Job Order Costing

Costing System

A costing system determines and reports to the management total unit cost of the product with details of cost components.

Job Order Costing

The costing system that separately accumulates cost of each Job, i.e. each Job is distinguishable from the other Job throughout the production process.

Examples of Organizations employing Job Order Costing:

·         Accounting Firms

·         Furniture Manufacturing

·         Civil Engineering

·         Medical Care

·         Printing Press

·         Ship Building

·         Jewellery Manufacturing

·         Movie Studios

·         Repair Shops

Batch Costing

Batch costing is employed where the job consists of a group of identical units and job is separately identifiable throughout the production process, i.e. cost is accumulated for the whole batch and not for a single unit.

Examples of Organizations employing Batch Costing:

  • Shoe Industry
  • Ready-made Garments
  • Bakeries
  • Pharmaceuticals

Job Order Costing Procedure:

  1. Estimation of Cost likely to be incurred to complete the Job. On the basis of estimated cost, price is quoted.
  2. When customer’s order is finalized, Production Planning and Control Department takes the first step towards the execution of the Order.
  3. On receipt of production Order, Costing Department prepares a job cost sheet for each job.

Job Cost Sheet:

A document used for accumulating costs incurred to complete a job. A Job Cost Sheet is designed to show the following Information:

1. Job Number

2. Name of the customer

3. Description of Job

4. Date of Commencement of Job

5. Date of completion of job

6. D. Material issued

7. Direct Labour Cost Incurred           

8. FOH Applied to Job

9. Total Cost of Job

10. Selling and Admin.expenses chargeable to job. 

11. Sales price of Job and profit thereon 


QUESTIONS

Question 1

Following information is related to Haroon Manufacturing Company for the Job # B-1500 which consisted of 1500 table lamps.

Direct material:

December 1 2022. Req. # 100:  1000 meters of Aluminum sheet @ Rs. 250 per meter.

December 15 2022. Req. # 101: 500 KG of special plastic @ Rs. 125 per KG.

Direct labor:

December 10 2022: Time card number 200: 1400 hours @ Rs. 35 per hour.

December 25 2022: Time card number 201: 1600 hours @ Rs. 33 per hour.

Factory overheads:

FOH is applied on the basis of direct labor hours @ Rs. 11.90 per hours.

Machine was used for 9000 hours in the month of December 2004.

On December 31, 2022;  1200 of the table lamps were shipped to a local electric shop @ Rs. 425 per lamp.

Required: Job Cost Sheet.

 

Question 2     

Khan & Company collects its cost data by the job order cost accumulation procedure for job # 333, the following data are available.

Total units in the job:              980 units

Direct Material:

14/6/2023        210 units were issued @ 50 per unit               Rs. 10,500

20/6/2023        115 units were issued @ 50 per unit               Rs.   5,750

23/6/2023        84 units were issued @ 50 per unit                 Rs.   4,200

Direct Labor:

Week of June 14                     630 hours @ 21 per hour

Week of June 20                     490 hours @ 24 per hour

FOH:

Factory overheads were applied at the rate of Rs. 8.5 per direct labor hour.

Marketing and Administration expenses:

Marketing and Admin. Expenses in the month of June were Rs. 18,620.

Note:  

At 25th June job is complete and 75% of total production is sold and shipped @ 95 per unit.

Required: Prepare job cost sheet.     


Question 3

Following information is related to Haroon Manufacturing Company for the job # B-1300 which consisted of 1500 table lamps.

Direct Material:

January 1, 2023. Requisition number 001: 1000 yards of aluminum sheets at Rs. 200 per yard.

January 10 2023. Requisition number 002: 500 KG of special plastic at Rs. 100 per yard.

Direct Labor:

January 15 2023. Time card number 001: 1500 hours at Rs. 30 per hour.

January 31 2023. Time card number 002: 1500 hours at Rs. 30 per hour.

Manufacturing overhead:

Applied on the basis of machine hours at Rs. 5 per hour.

Machine was used for 9000 hours in the month of January 2023.

On January 31, 2023,  950 table lamps were shipped to a local electric shop @ Rs. 400 per lamp. The remaining stock was also shipped on the same day to another local electric shop @ Rs. 425 per lamp.

Marketing expenses for the month of January 2023 were Rs. 20,000.

Administration expenses for the month of January 2023 were Rs. 30,000.

Required:

Prepare a job cost sheet and record the information given above.

 

Question 4

Suraj manufacturing Company incurred the following costs to produce job number X-100, which consisted of 300 Iron tables. Job started at March 1 2023 and completed at March 31 2023.

Direct Material:

March 2, 2023, Requisition number 101:  1000 meters of Grade 1 Iron sheet @ Rs. 150 per meter.

March 15, 2023,  Requisition number 102:   500 meters of Grade 2 Iron sheet @ Rs. 115 per meter.

Direct Labor:

March 10,  Time Card Number 201: 250 hours at Rs. 50 per hour

March 20,  Time Card Number 202: 300 hours at Rs. 45 per hour

March 30,  Time Card Number 203: 450 hours at Rs. 60 per hour

Manufacturing Overhead:

Applied on the basis of direct labor hours at Rs. 20 per hour.

On March 31, 250 tables were shipped to a local customer at Rs. 1600 per table. Marketing & Administration Expenses were Rs. 200 per table.

Required: Prepare Job cost Sheet.


SOLUTION