods sold

Note: If there is no given factory over applied, the total factory overhead control amount will be charged
to work in process.
b)
XYZ Manufacturing Company
Cost of Goods Manufactured and Sold
For the month ended, March 31, 202A

Materials Inventory, March 1, 202A P10,000

Purchases 50,000
Materials available for use P60,000
Less: Indirect Materials P2,000
Materials Inventory, March 31, 202A 13,000 15,000
Materials used P 45,000
Direct Labor 50,000
Factory Overhead Applied 50,000
Total Manufacturing Cost P145,000
Add: Work in Process Inventory, March 1, 202A 50,000
Total cost put into process P195,000
Less: Work in Process Inventory, March 31, 202A 45,000
Total Cost of Goods manufactured P150,000
Add: Finished Goods Inventory, March 1, 202A 75,000
Total Goods available for sale P 225,000
Less: Finished Goods Inventory, March 31, 202A 150,000
Cost of Goods Sold P 75,000
Less: Over applied Factory Overhead 3,000
Net Cost of Goods Sold P 72,000

1) Job Order Cost Sheets

JOB ORDER 101

Materials:
March 1 P15,000
Requisitions 10,000
Total P25,000
Labor:
March 1 P10,000
Payroll 15,000
Total 25,000
Overhead:
March 1 P10,000
Applied 15,000
Total 25,000

Total Product Costs P 75,000

100% Mark up 75,000
Sales Price P150,000
 JOB ORDER 102

Materials:
March 1 P 7,000
Requisitions 20,000
Total P27,000

Labor:
March 1 P 4,000
Payroll 20,000
Total 24,000

Overhead:
March 1 P 4,000
Applied 20,000
Total 24,000

Total Product Costs P 75,000

100% Mark up 75,000
Sales Price P150,000

JOB ORDER 103

Materials:
Requisitions P 15,000
Labor:
Payroll 15,000

Overhead:
Applied 15,000

Product Costs P 45,000

Status: Still in process, March 31 P45,000

d) Work in Process, March 31

Work in Process
March 1 Balance 50,000 Cost of Goods Manufactured (i) 150,000
Materials (b) 45,000
Labor (e) 50,000
Overhead
Applied (h) 50,000
March 31 Balance 45,000

The Work in process balance on March 31 shown is P45,000 which is also the total updated cost of Job
Order 103 in the cost sheet. The amount is equal to the one included in the cost of goods manufactured
and sold statement.

Summary of the Lesson

 In job order costing, the cost of each order produced for a given customer or the cost of each lot to
be placed in stock is recorded on a job order cost sheet, sometimes called simply a cost sheet.
 The cost sheets are subsidiary records which are controlled by the work in process account.
Although several jobs or orders may be going through a factory at the same time, each cost sheet is
designed to collect the cost of materials, labor and factory overhead (usually estimated rather the
actual factory overhead cost) to a specific job.
 Each cost sheet is assigned a job number, which is placed on each material requisition and labor
time ticket in connection with the job. These forms for materials and labor are totaled daily or
weekly by job number, for summary journal entries, and the details are entered on the cost sheets
Enrichment Activity

Problem 1 The DBE Company had the following inventories on August 1 of the current year.

Finished Goods P50,000

Work in Process 37,000
Materials 44,000

The work in process account controls two jobs:

Job 401 Job 402
Materials P6,000 P11,200
Labor 5,000 6,000
Factory Overhead 4,000 4,800
P15,000 P22,000

The following information pertains to August operations:

1) Materials purchased on account P56,000.

2) Materials issued for production, P50,000. Of this amount P6,000 was for indirect materials; the
difference was distributed: P11,000 to Job 401; P14,000 to Job 402 and P19,000 to Job 403.
3) Materials returned to the warehouse from the factory, P1,600 of which P600 was for indirect
materials, the balance from Job 403.
4) Materials returned to vendors, P2,000.
5) Payroll after deducting P6,050 for withholding taxes P3,200 for SSS contributions, P750 for
Philhealth contributions, and P2,400 for Pagibig was P65,600. The payroll due the employees was
paid during the month.
6) The payroll was distributed as follows: P20,800 to Job 401, P25,000 to Job 402, P21,000 to Job 403
and the balance represents indirect labor.
7) The share of the employer for payroll was recorded – P4,000 for SSS contributions, P750 for
Philhealth and P2,400 for Pagibig Funds
8) Factory overhead, other than any previously mentioned, amounted to P30,000. Included in this
figure were P6,000 for depreciation of factory building and equipment, P1,900 for expired insurance
on the factory. The remaining overhead was unpaid at the end of August.
9) Factory overhead was applied to production at the rate of 80% of direct labor.
10) Jobs 401 and 402 were completed and transferred to finished goods warehouse.
11) Job 401 was shipped and billed at a gross profit of 40% of the cost.
12) Cash collections from accounts receivable during August were P70,000.

Required: 1. Journal entries to record the above transactions.

2. Job Order cost sheets
3. Cost of goods sold statement
Assessment

The following inventory data relate to BSA Corporation.

____Inventories_____
Beginning Ending
Finished Goods P90,000 P110,000
Work in process 80,000 70,000
Direct Materials 95,000 90,000
Revenues and costs for the period
Sales P900,000
Cost of goods available for sale 775,000
Total manufacturing costs 675,000
Factory Overhead 175,000
Direct Materials used 205,000

Required: Compute the following for the year:

1. Direct materials purchased
2. Direct labor costs incurred
3. Cost of goods sold
4. Gross Profit

Suggested Links:

1.https://www.google.com/search?
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BH0Q9QF6BAgPEAE&biw=1396&bih=686#imgrc=BtZZht1sjOMP3M

2.https://www.google.com/search?q=material+requisition+form+example&tbm=isch&ved=2ahUKEwjg2-n-
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KDxFof60gSsp4DQCA&bih=686&biw=1396#imgrc=X1fo3doPLq5CKM

3.https://www.google.com/search?
q=labor+ticket&tbm=isch&ved=2ahUKEwjrlPLi4uPuAhUXyosBHXKgCzgQ2-
cCegQIABAA&oq=labor+tic&gs_lcp=CgNpbWcQARgAMgQIABAYOgIIADoGCAAQBRAeOgYIABAIEB46BAgAEE
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eUr7wP8sCuwAM&bih=686&biw=1396#imgrc=oOrlzuhmN7qb-M

References:

1. De Leon (2019), Cost Accounting and Control 2019 Edition: Manila GIC Enterprise & Co., Inc (Text Book). 2.
Rante (2013) Cost Accounting 2013 Edition : Manila: Millenium Books Inc.
3. Cabrera, M. E. B. (2019) Cost Accounting and Control 2019 Edition) Manila: GIC Enterprise & Co. Inc.