Work-in-process in a job-costing environment
ID:CVWIPJ

Video Overview

Thus far in a manufacturing entity, we have calculated the total manufacturing costs for a given accounting period. Job costing involves dividing these total costs between the particular jobs in the factory. A job is defined as a group (number of units) of similar products that are manufactured as a batch. For job costing the same principles apply as previously used. The cost for a job is the actual direct materials cost, plus the actual direct labour cost, plus the applied factory overheads allocated according to a predetermined overhead rate.  The total direct materials, the total direct labour, and the total applied overheads are divided between the various jobs, and transferred to the work-in-progress account for each job. This is only transferred to the finished goods inventory account for each job once the job has been completed. If the job is not completed by the period end, the balance in work-in-progress stays in the account and becomes the opening balance in the work-in-progress account for the next accounting period. In this tutorial we will focus on work-in-progress in a job costing environment.