How a particular Job may be traced in a Job order Cost System?

In an actual or a normal cost job order system, direct material and direct labor are traced, respectively, using material requisition forms and employee time sheets, to individual jobs in process. Service companies may not attempt to trace direct material to jobs, but instead consider the costs of direct material to be part of overhead. Tracing is not considered necessary when the materials cost is insignificant in relation to the job’s total cost. 

Technology is playing an increasing role in aiding the management of jobs and in tracking job costs. Even basic accounting software typically has a job costing module. By automating the data entry processes, more accurate and timely data are gathered and employees are relieved of the recurring burden of logging data. The latest technology being adopted in job shops is project management software. These programs allow operational and financial data about jobs to be shared throughout the firm. Intranets are being created to facilitate the dissemination of this information.

In an actual cost system, actual overhead is assigned to jobs. More commonly, however, a normal costing system is used in which overhead is applied using one or more predetermined overhead rates multiplied by the actual activity base(s) incurred. Overhead is applied to Work in Process Inventory at the end of the month or when the job is complete, whichever is earlier.
Share This
Previous Post
Next Post