Job Order Cost Sheet

A job order cost sheet, often simply called a job cost sheet, is the document or computer record that collects every cost charged to a particular job in a job order costing system. Each customer order, contract or batch is given a job number, and its cost sheet accumulates the direct materials issued to the job, the direct labor worked on it and the manufacturing overhead applied to it. When the job is finished, the sheet shows its total cost and, if it consists of several units, the cost per unit.

Job cost sheets are used by businesses that produce distinct, identifiable products or services, such as custom furniture makers, printers, construction contractors, machine shops, shipbuilders, advertising agencies and law firms. They are the basic building block of cost accounting in these industries, linking day-to-day production records to the inventory accounts in the general ledger.

A typical job cost sheet includes:

• Header details such as the job number, customer, description, quantity, start date, completion date and agreed price.
• A direct materials section, listing each materials requisition by number, date and cost.
• A direct labor section, listing employee time tickets showing hours worked on the job and the labor rate.
• A manufacturing overhead section, showing overhead applied using the predetermined rate and the allocation base, such as direct labor hours or machine hours.
• A summary showing total cost, cost per unit and, often, the selling price and gross profit on the job.

Materials and labor are direct costs traced to the job from source documents, while overhead is an estimate applied through a rate, because indirect costs such as factory rent and supervision cannot be traced to individual jobs.

A sign maker receives an order for 20 illuminated shop signs, Job 418, at a price of $16,000. Over two weeks the job cost sheet records:

• Direct materials from three requisitions totaling $5,200 for aluminium, acrylic and LED modules.
• Direct labor of 120 hours at $28 per hour, or $3,360, from employee time tickets.
• Manufacturing overhead applied at $35 per direct labor hour, or 120 times $35, which is $4,200.

The total cost of Job 418 is $12,760, or $638 per sign. When the signs are delivered, the $12,760 moves to cost of goods sold, and the job shows gross profit of $16,000 minus $12,760, or $3,240, a margin of about 20 percent. If a later analysis finds that actual overhead for the year differed from applied overhead, the difference is adjusted in total at year end, not on individual cost sheets.

The job cost sheets together form a subledger for work-in-process inventory. The total of all cost sheets for jobs still in progress should equal the balance of the work-in-process control account in the general ledger. When a job is completed, its cost sheet is moved to a completed jobs file, and its cost is transferred by journal entry from work in process to finished goods inventory, then to cost of goods sold on delivery. Reconciling the subledger to the control account each month is an important check on the accuracy of inventory records.

Job cost sheets help managers price jobs, compare actual costs with estimates in bids, identify jobs that ran over budget and see which customers or types of work are most profitable. They also support billing on cost-plus contracts, where the customer pays cost plus an agreed margin, and provide evidence for claims and disputes. The accuracy of a cost sheet depends on the accuracy of time records and materials requisitions, and on how well the overhead rate reflects the resources a job actually uses. Businesses with very diverse jobs sometimes use activity-based costing to apply overhead more accurately. Modern systems capture time and materials electronically, but the logic of the cost sheet remains the same.