Problem: This Tool Demonstrates A Basic Job Costing System ✓ Solved
Problem This tool demonstrates a basic job costing system. The
This tool demonstrates a basic job costing system. The following assumptions apply: (1) There are three specific jobs: X, Y, and Z (2) There are two employees: A and B (3) There are three days of activity: 1, 2, and 3 (4) There are three types of direct material: AA, BB, and CC (5) A is paid $15 per hour and B is paid $20 per hour (6) AA costs $11, BB costs $23, and CC costs $9 (7) Overhead is applied at $20 per direct labor hour (8) Each employee is only allowed to requisition one item of direct material daily.
Complete each time card below by assigning exactly 8 hours of work to each day for each employee. It is up to you to choose how many hours are worked on each job or on administrative time that is not charged to a specific job. Similarly, use the pick lists within the material requisition cards to decide which materials were used by each employee on each day. The job costs sheets will be automatically prepared based on your selections. Carefully tie the job costs sheets to the entries you made on the time sheets and material requisitions.
Job Costing System Overview
In this job costing system, we will explore the processes and considerations involved in allocating labor and material costs across different jobs performed by employees A and B. We'll ensure that the total hours worked by each employee each day equal 8 hours, adhering to the structure laid out in the assignment guidelines.
Employee A: Job Assignments and Material Usage
For Employee A, we distribute work across jobs X, Y, and Z over the three days. We will also choose materials accordingly.
Time Card for Employee A
| Day | Job | Hours |
|---|---|---|
| 1 | X | 4 |
| 1 | Admin | 4 |
| 2 | Y | 4 |
| 2 | Admin | 4 |
| 3 | Z | 4 |
| 3 | Admin | 4 |
Material Requisition for Employee A
| Day | Job | Item | Qty |
|---|---|---|---|
| 1 | X | AA | 1 |
| 2 | Y | BB | 1 |
| 3 | Z | CC | 1 |
Employee B: Job Assignments and Material Usage
For Employee B, we will also distribute hours and material consumption similarly across jobs X, Y, and Z.
Time Card for Employee B
| Day | Job | Hours |
|---|---|---|
| 1 | X | 4 |
| 1 | Admin | 4 |
| 2 | Y | 4 |
| 2 | Admin | 4 |
| 3 | Z | 4 |
| 3 | Admin | 4 |
Material Requisition for Employee B
| Day | Job | Item | Qty |
|---|---|---|---|
| 1 | X | BB | 1 |
| 2 | Y | CC | 1 |
| 3 | Z | AA | 1 |
Cost Calculation for Each Job
To calculate the costs for jobs X, Y, and Z, we will need to consider labor costs, material costs, and the overhead applied for each employee based on their hours worked per job.
Job X Cost Sheet
| Direct Labor | Materials | Overhead |
|---|---|---|
| Employee A: 4 hours at $15/hour = $60 | Materials AA: 1 x $11 = $11 | Overhead: 4 x $20 = $80 |
| Employee B: 4 hours at $20/hour = $80 | Materials BB: 1 x $23 = $23 | Overhead: 4 x $20 = $80 |
Job Y Cost Sheet
| Direct Labor | Materials | Overhead |
|---|---|---|
| Employee A: 4 hours at $15/hour = $60 | Materials BB: 1 x $23 = $23 | Overhead: 4 x $20 = $80 |
| Employee B: 4 hours at $20/hour = $80 | Materials CC: 1 x $9 = $9 | Overhead: 4 x $20 = $80 |
Job Z Cost Sheet
| Direct Labor | Materials | Overhead |
|---|---|---|
| Employee A: 4 hours at $15/hour = $60 | Materials CC: 1 x $9 = $9 | Overhead: 4 x $20 = $80 |
| Employee B: 4 hours at $20/hour = $80 | Materials AA: 1 x $11 = $11 | Overhead: 4 x $20 = $80 |
Conclusion
This job costing system emphasizes the importance of accurate tracking of both labor and material costs associated with specific jobs. By utilizing time cards and material requisitions, businesses can ensure that all costs are appropriately accounted for, leading to better financial analysis and decision-making. In actual business environments, such systems help separate administrative tasks from productive work, allowing for clearer insights into project costs and profitability.