 In this presentation, we will take a look at a job cost sheet. A job cost sheet is going to be used to help us to track the costs of inventory or jobs to a particular job. A job cost sheet or job cost system could be used for a manufacturing company that produces inventory. It could also be used for a service company that's tracking, say, time that goes to a particular job, say a legal firm or an accounting firm that needs to track the time that they put in to a particular job would use a similar system in order to track those costs by job. In a construction company, oftentimes we're going to use a similar job cost system because, again, those jobs are all going to be different in nature. We'll have to track the costs to jobs. If we make something like custom, anything that's going to be customized, customized guitars or something like that, if we produce inventory, in other words, we're going to have the same kind of issue that we're going to need to be able to track the costs to the particular job. The inventory is usually the one that we work with in a manufacturing company that makes inventory because it needs to track the costs to job and has the added complication of dealing with inventory, meaning materials that we'll have to be dealing with. Now the job cost sheets are going to be a type of subsidiary ledger. If we think about all the job cost sheets put together, they are going to support amounts that are going to be on the balance sheet. In other words, when we have work in process, when we start to the work in process, the inventory account that's going to be tracking what we're doing in terms of the inventory for putting together guitars, and we're tracking the cost, the direct materials, the direct labor and the overhead of those guitars on the trial balance on the financial statements as an asset in inventory, then that number needs to be supported by something like a job cost sheet job cost sheets, multiple sheets that will be reporting and supporting that in a similar way as one, every account has a GL account, every account has a GL account and that gives support to those accounts by date of transaction. Some accounts need more than that. However, for example, accounts receivable, it's not enough to have a GL account. We also need to know that the supporting subsidiary ledger by customer, which customers owe us money so we can track that and hopefully collect. When we talk about the inventory account, we're going to break that out to work in process and finished goods. Whenever something goes into work in process, it's not enough for us to just know the date of the transaction as will be on the GL, the general ledger. We also need to know which job to track these costs to. So this is similar to tracking the accounts receivable by customer. Here we're tracking the work in process by job that we have, the job that we're applying this to. Now the job cost sheet could have a customer here. It may be the fact that we're making, we're assigning jobs, we're making jobs and maybe we don't have a customer. We might be in a system where the customer custom orders the job and therefore we have the customer that we're going to start to create the job for. And that's typically the case because if we're in a construction company, if we make custom anything, we're typically going to get the order. We're going to know the customer and then can create the job typically with a job number from it. But it's possible for us to make a job for something that we're going to have that on display or something like that and not have the customer at this point in time, right? But we would have, of course, a job number. We need a job that we're going to be working on. So it would be depending on the industry in terms of how these job costs sheets might be formatted. We could have the address, the job description, depending on what we're making. If we're making custom guitars, we might say the type of guitar that we're making in general. We might have the date of the proposed date, the date started, and the date completed on the job. And of course, when it's completed, that's when this job then would go from work in process to finished goods. It would then be done and we can make the general ledger transfer from what's in process to the finished goods. Now the job, any job cost sheet, no matter what we're dealing with, is going to have the three components unless it's a service company, right? If it's a service company, if we're if we're a law firm or for a bookkeeping firm, all we really need to track is the labor is the hours, the labor that we had. So if we work on bookkeeping, we need to know how much time we spent and who spent the time and what their billable rate is for any particular job. So we would have this and then we're going to have the overhead of like the office base and whatnot that we could we may include in a job cost sheet. So those would be for a service company. Of course, it's a little bit more complex for a manufacturing company because they're going to be dealing with materials. So if we deal with a manufacturing company, like making something like custom guitars, then anything anytime you think of inventory, anything that deals with tracking inventory, what's the value of inventory, its value is the direct materials, the direct labor and the overhead, all the other stuff. So those are going to be the three components of our job cost sheet, direct materials, direct labor and overhead. And then we're going to have to track that information in some way. So the direct materials we may track by the date that we brought the materials in, if we have a long job that we're working on, we may have multiple dates that we're going to have here, something like a construction company might have, of course, multiple dates of materials, requisitions, meaning we might have, you know, that's going to be the document that we're going to use in order to requisition materials. If we're in a large company, then we're going to have to get the materials from, you know, purchasing or the materials department, we're going to have to ask for those to happen, we're going to have to requisition those, we might list out the requisition number if that's the case. But at the minimum, we probably want the date and the cost of the materials per job. And then we're going to have the direct labor that we're going to have. And again, if it's a construction company, we might have multiple dates and multiple people at multiple different rates in that are working on a particular job. We're going to want the date. And then we're going to want the time ticket or some kind of tracking to a source document to be able to know how much time and what the billable rate that we're using is for these. So we're going to source these out again. And these time tickets are going to help us to know exactly how much to apply to these particular jobs. And again, this could get kind of complicated, because we might have multiple people at multiple different billable rates. And of course, a computer system can help us out with this. But at the minimum, we need the date and we need the cost that we're going to have for the hours that will be worked. And the hours worked, we might be charging just per hour on our direct labor. It's basically the payroll that we have here. We're processing the payroll and allocating the payroll not to an expense as we process it, but to whatever job we're applying to. And then we've got the overhead, which is always the most confusing part, both to us creating it. And when we try to explain something like this to a customer, how much it costs us, and the overhead, we're going to have a predetermined overhead rate. And here, we're going to say it's 160% of direct labor and shipping labor costs. And notice that it has nothing to do with labor in particular, but labor can be used as a way for us to know how big one job is compared to another. So for example, if total labor was 1000 for this job, and it's 2000 for the second job, that might be a good way for us to say, well, that means that we should be applying twice as much of overhead to the second job, not because there was more labor, but because the more labor indicates that it's a bigger job. So we're using direct labor as an indicator to allocate the overhead. We'll talk more about that allocation and how that works, how we get to this number here, but just note that the overhead is going to have to do with everything else that's involved. So if we make the guitar, everything in the factory. So the depreciation on the factory, the, you know, the any small materials that we use in the factory, the indirect labor in the factory, the indirect material in the factory, anything, utilities in the factory, anything in the factory. And then if we sum these up, then we got the materials, we've got the labor, and we've got the overhead, that's going to be our total cost. Now, if you look at this, you might say, hmm, this looks a lot like an invoice or like a bid that we might make on, say, like a construction company or something like that. And it is very similar, but note that this is tracking the, the basically the actual costs here. So this isn't a bid, which would look the same, but it would be before, you know, before we do any work. This is basically the actual cost as close as we can. Of course, this is an estimate over here in the overhead, but this is the actual cost. And note that a bid or an invoice won't stop here because this is only the cost. We might include this in our invoice. We might tell our customers, Hey, here's our invoice. The materials cost is the labor cost is the overhead cost. This, this is our best calculation of what the cost is. And our markup is whatever it is, right? If we have a 30% markup, we might say that then how much are we charging you 3266 times a 30% mark 1.3 and then get the amount that we're going to bill. So this might be the start to the bill, in other words, but then we're going to say that based on that, we're going to give our markup. And this is the actual amount that, that we might have say, if we were using this to create a bill. So note that, of course, if we had a process in a construction company, if it was a big job, we would probably set a price at the beginning based on an estimate that would be similar to this, but it would all be estimates. And then we might tell our customer that we're either going to, you know, abide by the estimate or we are going to make adjustments if the costs run over the estimate. And then once we have the end product here, here's the end product, here's our end cost. We might use this then for the invoice, basically, and mark it up. So this looks similar to the invoice, but this might be used for invoicing a similar type of process, but this is going to be the actually used for the allocation of the job. What we will definitely use this for is when we sell this, if this was a guitar or something, if this was a job, once the job is done, once we sell the inventory at the end, then we will debit accounts receivable or cash or credit sales, not for this number, possibly for that other number that we just looked at. But then this number will be used to debit cost of goods sold the expense on the income statement, the cost of the inventory we used, and then we'll credit the inventory lowering the finish goods inventory by this amount. Also note that this is only one job here. So when we think of the working process account, what's reported on the balance sheet in working process, it's going to be the sum of all these jobs. So this would be like one customer, this amount would be like similar to one customer on the accounts receivable subsidiary ledger. And we'd have to add up all the customers to get to the number on the balance sheet. This is like one job on our job sheets. And we would have to add up all the jobs that are open that haven't been finished yet in order to add up to what is being included on the balance sheet in working process.