2. INTRODUCTION
Job costing is defined as form of specific order costing
applies where work is undertaken to customers’ special
requirements and each order is completed in short
duration.
The job is usually carried out within a factory or
workshop and moves through processes and operations
as a continuously identifiable unit.
E.g. making of coats, jacket, costumes, furniture and etc.
3. SPECIFIC ORDER COSTING
The job consists of separate contracts,
job or batches.
Divided into:
1. Job costing
2. Batch costing
3. Contract costing
4. CONTINUOUS OPERATION
COSTING
Result from a sequence of continuous
/repetitive operations.
The cost is charged before being
averaged over the unit produced.
The costs is charged to a department
process & not directly to cost unit.
5. JOB COSTING
Essential features are:
• Job order according to customer’s
requirement compare to contract
costing.
• Short duration compare to contract
costing.
• Completed at factory/workshop.
• Each job can be accurately identified.
6. JOB COSTING
Essential features are:
• Each job can be accurately identified.
• Direct costs are charged to individual
jobs.
• Example of business that use job
costing are repairs, advertising
agency, assembly of individual aircraft,
construction of ships & promotion of
new products.
7. BATCH COSTING
Essential features:
Customers orders a quantity of
identical units.
The costs are accumulated as for
particular job & one batch is one job
order.
The recording of costs is done in
batch cost card.
8. PROCEDURES FOR JOBBING
WORK
1. The prospective client will approach the supplier and
indicates his requirements.
2. Supplier will record the details such as quantity, quality,
size, colour, date and etc.
3. Supplier will calculate the estimate of the cost, the profit
margin and selling price.
4. If the client agrees with the price, the job will be carried out
with specific job order reference number. (E.g. Job 709)
9. PROCEDURES FOR JOBBING
WORK
5. The factory floor will prepare Material Requisition Notes
(MRN) to request the materials from the store. Purchase
Requisition Notes (PRN) will be issued to the purchasing
department for special materials or equipment needed.
Job cost card /sheet will be set out to perform the jobbing
work.
6. When all materials, labour and equipment available in the
factory, then the job can be started.
10. JOB COST STATEMENT
To record costs/charges such as
material, labor and other expenses.
To record overhead costs by using
pre-determined absorption rate.
11. Format for Job Cost
Statement
RM
DIRECT COSTS:
DIRECT MATERIAL XX
DIRECT LABOUR XX
DIRECT EXPENSES XX
PRIME COST (DM+DL+DE) XXX
12. Format Job Cost Statement
RM RM
PRIME COST
XXX
INDIRECT COSTS:
INDIRECT MATERIAL XX
INDIRECT LABOUR XX
INDIRECT EXPENSES XX
PRODUCTION OVERHEAD (IM + IL + IE ) XXX
TOTAL PRODUCTION /FACTORY PROFIT XXX
(PRIME COST + PROD.OVERHEAD)
13. Format Job Cost Statement
RM
PRODUCTION COST/FACTORY PROFIT
XXX
NON-PRODUCTION COST
FINANCE COST XX
ADMINISTRATIVE COST XX
SELLING & DISTRIBUTION XX
NON-PROD.COST (FC +AC+SD) XXX
TOTAL COST XXX
(PROD.COST + NON-PROD COST)
PROFIT XXX
SELLING PRICE XXX
14. SUMMARY OF FORMULA
Prime Cost = Direct Materials + Direct Labour +
Direct Expenses
Production Cost = Prime Cost + Production
Overhead
Total Cost = Production Cost + Non-
Production Overhead
Selling Price = Total Cost + Profit
15. HOW TO CALCULATE PROFIT?
There are 2 methods:
1. PROFIT MARK UP
PROFIT IS CALCULATED BASED ON TOTAL
COST.
For example:
Total Cost =RM200
PROFIT MARK UP = 20%
PROFIT = TC x PMU = RM200 X 20% = RM40
16. HOW TO CALCULATE PROFIT?
2. PROFIT MARGIN
PROFIT IS CALCULATED BASED ON
SELLING PRICE.
FORMULA:
PROFIT = [%PROFIT MARGIN/(100%-
PROFIT MARGIN %)] X TC
PROFIT= [20%/100%-20%] X RM200 =RM50
17. COMPREHENSIVE
EXAMPLE
Agro Best Bhd produces 2 types of
products named Design A & Design B.
You are required to help the company
to determine the selling price of the
products.
The management has set a profit of
20% on selling price for Design B and
20% on total cost for design A.
18. Given below the information regarding the
prime costs for both products.
ITEM RM PERCENTAGE
USED IN
DESIGN A
PERCENTAGE
USED IN DESIGN
B
MATERIAL A 1500 60% 40%
MATERIAL B 1000 45% 55%
DIRECT
LABOUR
2000 55% 45%
DIRECT
EXPENSES
200 90% 10%
19. Other relevant data are given as follows:
DESIGN A DESIGN B
OVERHEAD
ABSORBTION
RATE
RM5 PER
DIRECT LABOUR
HOUR
RM3 PER
MACHINE
HOURS
DIRECT LABOUR
HOURS
100 HOURS 50 HOURS
MACHINE
HOURS
130 HOURS 170 HOURS
ADMINISTRATIV
E EXPENSES
RM200 RM200
SELLING
EXPENSES
RM150 RM170
20. Required:
Prepare the Job Cost Statement
Calculate the Profit Margin/ Mark-up
Calculate the Selling Price
21. Format for Job Cost
Statement
DESIGN A DESIGN B
(RM) (RM)
DIRECT COSTS:
DIRECT MATERIAL A RM900 600
DIRECT MATERIAL B 450 550
DIRECT LABOUR 1100 900
DIRECT EXPENSES 180 20
PRIME COST (DM+DL+DE)2630 2070
22. Format Job Cost Statement
DESIGN A DESIGN
B
(RM) (RM)
PRIME COST 2630
2070
INDIRECT COSTS:
INDIRECT MATERIAL 0
INDIRECT LABOUR 0
INDIRECT EXPENSES 0
PRODUCTION OVERHEAD 500 510
TOTAL PRODUCTION 3130 2580
(PRIME COST + PROD.OVERHEAD)
23. Format Job Cost Statement
DESIGN A DESIGN B
(RM) (RM)
PRODUCTION COST/FACTORY PROFIT 3130
2580
NON-PRODUCTION COST
FINANCE COST 0
ADMINISTRATIVE COST 200 200
SELLING & DISTRIBUTION 150 170
NON-PROD.COST (FC +AC+SD) 350 370
TOTAL COST 3480 2950
(PROD.COST + NON-PROD COST)
PROFIT 696 737.50
SELLING PRICE 4176 3687.50
24. WORKING TO CALCULATE PRIME COSTS
DESIGN A DESIGN B
DIRECT
MATERIAL (A)
RM1500 X 60%
=RM900
RM1500 X 40%
=RM600
DIRECT
MATERIAL (B)
RM1000 X 45%
=RM450
RM1000 X 55%
=RM550
DIRECT
LABOUR
RM2000 X 55%
=RM1100
RM2000 X 45%
=RM900
DIRECT
EXPENSES
RM200 X 90%
=RM180
RM200 X 10%
=RM20
PRIME COSTS =RM2630 =RM2070
PRIME COST = DM + DL + DE
25. WORKING TO CALCULATE
PRODUCTION OVERHEAD
FORMULA:
OAR X DLH IF BASED ON LABOUR HOURS
OAR X MH IF BASED ON MACHINE HOURS
DESIGN A RM5 X 100 HOURS =RM500
DESIGN BRM3 X 170 HOURS =RM510
26. WORKING TO CALCULATE
PROFIT FOR DESIGN A
PROFIT IS BASED ON TOTAL
COST/MARK-UP.
FORMULA:
PROFIT = TOTAL COST X %
PROFIT
= RM3480 X 20%
= RM696
27. WORKING TO CALCULATE
PROFIT FOR DESIGN B
PROFIT IS BASED ON SELLING
PRICE/PROFIT MARGIN
FORMULA:
PROFIT = [%PROFIT MARGIN/(100%-
PROFIT MARGIN %)] X TC
= 20%/(100%-20%) X RM2950
=( 20%/80% )X RM2950
= RM737.50
