Tracing Costs: Videos & Practice Problems
Tracing Costs in job order costing follows a job through production by linking specific resource use to a single job number. For direct materials, companies rely on the bill of materials, the materials requisition form, and the raw materials record. The bill of materials lists all raw materials needed to complete the job, while the materials requisition form records materials leaving the storeroom and assigns their cost to the job. The raw materials record tracks the stock and movement of each material item.
Once production begins in work in process, managers trace direct labor using a time ticket. A time ticket records the hours one employee worked across jobs during a time period, including the job numbers, hours, and related labor cost. Because employees may work on multiple jobs and a single job may involve many employees and many time tickets, these records allow labor costs to be accumulated accurately for the job being produced.
Tracing Direct Materials Cost to a Job
Tracing Direct Materials Cost to a Job
Prisca’s Printing Co. needs to take specialty glitter ink out of their inventory to use on their next job order. When they take the glitter ink out of their inventory, which document would they use to track the cost of glitter ink to job the glitter ink is being used for?
Bill of Materials.
Materials Requisition Form.
Raw Materials Record.
General Journal.
Tracing Direct Labor Cost to a Job
Tracing Direct Labor Cost to a Job
At what stage in the production process are time ticket traced?
Raw Materials Inventory.
Work in Process.
Finished Goods.
Costs of Good Sold.
Here's what students ask on this topic:
The bill of materials is a key document in tracing costs within a job order costing system. It lists all the raw materials needed to complete a specific job, including the quantity of each item. Think of it as a recipe that outlines exactly what materials are required to produce the job, such as a chair or any other product. While the bill of materials itself does not assign costs, it provides the foundation for tracking materials by specifying what is needed. This helps managers and accountants know what to expect and prepare for in terms of materials usage, which is essential for accurate cost tracing and job costing.
A materials requisition form records the actual materials taken from the storeroom to be used on a specific job. Unlike the bill of materials, this form includes the cost of the materials issued, linking these costs directly to the job number. Since materials are often withdrawn in stages rather than all at once, multiple requisition forms may be used for one job. Each form tracks the quantity and cost of materials leaving inventory, ensuring that direct material costs are accurately traced and assigned to the correct job. This is crucial for maintaining precise job cost records.
A time ticket is used to trace direct labor costs in a job order costing system. It records the hours an employee works on specific jobs during a given period, including the job numbers, hours worked, and the labor cost associated with those hours. Since employees may work on multiple jobs in a day, the time ticket helps allocate labor costs accurately to each job. Collecting all time tickets related to a job allows managers to sum up the total direct labor cost for that job, which is essential for accurate job costing and cost control.
Tracking raw materials inventory is important because it ensures that the costs of materials used in production are accurately assigned to specific jobs. By monitoring inventory through documents like the bill of materials, materials requisition forms, and raw materials records, companies can trace the flow and cost of materials from purchase to usage. This helps prevent errors, controls inventory levels, and provides accurate cost information for each job, which is vital for pricing, profitability analysis, and financial reporting.
Multiple time tickets can affect the tracing of labor costs because a single job may involve many employees working at different times or even the same employee working on the job over multiple days. Each time ticket records labor hours and costs for specific jobs, so to get the total direct labor cost for a job, all relevant time tickets must be collected and summed. This ensures that the labor cost assigned to the job is comprehensive and accurate, reflecting all the work done by various employees throughout the production process.
