Question

Topic: Job order costing in the food industry

How exactly would the costs in food industry accumulate for each job? In other words, how would you track direct labor, materials, etc?

Answer 1

Solution: In food industry under Job Order Costing, all direct costs (i.e. Direct material, direct labor) are easily traceable to each job like: Direct material (i.e. floor, sugar & other materials used in producing such food) are accumulated based on actual purchase cost of such materials used in each job, and Direct labor cost ( i.e. cost of labor (workers) who are actually associated in producing such food ) are accumulated based on actual wages given to such workers based on hours spent in completing the job.

Other manufacturing expenditures such as indirect material ( packaging, machine oil, factory supplies etc.) , indirect labor cost ( i.e. factory cleaner wages, factory supervisor wages etc.) and other overhead costs like: factory machine depreciation exp., factory rent & insurance, Factory electricity cost are accumulated to job based on the cost object set by the company (i.e. using plantwide OH rate, or using predetermined overhead rate by multiplying it with units of cost object used )

All the above cost are added to such job cost sheet, and total of which shows the final total cost accumulated to such job.