Sure, here's a concise description you could use for your managerial accounting Chapter 2 slide on job order costing: "Chapter 2 focuses on job order costing, a vital method in managerial accounting for tracking costs and profitability on a per-job basis. This slide delves into the intricacies of job order costing, including its application in various industries, cost accumulation techniques, and how it aids in decision-making for managers."

1. CHAPTER 2
JOB ORDER COSTING
17TH EDITION
PRESENTED BY: SEJAL ANAND &
M.AWAIS
ASIGNED BY: MA’AM NADIA
ANJUM

2. AGENDA
SUKKUR IBA UNIVERSITY KANDHKOT CAMPUS 2
• Measuring Direct Materials Cost
• Job Cost Sheet
• Measuring Direct Labor Cost
• Computing Predetermined Overhead Rates
• Applying Manufacturing Overhead
• Manufacturing Overhead
• Application of Manufacturing Overhead
• The Need for a POHR
• Examples

3. Measuring direct material cost
• DIRECT COST
• The cost of raw materials or components that
can be directly traced to the production of a
specific good or service.
• Think of it as the essential ingredients that go
into making a product.
• Examples:
• For a toy manufacturer: Plastic used to make
the toys, fabric for clothes, paint.
• For a bakery: Flour, sugar, eggs, butter.
• For a furniture maker: Wood, screws, nails.

4. FR
A job cost sheet is a crucial document in a job
order costing system, used to track and
accumulate all the costs associated with a
specific job or project.
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JOB COST SHEET

5. FR
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• The amount of payroll expenses paid to direct laborers
on specific projects or working on specific products.
• Examples:
• Base Wage: $15/hour
• Fringe Benefits: $2/hour
• Payroll Taxes: $1/hour
• Total Work Hours: 40 hours/week
Direct labor cost

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Computing Predetermined Overhead
Rates
• A predetermined overhead rate is an estimated cost per unit of a
chosen "allocation base" used to allocate manufacturing overhead
costs to products.
• It allows companies to anticipate and distribute overhead costs
before production even starts.

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Applying Manufacturing Overhead
• It's the process of allocating estimated
manufacturing overhead costs to individual
products or jobs during production.
• This helps determine the total cost of production,
which is crucial for pricing, profitability analysis,
and cost control.

8. Manufacturing Overhead
• Manufacturing overhead, in simple terms, refers to all the
indirect costs associated with the production process, but
not directly traceable to a specific unit of product.
• Examples:
• Factory Rent/Utilities: The cost of operating the
production facility.
• Depreciation of Machinery: The gradual decrease in the
value of equipment used in production.
• Indirect Labor: Salaries of supervisors, quality control
personnel, etc.
• Maintenance and Repairs: Costs associated with keeping
equipment and facilities operational.
• Factory Supplies: Lubricants, cleaning materials, etc.

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Application of Menufecturing
Overhead
• T h e P r e d e t e r m i n e d O v e r h e a d R a t e ( P O H R ) i s t h e e s t i m a t e d
o v e r h e a d c o s t p e r u n i t o f a c t i v i t y u s e d t o a l l o c a t e o v e r h e a d t o
p r o d u c t s o r s e r v i c e s

10. FR
10
SUKKUR IBA UNIVERSITY KANDHKOT CAMPUS
The Need for a POHR
• C o s t A l l o c a t i o n
• P r o v i d e s a
s t a n d a r d m e t h o d
t o a l l o c a t e
o v e r h e a d c o s t s
t o p r o d u c t s o r
s e r v i c e s
• B u d g e t i n g a n d
P e r f o r m a n c e E v a l u a t i o n
• F a c i l i t a t e s b u d g e t i n g b y
e s t i m a t i n g o v e r h e a d c o s t s
i n a d v a n c e a n d e n a b l e s
p e r f o r m a n c e e v a l u a t i o n
t h r o u g h v a r i a n c e a n a l y s i s .
• A c c u r a c y i n P ro d u c t C o s t i n g
• E n s u r e s m o r e p r e c i s e
d e t e r m i n a t i o n o f t o t a l p r o d u c t
c o s t s f o r p r i c i n g a n d
p r o f i t a b i l i t y a n a l y s i s

11. FR
Example
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• P e a r l C o . a p p l i e s o v e r h e a d b a s e d o n d i r e c t l a b o r h o u r s . To t a l e s t i m a t e d
o v e r h e a d c o s t f o r t h e y e a r i s $ 6 4 0 , 0 0 0 . To t a l e s t i m a t e d l a b o r c o s t i s
$ 1 , 4 0 0 , 0 0 0 , a n d t o t a l e s t i m a t e d l a b o r h o u r s a r e 1 6 0 , 0 0 0 .
•
• W h a t i s P e a r l C o . ’s p r e d e t e r m i n e d o v e r h e a d r a t e ?
•
• I f j o b N o . 1 0 1 t o o k 5 0 l a b o r h o u r s t o c o m p l e t e , w h a t i s t h e o v e r h e a d
a p p l i e d / c h a rg e d t o j o b 1 0 1 ?

12. FR
Example
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13. ABOUT US
I B A U n i v e r s i t y K a n d h k o t C a m p u s
• The establishment of Sukkur IBA University has been a
ray of hope for those who cannot afford quality
education. Ranked as one of the best educational
institutions in Pakistan, the university has been
successfully transforming the students' lives and uplifting
their careers. Sukkur IBA University has emerged as a
beacon of light forth underprivileged talented youth with
small pockets. Having national accreditation and
collaboration all around the world, Sukkur IBAUniversity
is now considered one of the best educational institutes in
Pakistan.

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