Flowchart ofJob Costing System—Manufacturing Process
This manufacturing company’s flowchart starts with two source documents: the time card and materials requisition. The time card represents the addition of labor to the manufacturing process, and the materials requisition adds raw material.
Information is first key inputted from the time card (or labor ticket), describing the jobs the employee worked on and for how many hours. This information is recorded in the production labor transaction file. Both direct and indirect labor would be included.
Information from the materials requisition form is also input, verified, and recorded in the materials issuance transaction file. As previously mentioned, both direct and indirect material would be added to production.
The production labor transaction file and materials issuance transaction file are then merged using an offline process to produce a production cost transaction file. The production cost transaction file contains the total labor hours and total materials cost of the job (or total actual cost). The production labor transaction file is then sent to payroll.
After the labor Transaction and issued materials files are merged the data is input into the Production Cost Transaction file. The Production Cost Transaction file consists of the actual direct cost and indirect cost of each job in work-in-process. Direct cost includes direct material and direct labor, which can be traced to the product in each job. Indirect cost includes manufacturing overhead costs, whichwill be allocated to each job using allocation base and rate.
The Production Cost Transaction file is then used for several purposes.
First, this file is used to print two reports. One report is the Materials and Labor Usage Report for each job in process, and the other report is the Scrap and Lost Time Report, which indicates material and labor time that are wasted during the manufacturing process.
Second, an online cost distribution process analyzes the data and inputs direct material cost and direct labor cost in the Open Job file (WIP), and indirect cost or actual manufacturing overhead to the Manufacturing Overhead file.
Third, the online standard cost variance analysis process compares the actual cost from the Production Cost Transaction file with the standard cost from the Standard Cost file and communicates the results in standard cost variance reports. The analysis process looks into the differences of labor time and rate and used material quantity and rate between actual cost and budgeted standard cost. With the information from the analysis a standard cost variance report is produced. We are able to see the Spending variance, Efficiency variance and Production-Volume variance for variable and fixed overhead costs.
As the online process of cost distribution applies direct costs of materials and labor hours to the work in process file, the indirect manufacturing overhead costs incurred are input to the Manufacturing Overhead file. The Manufacturing Overhead file and the Standard Cost file (of budgeted costs) are compared to produce the overhead application. Overhead applied is calculated as actual indirect manufacturing costs multiplied by the allocation base rate. Applied overhead is then added to the work in process file so that indirect costs are reflected in the open jobs. The overhead application process produces an overhead residual analysis, which is a report that indicates the amount of manufacturing overhead applied to a particular cost object or job, as well as applied overhead to the entire work-in-process, and any amounts over or under applied. Any differences between the amount of overhead actually incurred and the amount applied to products must be accounted for.
When the Open Job file (a listing of open jobs) is updated for all costs (direct and indirect), a job status query can be displayed to individuals who wish to know the progress of any particular job. A job status report can also be printed from the Open Job file to provide management executives with information on the level of completion.