 materials we may track by the date that we 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 on a particular job we're going to want the date and then we're going to want the 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 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 in the hours worked we might be charging just per hour on our on our 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 say is a we're going to have a predetermined overhead rate and here we're going to say it's 160 percent of direct labor and shipping flavor costs and notice that 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 you know 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 something to allocate the overhead we'll talk more about that allocation and how that how that works how we get to this number here but just note 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 that's 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've 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 and 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 this 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 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 and 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 it 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 as far as when we sell this if this was a guitar or something if this was the job once the job is done once we sell the inventory at the end then we will debit accounts receivable or cash we'll 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 good sold the expense on the income statement the cost of the inventory we used and then we'll credit the inventory lowering the finished goods inventory by this amount also note that this is only one job here so when we think of the work in process account what's reported on the balance sheet in work in 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 work in process