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Job costing

Job costing. 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

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Job costing

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  1. Job costing

  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

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

  4. Which one better? • Normal product costing and standard costing are preferable

  5. 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

  6. Flow chart direct Work In Progress indirect Delivery of materials to job indirect direct Payment of wages to workers Charging of applied overhead Costs to work in progress sold Cost of sales

  7. Example Refer to textbook P.198

  8. Job Account Job 682 Bal b/f 2310 Job 683 a/c – material transfer 900 Material return 1600 Materials 9780 Wages 3000 Factory overhead (3000*50%) 1500 Cost of sales 14090 16590 16590 Job 683 Materials 7480 Wages 4000 Factory overhead (4000*50%) 2000 Job 683 a/c – material transfer 900 Material return 1600 Cost of sales 14090 Job 682 a/c – material transfer 900 Job 684 a/c – Material transfer 500 14880 14880

  9. Job 684 Materials 7900 Wages 2500 Factory overhead (2500*50%) 1250 Job 683 a/c – material transfer 500 Cost of sales 11150 11650 11650 Job 685 Materials 8840 Wages 2500 Factory overhead (2500*50%) 1250 Material return 340 Cost of sales 12250 12590 12590

  10. Job Cost Sheet 1260+9780-900-1600 Job 682 Job 683 Job 684 Job 685 Materials 8540 8880 7400 8500 Wages 3700 4000 2500 2500 Factory overhead 1850 2000 1250 1250 Factory cost 14090 14880 11150 12250 Adm. Overhead (20%) 2818 2976 2230 Cost of sales 16908 17586 13380 Sales value 21000 24000 16000 Profit/ (Loss) 4092 6144 2620 3000+700 1500+350

  11. Control Accounts Store ledger control account Bal b/f 8400 WIP control (issue direct material 34000 Factory O/H control (issue indirect Material 3000 Cost ledger control (purchase) 31000 WIP control (material return to store) 1940 Bal c/f 4340 41340 41340 Wages control account Cost ledger control ((wages paid) (12000+1000) 13000 WIP control (direct labour) 12000 Factory O/H control ( indirect Labour) 1000 54310 54310

  12. Estimated overhead absorbed Actual overhead Factory overhead control account Store ledger control (indirect) 3000 Wages control (indirect) 1000 WIP control (12000*50%) 6000 Cost ledger control - Factory indirect exp. 2600 Under-absorbed overhead 600 6600 6600 Work in progress control account Bal b/f 2310 Store ledger control – return 1940 Cost of sales (14090+14880 +11150) 40120 Store ledger control (direct) 34000 Wages control (direct) 12000 Factory O/H (O/H absorbed) 6000 Bal c/f 12250 54310 54310

  13. Estimated overhead absorbed Actual overhead Admin & marketing overhead control account Cost ledger control (actual) 7950 1000 Cost of sales 8024 (2818+2976+2230) Over-absorbed overhead 74 8024 8024 Under - / Over- absorbed overhead control Factory overhead control - Under absorbed 600 Admin & Marketing overhead - Over absorbed 74 Costing profit and loss 526 600 600

  14. Cost of Sales WIP control 40120 Admin & marketing O/H 8024 Costing profit and loss 48144 481444 48144 Costing profit and loss Cost of sales 48144 Under-absorbed overhead 526 Cost ledger control – sales 61000 Cost ledger control – net profit 12330 61000 61000 Cost ledger control account Costing profit and loss - sales 61000 Bal b/f 10710 Store ledger control 31000 Wages control 13000 Factory overhead control 2600 Admin & Marketing O/H control 7950 Bal c/d (12250 + 4340) 16590 Consolidated profit and loss 12330 77590 77590

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