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Measuring Direct Materials Cost in Job Order Costing System:

Learning objective of this article:

1. What is a materials requisition form. Give an example of materials requisition form.

2. What is a job cost sheet. Give an example of job cost sheet.

3. How direct materials cost is measured and recorded on a job cost sheet.

Bill of Materials:

At the beginning of production process  a document known as bill of materials is used for standard products. "A bill of materials is a document that lists the type and quantity of each item of materials needed to complete a unit of standard product". In case where it is not possible to use a bill of materials, the production staff determines the materials requirements from the blueprints submitted by the customer.

Materials Requisition Form:

When an agreement is reached with the customer concerning the quantities, price and shipment date for the order, a production order is issued. The production department then prepares a materials requisition form. "The materials requisition form is a detailed source document that specifies the type and quantity of materials to be drawn from the storeroom, and identifies the job to which the costs of the materials are to be charged". The form is used to control the flow of materials into production and also for making entries in the accounting records. The completed form is presented to the storeroom clerk who then issues the necessary raw materials. The storeroom clerk is not allowed to release materials without such a form bearing an authorized signature. Following is an example of a materials requisition form.

Sample of materials requisition form:

Job Cost Sheet:

After being notified that the production order has been issued, the Accounting Department prepares a job cost sheet. A job cost sheet is a form prepared for each separate job that records the materials, labor and overhead costs charged to the job. After direct materials are issued , the Accounting department records their costs directly on the job cost sheet.

In addition to serving as a means for charging costs to jobs,  the job cost sheet also serves as a key part of a firm's accounting records. The job cost sheets form a subsidiary ledger to the work in process (WIP) account. They are detailed records for the jobs in process that add up to the balance in the work in process (WIP). Following is an example of a job cost sheet.

Example of Job Cost Sheet:

You may also be interested in other useful articles from "job order costing system" chapter:

1. Measuring Direct Materials Cost in Job Order Costing System
2. Measuring Direct Labor Cost in Job Order Costing System
3. Application of Manufacturing Overhead
4. Job Order Costing System - The Flow of Costs
5. Multiple Predetermined Overhead Rates
6. Under-applied overhead and over-applied overhead calculation
7. Disposition of any balance remaining in the manufacturing overhead account at the end of a period
8. Predetermined Overhead Rate and Capacity
9. Recording Non-manufacturing Costs
10. Recording Cost of Goods Manufactured and Sold
11. Job Order Costing in Services Companies
12. Use of Information Technology in Job Order Costing
13. Advantages and Disadvantages of Job Order Costing System
14. Job Order Costing Discussion Questions and Answers
15. Job Order Costing Exercises
16. Case Studies

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