by sachin sharma manipal jaipur

1. JOB COSTING
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2. 2
Job Costing
 Job costing is a product costing method
adopted by an enterprise that provides limited
quantities of unique products
 This kind of enterprise produces tailor-made
goods or services that conform to the
specifications designed by customer
 Costs can be determined separately for each
job order
 Businesses that use job order cost system
includes construction companies, furniture &
carpenters, jewellery, artwork, print shops,
etc.

3. 3
Costing under three different
method
 Actual costing
 Normal costing
 Standard costing

4. 4
Costing system Production cost
Actual costing Actual direct materials +
Actual labour + Actual
overhead
Normal costing Actual direct material +
Actual direct labour +
Applied overhead (i.e.
Per-determined overhead
rate * Actual level of
productivity)
Standard costing Standard direct material
+ standard direct labour +
applied overhead

5. 5
Which one better?
 Normal product costing and standard
costing are preferable

6. 6
Reasons
 Under actual costing, the product cost will be
delayed until the end of the accounting
period. However, the product cost should be
obtained beforehand for setting selling price
 Since monthly productivity may vary due to
holiday periods and seasonal variation, actual
overhead is fluctuating and cannot reflect
normal production conditions

7. Job Order Cost Sheet
Customer:____________ Job Order#:____________
Product:______________ Date Started:____________
Quantity:______________ Date Completed:_________
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Direct Material Direct Labour Factory Overhead
Date Type Amount Date Hour Amount Date Amount
Cost Summary
Actual Unit Cost Budgeted Unit Cost Variance
Direct Material
Direct Labour
Factory Overhead ______________ ____________ ____________
Total Job ________ ____________ ____________ _________
Explanation Of Variance:

8. Case-I
Asian Paints uses job order costing. On 1st
Jan 2006, the
following jobs were in process:
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Job Job AB Job CD Job XY
Direct Material 5000 8000 3000
Direct Labour 3000 5000 2000
Factory Overhead 2000 2000 1500
10,000 15,000 6,500
The company has incurred the following additional costs to complete the job:
Direct Materials: Rs12,000 allocated as follows: JoB AB (40%), Job CD (40%)
and Job XY (20%).
Direct Labour additional per job Rs. 5000. Factory Overhead: 10% of direct
labour. Unit selling price: Job AB – Rs2.70, Job CD - 3.00 and XY is Rs. 2.30.
Assume that total unit cost per job is Rs. 2.50. (a) Calculate the number of units
completed on each job and (b) Compute the profit or loss on each job.

9. Case-2
ABC Engineering is a manufacturing firm that uses a job
order cost system and applies factory overhead to
production order on the basis of direct labour costs. The
overhead rates for year 2006 are 160% for Department
A and 80% for Department B. Job MN started and
completed during 2006, were charged with the following
costs:
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Particulars Department A Department B
Direct Materials
Direct Labour
Factory Overhead
55,000
?
40,000
15,000
20,000
?
Determine the total manufacturing cost assigned to Job MN.

10. Solution
Particulars Dept. A
(Rs.)
Dept.B
(Rs.)
Total
(Rs.)
Direct Material
Direct Labour
Factory Overhead
Total Manufacturing Cost
55,000
25,000
40,000
1,20,000
15,000
20,000
16,000
51.000
70,000
45,000
56,000
1,71,000
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Manufacturing Costs assigned to Job MN:
Working Note:
Factory Overhead rates for Dept. A is 160% of Labour Cost
i.e Rs, 40,000 * 100/160 = 25,000
Factory Overhead rates for Dept. B is 80% of Labour Cost i.e
Rs, 20,000 * 80/100 = 16,000

11. Case-3
The information given as under relate to Job No. 222.
Some selected sales and cost data are also given below;
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Particulars Amount (Rs.)
Direct Material
Direct Labour
Factory Overhead (All indirect, 50% variable
Selling & Distribution Expenses (50% Direct, 70%
variable)
4,00,000
5,00,000
3,00,000
1,00,000
Compute the following: (a) Prime Cost, (b) Conversion
Cost, (c) Direct Cost, (d) Indirect cost, (e) Product Cost,
(f) Period expense, (g) Variable Cost, (h) Fixed Cost

12. Solution
(a) Prime Cost = Direct Material Used + Direct Labour
= Rs. 4,00,000 + Rs. 5,00,000 = Rs. 9,00,000
(b) Conversion Cost = Direct Labour + Factory Overhead
= Rs. 5,00,000 + Rs. 3,00,000 = Rs. 8, 00,000
(c ) Direct Cost = Direct Material + Direct Labour + 50% Selling &
Distribution Overhead
= Rs. 400000+Rs. 5,00,000 + Rs. 50,000 = Rs. 9,50,000
(d) Indirect Cost = 100% Factory Overhead+ 50% S&D
= Rs. 3,00,000 + Rs. 50,000 = Rs, 3,50,000
(e) Product Cost = DM+ DL + Factory Overhead
= Rs. 400000+ Rs. 5,00,000 + Rs. 3,00,000= Rs.12,00,000
(f) Period Expenses = S & D Expenses = Rs. 1,00,000
(g) Variable Cost = DM +DL + 50% of Factory Overhead+ 70% S&D
= Rs. 400000+ Rs. 500000 + 150000+ Rs,70,000 = Rs. 11,20,000
(h) Fixed Cost = 1,50,000 + Rs. 30,000 = Rs. 1, 80,000
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13. Case-4
Sun Pharmaceuticals is manufacturing a range of
products. The work in the factory has to pass through
two divisions, namely, Division A and Division B.
Division A had 9,000 units in process on June and
4,500 in process on 30th
July. During the month, 10,500
units were transferred to Division B for further
processing. There were 2,000 completed units on hand
at the end of month.
(a)Compute the number of units in process during July.
(b)Prepare a quantity schedule for Division A.
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14. Solution
(a) Let X = the number of units started in the process
Thus, Units in process at beginning + Units started in
process = Units transferred to Division B + Units still in
the process + Completed (closing stock) units at the end
9000 + X = 10,500 + 4,500 + 2000
X = 8,000
(b) Quantity Schedule for Division A
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Particulars Units Units
Units in process at beginning
Add: Units started in process
Units transferred to Division B
Units still in process at the end
Completed units at the end
9,000
8,000
10,500
4,500
2,000
17,000
17,000

15. Case-6
The following information for the year ended 31st
Dec is
2001 is obtained from the books of M/s XYZ Ltd.
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Particulars Completed
Jobs
Work-in-
progress
Raw material supplied from store 90,000 30,000
Wages 1.00,000 40,000
Chargeable expenses 10,000 4,000
Materials transferred to WIP 2,000 2,000
Materials returned to stores 2,000
Factory overhead is 80% of wages and office overhead is
25% of the factory cost.
The value of the executed contract during 2002 was Rs.
4,10,000. Prepare (a) Consolidated Completed Jobs Account
(b) Consolidated WIP Account

16. Solution
Consolidated Completed Jobs Account
To raw material 90,000 By material trnf 2,000
To wages 1,00,000 By material returned 1,000
To chargeable exp 10,000 By prime cost c/d 1,97,000
2,00,000 2,00,000
To prime cost b/d 1,97,000 By contractee’s a/c 4,10,000
To Factory overhead 80,000
Factory Cost 2,77,000
To office overhead 69,250
(25% of FC) _________
Total Cost 3,46, 250
To Profit 63,750
________ 4,10,000
4,10,000
Similarly prepare WIP a/c
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17. Case -7
A factory uses job costing system. The following cost
data are available from the books for the previous year;
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Direct material Rs. 9,00,000 Selling & Dist. overheads Rs. 5,25,000
Direct wages Rs. 7,50,000 Administrative Overheads Rs. 4,20,000
Profit Rs. 6,09,000 Factory Overheads Rs. 4,50,000
a) Prepare a cost sheet indicating the prime cost, works cost, cost of
production cost, cost of sales and sales value.
b) In the next year, the factory had received an order for a number of
jobs. It is estimated that the direct material would be Rs. 12,00,000
and direct labour would cost Rs. 7,50,000. What would be the price
of these jobs if the factory intends to earn same rate of profit on
sales assuming that S & D overheads has gone up by 15%. The
factory recovers factory overhead as % of direct wages and Adms &
S& D overhead as a percentage of works cost, based on the cost
rates prevalent in the previous year.

18. Case-8
The following records have been extracted from the cost records
of ABC Engineering in respect of Job No. 1012.
Direct Material – Rs. 5,800
Direct Wages – Dept. A- 100 hrs @ Rs. 5 per hr.
Dept. B – 200 hrs @ Rs. 3 per hr.
Variable Overheads – Dept. A – Rs. 10,000 for 5,000 direct
labour hrs
Dept. B – Rs. 30,000 for 10,000 direct labour hrs
Fixed overhead is estimated at Rs. 50,000 for 50,000 normal
working hours.
Calculate cost sheet of Job No. 1012 and calculate the price to
be charged so as to give 20% profit on selling price.
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