JOB COSTING

METHODS OF COSTING

Job order costingContract costing or terminal

costingBatch costingProcess costingOperation costingSingle or unit costingService costingComposite costing

SINGLE OR UNIT COSTING

It is applied where the organisations produce single product and the whole production involve in manufacture of single product.

In unit costing, cost is collected elementwise like Direct Materials, Direct Labour, Prime cost, Factory Overhead, Administration Overhead, Selling and Distribution Overhead etc.

Cost per Unit = Total cost for the period

Number of Units produced during the Period

JOB COSTING & BATCH COSTING

Job costing: A Job is a specific order for work usually carried out within a factory or workshop and moves through activities and operations as a continuously identifiable unit. For ex-

Engineering jobs, Printing jobs, ship building, Furniture making etc

Batch costing: The batch costing is used when a quantity of similar and identical products are manufactured together as one Job. The batch costing is used in Printing, Packaging, Automobile and engineering components, Textiles etc

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COST FLOWCHART

BalanceSheet

IncomeStatement

InventoriableCosts

DirectMaterials

Purchases

Other DirectManufacturing

Costs

ManufacturingOverhead

Costs

DirectMaterialsInventory

Work-in-ProcessInventory

Revenues

Cost ofGoodsSold

R&D CostsDesign Costs

Marketing CostsDistribution CostsCustomer-Service

Costs

PeriodCosts

FinishedGoods

Inventory

Equals OperatingIncome

Stored

Incurred

Applied

Completed

SEVEN-STEP JOB COSTING

1. Identify the Job to be costed2. Identify the Direct Costs of the Job3. Select the Cost-Allocation base(s) to

use for allocating Indirect Costs to the Job

4. Match Indirect Costs to their respective Cost-Allocation base(s)

SEVEN-STEP JOB COSTING (CONTINUED)5. Calculate an Overhead Allocation

Rate:• Actual OH Costs ÷ Actual OH Allocation

Base

6. Allocate Overhead Costs to the Job:• OH Allocation Rate x Actual Base Activity For the Job

7. Compute Total Job Costs by adding all direct and indirect costs together

JOB COSTING OVERVIEW

The Cost Object:

Job #123

DM $100DL $200OH $50

Total Cost:$250

Direct Materials:$100

Direct Labor:$200

Indirect Cost Pool:All Manufacturing

Costs

$1,000

IndirectCost-Allocation

Base:Direct

ManufacturingLabor-Hours

100 hours

OverheadAllocation

Rate:

$1,000 ÷100 DLhrs

=$10/DLhr

OverheadApplied toJob #123:

$10/DLhrX

5 hours used in

Job #123=

$50

COST SHEET FOR THE YEAR ENDED….

Particulars of Cost Amount (Rs.) Per Unit (Rs.)

Opening Stock of Raw Materials xxxAdd: Purchase of raw materials xxxAdd: Direct expenses related to purchase of raw material xxx xxx less: closing stock of Raw mat. xxxRaw Materials consumptionDirect LabourDirect ExpensesPrime costAdd: Factory OverheadsAdd: Opening Work-in-progressLess: Closing Work-in-progressFactory Cost Add: Administration OverheadsCost of ProductionAdd: Opening Stock of Finished stockLess: closing stock of Finished stockCost of Goods SoldSelling and Distribution OverheadsCost of Sales

xxxXxxxxxXxxXxxXxxXxxXxxXxxXxxXxxXxxXxxXxxXxx

XxxxXxXxXxXxXxXxXxXxXxXxXxXxXx

Profit or Loss Xxx Xx

Sales xxx xx

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COST OF GOODS MANUFACTURED

Direct Materials: Beginning Inventory, January 1 11,000$ Add: Purchases 73,000 Cost of Direct Materials Available for Use 84,000 Less: Ending Inventory, December 31 8,000 Direct Materials Used 76,000Direct Labor 9,000Prime Cost 85,000Manufacturing Overhead: Indirect Labor 7,000 Supplies 2,000 Heat, Light & Power 5,000 Depreciation - plant building 2,000 Depreciation - plant equipment 3,000 Miscellaneous 1,000 Total Manufacturing Overhead Costs 20,000Manufacturing costs incurred during 2007 190,000Add: Beginning WIP, January 1 6,000Total Manufacturing Costs to account for 196,000Less: Ending WIP, December 31 7,000

Cellular ProductsSchedule of Cost of Goods Manufactured

For the Year Ended December 31, 2007 (in thousands)Calculates the cost of Direct Materials UsedAccumulates the three product costs for the current period

Adjusts the current period manufacturing costs to account for units actually completed

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INCOME STATEMENT

Revenues $210,000Cost of Goods Sold Beginning Finished Goods, January 1 22,000 Cost of Goods Manufactured 104,000 Cost of Goods Available for sale 126,000 Ending Finished Goods, December 31 18,000 Cost of Goods Sold 108,000Gross Profit 102,000Operating Costs: Marketing, distribution, and customer-service 70,000 Total operating costs 70,000Operating Income $32,000

Cellular ProductsIncome Statement

For the Year Ended December 31, 2007 (in thousands) Figure carries forward from the Schedule of Cost of Goods ManufacturedPeriod Costs are expensed as incurred