Job order costing is a method of costing which is used in various industries to maintain the cost records. Job order costing is used in the Industries that produce customized nature of products according to the need of clients such as sneakers shoes, Designer apparels. This method is used when the organization has various jobs and the costs need to be divided amongst those jobs. Also when there are heterogeneous products, firms would prefer using job order costing.
Following is an example which will help in analyzing the job order costing method:-
Roxy Inc. uses a job order cost accounting system that charges overhead to jobs on the basis of direct material cost. At year-end, the Goods in Process Inventory account shows the following.
Date Explanation Debit Credit Balance
2009
Dec. 31 Direct materials cost 1,200,000 1,200,000
31 Direct labor cost 270,000 1,470,000
31 Overhead costs 480,000 1,950,000
31 To finished goods 1,860,000 90,000
1. Determine the overhead rate used (based on direct material cost). (Omit the "%" sign in your response.)
2. Only one job remained in the goods in process inventory at December 31, 2009. Its direct materials cost is $40,000. How much direct labor cost and overhead cost are assigned to it? (Omit the "$" sign in your response.)