This video shows how to record journal entries to account for the flow of costs when a manufacturer uses Job-order Costing.

1.) Purchased $20,000 of raw materials for cash.

Purchase of Raw Materials:
Raw Materials Inventory $20,000
               Cash $20,000

2.) Requisitioned $17,000 of materials for production ($12,000 for Job A and $5,000 for Job Z)

Raw Materials Moved into Production:
Work-in-Process Inventory $17,000
              Raw Materials Inventory $17,000

3.) The company incurs direct labor costs for work done on the raw materials.  The company incurs $8,000 of direct labor for job A and $2,000 of direct labor for Job Z. (Employees will be paid for this work at the end of the week.)

Direct Labor Costs Incurred:
Work-in-Process Inventory $10,000
              Wages Payable $10,000

4.) $100 of glue is used to help build units.  The glue cannot be traced to specific jobs.

 Glue Used During Production:
Manufacturing Overhead $100
              Supplies $100

5.) The company incurs $2,000 of salary costs for its production supervisor.  (The supervisor is paid immediately.)

Incurred Salary Costs for Production Supervisor:
Manufacturing Overhead $2,000
              Cash $2,000

6.) The company incurs $900 of janitorial costs for its factory.  (The janitor is paid immediately for his services.)

Incurred Janitorial Costs for the Factory:
Manufacturing Overhead $900
              Cash $900

7.) The company incurs $700 of janitorial costs for its sales department.  (The janitor is paid immediately for his services.)

Incurred Janitorial Costs for the Sales Department:
Selling, General, & Administrative Expense $700
              Cash $700

8.) The company incurs $4,000 of factory rent, which it paid immediately.

Incurred Rent Cost for the Factory:
Manufacturing Overhead $4,000
              Cash $4,000

9.) The company applies $5,000 of Manufacturing Overhead to Job A and $1,000 of Manufacturing Overhead to Job Z.

Company Applies MOH to Jobs:
Work-in-Process Inventory $6,000
              Manufacturing Overhead $6,000

10.) Job A is completed.

Completing Job A:
Finished Goods Inventory $25,000
              Work-in-Process Inventory $25,000

11.) Job A is sold.

Sold Job A:
Cost of Goods Sold $25,000
              Finished Goods Inventory $25,000