It is a part of the cost accounting where the amount of work done is calculated on the basis of number of jobs completed. It is a method which calculates expenses and revenue by ‘jobs’. Job order costing or job costing is a system for assigning manufacturing costs to an individual product or batches of products. For example- Industries like Printing Press, Automobile Garage, Repair workshops, Ship Building, Foundry and other similar manufacturing units.
In the Job Costing, cost is not taken on singular basis but as a bulk of objects. Job costing involves direct material, labor and expenses, commonly known as prime cost and also other overheads used for factory, office and selling.
1) Receiving an enquiry- Customers generally do not give orders without examining the various aspects of the company and product. They usually study the rates, about the manufacturer, quality and then they make a decision. So, in the first step, they receive enquiries from the customers regarding the product.
2) Estimation of the price of the job- Cost of the job is ascertained by keeping the needs and preferences of the customer. Another factor is that, they also keep in track of the change in the cost of the materials, especially in the recent years and specify the difference in cost.
3) Receiving of Order- If the customer is satisfied with the job costs, he will place the order.
4) Production order- After accepting of the job, production order will be issued to the subsidiaries, which mean the starting up of production. It is a set of instructions directed towards the foreman directing when and how the job should be done and how much should be completed in a day.
5) Recording of Costs- In this step, the costs are recorded and collected for each kind of job.
6) Completion of Job- At the time of the completion, a report will be given to the accountant where the final calculation of the cost takes place.
7) Profit and Loss- After the completion of job, a report will be sent to the accountant department where the actual expenditure on the job will be calculated. After the calculation of actual expenditure, it will be compared with the estimated expenditure of the job, so as to calculate the profit and loss of the company.
|Particulars||Dept A||Dept B||Total For Factory as a whole|
|Direct Labor Hours||10000||14500||31,000|
|Budgeted Variable O/H||14500||17200|
|Budgeted Fixed O/H||-||-||31,000|
Details of Job Cost
Direct Materials: a) Cast Iron- 15 kg @ $4 per kg b) Gun Metal- 5 kg @ $12 per kg Direct Labor Hours: Dept A- 20 hrs @ $2 per hour Dept B- 15 hrs @ $1 per hour Direct Expenses- Special tools $40 (to be paid by customer)
Job Cost Sheet
|Cost Iron||15 kg||4||60|
|Gun Metal||2 kg||12||24||84|
|Dept A||20 hrs||2||40|
|Dept B||15 hrs||1||15||55|
|Add: Variable O/H|
|Dept A (14500/10,000) x 20 hours||20 hrs||1.45||29|
|Dept B (17200/14500) x 15 hours||15 hrs||1.19||17.85|
|(31000/31000) x 35 hours||35 hrs||1||35||81.85|
|Add: Profit @ 20% on sales or 25% on cost||65.21|
|Total amount to be charged||326.06|
Assignment Writing Help
Engineering Assignment Services
Do My Assignment Help
Write My Essay Services