Job Order Costing Examples, Practical Problems and Solutions

Problem No. 1: (Job Order Costing Cycle)

The Excellent Company had the following inventories on April 1, 2019:

Raw Material50,000
Finished Goods28,000
WIP – Material2,000
WIP – Labour30,000
WIP – FOH12,000

During the month the cost of material purchased was $120,000, direct labor cost incurred was $160,000 and factory overhead applicable to production was $60,000, on April 30 inventories were:

Raw Material46,000
Finished Goods44,000
WIP – Material10,000
WIP – Labour18,000
WIP – FOH8,000


Prepare Journal entries on April 30, to show the flow of cost through the proper summary accounts and also give the subsidiary records.


Job Order Costing Cycle


Computations Explained:

Raw Material Consumed:

Opening Inventory50,000
+ Purchases1,20,000
Material available for use1,70,000
– Ending Inventory46,000
Material used1,24,000

W.I.P. – Material


W.I.P Labour




Finished Goods

Finished Goods

Problem No. 2: (Charging Actual FOH to Jobs)

The Moon Manufacturing Co. has a partial job order cost system instead of predetermining a factory overhead rate. The company computes a separate factory overhead rate at the end of each month and this rate is used to charge factory overhead to the jobs worked on during that month using the number of direct labour hours used on the jobs as the basis of such allocation. In the following table, the actual factory overhead costs and the direct labour hours for the past two months are listed.

Also Check:  Cost accounting formulas
Actual Factory Overhead Costs$6,000$12,000
Actual direct labour hours15,00020,000

During this two month period one customer sent in an identical order each month, calling for the production of 1,000 units, requiring 400 direct labour hours at $1.00 per hour and material $750.


Compute (a) The total and the unit cost for the job in each of the two months and (b) Give your comments regarding this method of charging actual factory overhead costs to jobs.



Computing Actual FOH to Jobs

(b). Comments:

It is clear from the above calculation that charging actual FOH Costs to Jobs gives inaccurate and misleading results. The company should use predetermined FOH rates for correct computation and control.

Computations Explained:

FOH Calculation

Problem No. 3: (Journal Entries for Cost Cycle)

John Manufacturing Company has a Job Order Costing System, and compiled the following data for 2019.


Material and Supplies Purchased$242,000
Direct Material Used190,000
Supplies Used20,000
Direct Labour150,000
Other Labour35,000
Utility Cost for the Year65,000
Miscellaneous Overhead40,000
Depreciation Equipment22,000
Applied Factory Overhead (20% of direct labour costs)
Cost of Goods completed (material, $170,000; labour, $130,000)3,26,000
Selling and Administrative Expenses1,10,000


(1). The appropriate journal entries

Also Check:  Costing methods and techniques

(2). The computation of net income


Journal Entries for Job Order Costing Cycle

Net Income:

– Cost of sales3,26,000
– Selling & Administrative Expenses1,10,000
Net Income64,000

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