JOB COSTING

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Specific order costing Characteristics of job costing Differentiate between job costing and batch costing Job Cost Sheet

Job Costing

• The specific order costing is an appropriate technique or method for organization which produces cost units which are separately identifiable from each other. • The specific order costing methods consist of Job, Batch and Contract Costing.

Specific Order Costing

Job Costing Concepts • Job costing is define as a form of specific order costing to meet customer’s special requirements in which normally complete within short duration. The work usually carried out within a factory or supplier’s premises or workshop as a continuously identifiable unit.

• Example: Plumbing work, repairing work, tailoring, catering food

Job and Batch Costing Job costing • Individual products designed and produced for individual customers • Production which may NOT held as inventory until sold • Example plumbing work, repairing work, tailoring, catering

Batch costing • Separate, readily identifiable group of product units which maintains its separate identify throughout the production process.

• Production to be held as inventory until sold • Products within each batch are identical but separately identifiable.

Products between batches may vary according to size, style, colour etc • Example car manufacturing, printing of cards, production of pens, pencils, markers

Job Costing Flowchart Direct Material Direct Labour Production Overhead

Work–inprocess

Job 1 Job 2

Finished Goods Inventory

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According to customer’s requirement Completed within short duration Completed at factory or workshop Accumulation of expenditure incurred (material, labour and overhead) for each job • Having a separate cost account or job cost sheet for a separate job • Each job is differ from any other because having their own characteristics

Characteristics Of Job Costing

• Having a separate cost account or job cost sheet for a separate job • Each job is differ from any other because having their own characteristics

Characteristics Of Job Costing

Job Cost Sheet Job Number : JLW 4495 • • • • • • • • • • • •

Direct material cost Direct labour cost Direct expenses PRIME COST Production overhead absorbed PRODUCTION COST Non-production overhead Administration overhead Selling and distribution overhead TOTAL COST Profit mark up or margin SELLING PRICE

RM xx xx xx xxx xx xxx xx xx xx xxx xx xxx

• The objectives of business or company is to gain profit as much as possible.

• The business has to estimate how much is the expected profit to earn from the saleable product or job or services rendered.

• The client or customer has a right to know how much the selling price would be charged on the product and job earlier before making decisions.

• Two method of estimation profit percentage are as follows: i) Profit Mark Up ii) Profit Margin

Profit Percentage

• Based on cost • It could be either production cost or total cost • Usually the selling price charged based on profit mark up is lower than the profit margin because profit charged is lower • Example: • Total Cost RM100,000 • Profit is 20% mark up • Profit = 20/100 x RM100,000 = RM20,000 • Selling Price = Total cost + Profit = RM100,000 + RM20,000 = RM120,000

Profit Mark-up

• Based on sales or selling price • Usually the selling price charged based on profit margin is higher than the profit mark up because profit charged is higher.

• Since the sales figure is the unknown figure, the business has to use the cost figure as the multiplier, so the denominator profit percentage need to be changed to percentage cost (**).

• Example: • Total Cost RM100,000 • Profit is 20% margin • Profit = 20/80 x RM100,000 = RM25,000 • Profit = 20/80 ** x RM100,000 = RM25,000 • Selling Price = Total cost + Profit = RM100,000 + RM25,000 = RM125,000

Profit Margin

• To record all cost incurred for a job • A source of information for estimating the required cost for new job • A basis to analyze cost • A basis to determine selling price and profit

Function Of Job Cost Sheet