Unit 4: Job Costing Cost Accounting By:Jyotsna Khaitan There are - - PowerPoint PPT Presentation
Unit 4: Job Costing Cost Accounting By:Jyotsna Khaitan There are two types of manufacturing concerns; 1) Mass production concerns: They produce uniform standard products involving the same type of raw-materials and labour and pass through the
There are two types of manufacturing concerns; 1) Mass production concerns: They produce uniform standard products involving the same type of raw-materials and labour and pass through the same set of processes. For eg.; paper manufacting, flour mills, etc. 2) Special order concerns: They manufacture products in distinguishable lots in accordance with special orders and individual specifications. For eg.; Printing shops, wood working shops, etc.
In such cases separate job-card or cost-sheet is maintained for each product or job, in which all expenses of materials, labour,
completing a job is calculated. Such a cost system is known as Specific Costing or Job Costing. In case of special-order concerns, products-produced or jobs- undertaken may be of diverse nature. Different products and jobs may involve materials and labour of different quantities and different amounts of overhead costs.
Following information has been extracted from costing records of ABC Engineering Works in respect of Job No. 12: Materials:
Wages : Department A 60 hrs @ Rs. 3 per hour Department B 40 hrs @ Rs. 2 per hour Department C 20 hrs @ Rs. 4 per hour Overheads for three departments are estimated as follows: Variable Overheads: Department A
Department B
Department C
Fixed Overheads: Estimated at Rs. 10,000 for 10,000 normal working hours. You are required to calculate the cost of Job No. 12 and calculate the price to be charged so as to give a profit of 20% on the selling price.
Particulars Amount (Rs. ) Amount (Rs. ) Direct Materials 3,450 Wages: Department A – 60 hrs @ rs. 3/hr Department B – 40 hrs @ rs. 2/hr Department C – 20 hrs @ rs. 4/hr 180 80 80 340 PRIME COST 3,790
Particulars Amt (Rs) Amt (Rs.) Direct Materials 3,450 Wages: Department A – 60 hrs @ rs. 3/hr Department B – 40 hrs @ rs. 2/hr Department C – 20 hrs @ rs. 4/hr 180 80 80 340 PRIME COST 3,790 Variable Overheads: Department A – 60 hrs @ re. 1/hr (rate = amt of overheads÷no. of labour hrs = rs. 4,000 ÷ 4,000 labour hrs) Department B – 40 hrs @ re. 2/hr (rate = rs. 3,000 ÷ 1,500 labour hrs) Department C – 20 hrs @ re. 2/hr (rate = rs. 1,000 ÷ 500 labour hrs) Fixed Overheads: 120 hrs @ Re. 1 per hr (fixed overhead rate = amt of estimated fixed overheads ÷ Normal working hrs = 10,000 ÷ 10,000) 60 80 40 180 120 TOTAL COST 4,090 PROFIT 20% on selling price or 25% on cost 1,022.5 SELLING PRICE 5,112.5
Profit = 20% of Selling price Total Cost + Profit = Selling Price Therefore, Total cost + 20% of selling price = selling price Or total cost = selling price – 20% of selling price Or total cost = 80% of selling price Or 4,090 = 80% of selling price SELLING PRICE = (100×4,090)/80 = 5,112.5 PROFIT = 20% of 5,112.5 = 1,022.5