Question

Explain what following documentation is used for in the job order cost system: Materials requisition slip, Time ticket, and the Job cost sheet. Explain the importance and main purpose of each type of documentation

Answer 1

Importance and main purpose of Materials requisition slip

Material requsition slip originates from the production aka shop floor , when the manager-in-charge requires raw materials for the production process.He sends the request , in the form of this slip , which is documented , to the raw-materilas storage department-in charge

The above requisition slip, which is dated & signed by an appropriate person   ,contains the job number, description of the required material, quantity required , in some well -established time- frequencies, ie. Weekly or daily.

Its main purpose is to have a track of the materials that have been bought by the purchasing department and used in production----that helps to know the type of material, its quantity as well as costs.

The above also helps to determine the raw materials costs , that have gone into the production of a particular finished product.

Materials issued to production, based on the above slip, is recorded as a debit to Work-in-Process--Job No. & credit to Raw materials inventory----in accounting records.

Importance and main purpose of Time ticket

Time ticket is a document , for each employee, based on which labor costs are worked out for each particular job.

It contains the employee name & number, dates & time on the job , including start & stop hours, total hrs. worked, the rate/ hr & total costs----signed by the supervisor.

Its main purpose is to help the accounting system to keep track of the labor and other labor-related costs associated with a particular job.Normally,time tickets are maintained daily in factories.

Importance and main purpose of Job cost sheet

In job costing system,a job cost sheet for a particular job-order shows all the costs incurred in respect of that specific job. The job may consist of one or a batch of production units.The job cost sheet shows the job number, starting and ending dates,activities performed , no.of units produced, quantity & cost direct materials consumed ,direct wage costs associated wit that job and also manufacturing overhead allocated at the pre-determined rates.

Thus, it helps to know the total costs in respect of that job , based on which,mark-up percentages are made , to decide the price to be quoted and thereby , the profits that will accrue to teh company.

Thus, a job cost sheet is a comprehensive summary of costs , all collected in one document .