Job Cost Sheets
The preceding information can be logically transferred to a job cost sheet that is a compilation of cost data for a specific job:
The direct labor information found on the job cost sheet is taken from Donnie Odom's daily time sheet (a cross-reference is created of "" to indicate "daily time sheet of July 14, 20x5, for Donnie Odom"). In similar fashion, Donnie's material requisition form was used as the source document for compiling the direct material information. Some type of cross-referencing system needs to be developed to allow one to trace specific cost allocations to their source documents. Overhead was applied directly to the job cost sheet based upon the predetermined overhead application scheme of $20 per direct labor hour.
Expanding the Illustration
The next graphic shows separate job cost sheets for all three of Donnie's jobs. All direct material and direct labor must be transferred to specific jobs. As alluded to earlier, the indirect labor (admin hours) and indirect material is not directly transferred to a specific job; its cost is instead represented through the applied overhead.
Another Expansion of the Illustration
Thus far, the illustration has focused only on Donnie's activities. He had relatively simple assignments on the 14th and was able to complete three separate jobs by himself. But, remember that Jack has three other electricians and many other jobs. Some of these jobs may require multiple employees and extend over days and weeks. One such job was the new home of Aba Obekie. This job took two electricians (Andy Axom and Bev Bentson) three full days to complete. The resulting job cost sheet appeared as follows:
Database Versus Spreadsheets
Jack could maintain some or all of his job costing system manually. Or, he could use an electronic spreadsheet to prepare reports similar to those just illustrated. However, there is another more powerful tool - the electronic database. A number of commercial packages are available. Generalizing, data are entered via a user friendly input form that includes a number of predetermined "slots" for entering desired information. For instance, below is a data entry form for entering Donnie's time and material for the 14th:
The benefit of the database approach is that information is only entered once; it need not be transferred to other forms. The computer files can be queried in many ways - beyond just preparing a job cost report. For instance, Jack could use the customized reports feature to find all jobs on which billboard light bulbs were used during the past 18 months, determine the total direct labor hours of any employee for a selected time interval, identify how many jobs were performed for a selected client, and on and on! Such databases provide a powerful management tool.
Moving Beyond the Conceptual Level
Thus far, we have looked at a simple and understandable illustration of job costing. What this illustration fails to show is:
o The sophistication of the information systems that are used to track job costs in a larger organization.
o The debits and credits that are needed to track the accumulation and application of costs within a company's general ledger system.
o The ultimate disposition of the difference between applied and actual overhead.
Each of these issues will be dealt with in the following sections of this chapter. As you proceed to study this material, you may find yourself becoming consumed by the details. If so, think again about Jack Castle; consider that we are applying Jack's costing model to a more robust business environment.