Written as an equation, job costing is calculated like this:
1. Total Job Cost = Direct Materials + Direct Labor + Applied Overhead.
2. Predetermined Overhead Rate = Estimated Overhead / Estimated Activity.
3. Total Job Cost = Direct Materials + Direct Labor + Applied Overhead.
Explanation:
Calculate the direct labor hours
The direct labor hours are the number of direct labor hours needed to produce one unit of a product. The figure is obtained by dividing the total number of finished products by the total number of direct labor hours needed to produce them.
