Job Order Costing: Examples, Practical Problems, and Solutions

Written by True Tamplin, BSc, CEPF®

Reviewed by Editorial Team

Updated on March 07, 2023

Problem 1: Job Order Costing Cycle

Excellent Ltd. had the following inventories on 1 April 2019:

Excellent Ltd. Inventories on 1 April 2019

During the month, the cost of materials purchased was $120,000. Also, the direct labor cost was $160,000 and factory overhead applicable to production was $60,000. On 30 April, the inventories were as follows:

Excellent Ltd. Inventories on 30 April 2019

Required: Prepare journal entries on April 30 to show the flow of cost through the proper summary accounts, and also give the subsidiary records.


Job Order Costing Cycle

Calculations Explained

Calculations Explained

Problem 2: Charging Actual FOH to Jobs

The Moon Manufacturing Co. has a partial job order costing system instead of predetermining a factory overhead rate.

The company computes a separate factory overhead rate at the end of each month.

This rate is used to charge the factory overhead to the jobs worked on during the month. The number of direct labor hours used on the jobs is the basis of such allocation.

The table below shows the actual factory overhead costs and the direct labor hours for May and June.

Actual Factory Overhead Costs and the Direct Labor Hours for May and June

During this two-month period, one customer sent in an identical order each month, calling for the production of 1,000 units. This required 400 direct labor hours at $1 per hour and materials amounting to $750.


  • Calculate the total cost and unit cost for the job across the two months
  • Comment on the method of charging actual factory overhead costs to jobs


Computing Actual FOH to Jobs

It is clear from the above calculation that charging actual FOH costs to jobs gives inaccurate and misleading results.

The company should use predetermined FOH rates for correct calculations and control.

Calculations Explained

May June Calculations Explained

Problem 3: Journal Entries For Cost Cycle

John Manufacturing Company has a job order costing system. It compiled the following data for 2019.

John Manufacturing Company Data 2019


  • Prepare the appropriate journal entries


Journal Entries

Net Income

Net Income

Job Order Costing: Examples, Practical Problems, and Solutions FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.