Recording Non-manufacturing Costs in a Job Order Costing System

Recording Non-manufacturing Costs in a Job Order Costing System:

In addition to manufacturing costs, companies also incur marketing and selling costs. These costs should be treated as period expenses and charged directly to the income statement and therefore should not go into the the manufacturing overhead account.


To illustrate the correct treatment of non-manufacturing costs, assume that a company incurred $30,000 in selling and administrative salary costs during a months, the following entry records these salaries.

Salaries expense 30,000 Dr.
Salaries and wages payable 30,000 Cr.

Depreciation on factory equipment is debited to manufacturing overhead account but depreciation on office equipment is considered a period expense and is not included in manufacturing overhead. Assume that depreciation of office equipment during the month was $7,000. The entry is as follows:

Depreciation expense 7,000 Dr.
Accumulated depreciation 7,000 Cr.

Finally assume that advertising was $42,000 and that other selling and administrative expenses during the month was $8,000. The following journal entry records these items:

Advertising expenses 42,000 Dr.
Other selling and administrative expense 8,000 Dr.
Accounts payable 50,000 Cr.

Since the amounts in entries above all go directly into expense accounts, they will have no effect on the costing of the company’s production for the month. The same will be true of any other selling and administrative expenses incurred during the month including sales commission, depreciation on sales equipment, rent on office facilities, insurance on office facilities, and related costs.

You may also be interested in other useful articles from “job order costing system” chapter:

  1. Measuring Direct Materials Cost in Job Order Costing System
  2. Measuring Direct Labor Cost in Job Order Costing System
  3. Application of Manufacturing Overhead
  4. Job Order Costing System – The Flow of Costs
  5. Multiple Predetermined Overhead Rates
  6. Under-applied overhead and over-applied overhead calculation
  7. Disposition of any balance remaining in the manufacturing overhead account at the end of a period
  8. Predetermined Overhead Rate and Capacity
  9. Recording Non-manufacturing Costs
  10. Recording Cost of Goods Manufactured and Sold
  11. Job Order Costing in Services Companies
  12. Use of Information Technology in Job Order Costing
  13. Advantages and Disadvantages of Job Order Costing System
  14. Job Order Costing Discussion Questions and Answers
  15. Job Order Costing Exercises
  16. Case Studies

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