The job cost sheet will have some code or descriptive

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Each job has its own job cost sheet on which costs are charged to the job. The job cost sheet will have some code or descriptive data to identify the particular job and will contain spaces to record costs of materials, labor, and overhead. Exhibit 3-4 provides an illustration of a job cost sheet.2.Materials Costs.When a job is started, materials that will be required to complete the job are withdrawn from the storeroom. The document that authorizes these withdrawals and that specifies the types and amounts of materials withdrawn is called the materials requisition form. The materials requisition form identifies the job to which the materials are to be charged. Care must be taken when charging materials to distinguish between direct and indirect materials. An example of a materials requisition form is shown in Exhibit 3-1 in the text.3.Labor.Labor costs are recorded on a document called a time ticketor a time sheet. Each employee records the amount of time he or she spends on each job and each task on a time ticket. The time spent on a particular job is considered direct labor and its cost is traced to that job. The cost of time spent on other tasks, not traceable to any particular job, is usually 9
MANAGERIAL ACCOUNTING - IIE 211CLASS 3
4.Manufacturing Overhead.Manufacturing overhead includes all manufacturing costs that are not traced to a particular job. In practice, manufacturing overhead usually consists of all manufacturing costs other than direct materials and direct labor. Since manufacturing overhead costs are not traced to jobs, they must be allocated to jobs if absorption costing is used. a.We do not dwell on the reasons for allocating all manufacturing overhead to jobs in this chapter. What costs should or should not be allocated to jobs and to products remains a controversial issue. In the chapter we confine discussion to absorption costing since that is the approach that is used in the vast majority of organizations for both external and internal reporting.b.In order to allocate overhead costs, management must choose an allocation base. The most widely used allocation bases are direct labor-hours, direct labor costs, and machine-hours. (These bases have been severely criticized in recent years. Critics charge that overhead is largely unrelated to, or even negatively correlated with, machine-hours or direct labor-hours.) In the costing system illustrated in the chapter, a predetermined overhead rate is computed by dividing the estimated total overhead for the upcoming period by the estimated total amount of the allocation base.c.Ideally overhead cost should be strictly proportional to the allocation base; in other words, an x% change in the allocation base should cause an x% change in the overhead cost. Only then will the allocated overhead costs be useful in decision-making and in performance evaluation. However, much of the overhead typically consists of costs that

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