How is job costing in service organizations is different from manufacturing organizations?
How Do you Assign Direct Materials and Labor Costs to Jobs?The job cost sheet reports manufacturing costs for each job. It also serves as a subsidiary ledger for the work-in-process inventory account. Show
Two primary documents track the assignment of material and labor to a Job Cost Sheet:
To record the cost of raw materials purchased, debit the raw materials inventory account and crediting either accounts payable or cash. To record hours worked, debit the salaries and payroll and credit cash. What Accounts are Used in Job Costing?There are also minor differences in the accounts that are used by manufacturing organizations and service organizations. Accounts Used in Service Organizations and Manufacturing Organizations
Some service companies do not use a work-in-process account but instead simply charge costs directly to expense accounts. Service organizations use a job cost sheet like the one discussed earlier to track direct materials, direct labor, and overhead. How to Assign Direct Material Costs to JobsThe materials requisition form specifies the type, quantity, and cost of materials requested for production and the job in which the materials will be used. The work-in-process inventory account tracks manufacturing costs in total. You will use s separate subsidiary ledger to track manufacturing costs for each job. The work in progress inventory subsidiary ledger will consist of individual job cost sheets - one for each job. To record the raw materials purchased, the raw materials inventory account is credited. Then, the work-in-progress inventory account is debited. Then, post the information shown on the materials requisition form to the appropriate job cost sheet. How do service organizations track direct materials using job costing?Direct materials are often negligible in a service organization. Thus, many service organizations do not track direct materials for each job. If, however, the direct materials are significant, service organizations track the direct materials for each job. The process of recording this information in the journal and job cost sheet is exactly the same as for a manufacturing company. How to Assign Direct Labor Costs to JobsDirect labor refers to the time spent by workers to convert materials into a finished product. Assigning direct labor means assigning this time to a product or job. Note: This process is carried out primarily in manufacturing companies. Worker hours, date, and job number are tracked on a time sheet (also known as a time card, time ticket, or job ticket. Next, use this information debit the Work-in-Process account and credit the Salaries and Wages Payable account. Next, post the information shown on the timesheet to the specific job cost sheet. How do service organizations track direct labor using job costing?Direct labor tends to be the most significant cost for service organizations. The process of tracking labor using a timesheet and recording labor costs in the journal and job cost sheet is exactly the same as for a manufacturing company. Related Topics
Why costing methods used in the service industry are different from those used in the manufacturing or merchandising industries?However, the service sector does not need to hold any kind of inventory as the industry can hire people whenever they need them. Therefore, the costing structure in the service industry is very different from the manufacturing industry due to the difference in operational and handling costs.
How a job order costing system works in a service company setting?Service companies can use various types of costing systems to determine their costs and how to charge customers. The most used costing system in service companies is the job order costing system. This system assigns costs to a specific unit or product. In this case, it assigns costs to a specific service.
How job costing is used in service sectors and manufacturing sectors?Manufacturers and service organizations often use job order costing to track direct labor costs. Job order costing is a system companies use when they can trace costs to a specific product or service. It allows managers to accumulate costs by jobs instead of departments.
Is job order costing as applicable to service companies as it is to manufacturing companies?Job order costing is also used in service organizations such as law firms, movie studios, hospitals, and repair shops, as well as manufacturing companies.
|
