Job order cost accumulation procedure and process costing procedure are employed by many types of manufacturing and service businesses. It should be remembered that Job order cost accumulation procedure and process costing represent two methods both of which follow the basic manufacturing cost cycle. In Job order cost accumulation procedure , each job is an accounting unit to which materials, labor, and factory overhead costs are assigned by means of job order numbers.
Job Order Cost Accumulation Procedure : 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 summary sheet called Job order cost sheet, or merely a cost sheet. This master sheet is designed to collect the cost of materials, labor, and factory overhead applicable to a specific job.
Several jobs or orders may be going through a factory at the same time. Each cost sheet is given a job number which is placed on each materials requisition and labor time ticket used in connection with the job. These forms used for materials and labor, numbered for the job to which they apply, are totaled daily or weekly and entered on the cost sheets. The cost sheet eventually becomes a summary of all the costs, including factory overhead, involved in completing a job. The cost sheets are subsidiary records and are controlled by the work in process account.
Jobs performed on the basis of the customer specifications allow the computation of a profit or loss on each order. If jobs constitute production of a specific quantity for inventory items, job order costing permits computation of a unit cost for inventory costing purposes. The data are expanded for the purposes of introducing the many detailed procedures that are so essential to adequate accounting for costs in job order cost accumulation procedure.
