JOB ORDER COSTINGGeneral Objective :
To understand and apply the methods of costing and JOC
Specific objectives :
I. Explain the various methods of costing
2. Define job order costing correctly.
This method is used when work is done according to customer’s order. Each job is often of a short duration.
Work must be planned and scheduled because there is no predetermine pattern of work.
• This method are popular among enterprises that are engaged in house building, Ships-building, Machinery production and repair.
* In Job Costing all cost of directly charge to the specific job of the product.
Definition of JOC
Characteristics of JOC1. Job order costing is known by different names such as
specific order or production order.
2. Unit cost is computed by dividing total manufacturing costs per job order by the number of good units produced. Cost of a units can be a job order, an individual unit or even a batch of a product.
3. Job cost sheets can be used to control efficiency and estimate future work.
4. Each job cost sheets have a number of the job.
JOB ORDER COSTING
Learning Outcome :
1.To explain the procedure of cost accumulation under job order costing.
2. To determine unit cost from the total cost.
Some examples of product under JOC…
Production Dept will give a number to that production
Production begins…
Job Cost Sheet issued to that particular job
What to do when received order from customer
What is Job Cost Sheet ?CHANTIQUE FURNITUREJOB ORDER COST SHEET
Customer Name :________________Date : _____________ Job Order No : _______ Product Description: __________________________
Selling Price : ________ Total Cost : __________ Cost per Unit: ________
Dept 1 Dept 2 Dept 3Materials :
Date (s)Requisition No.
AmountLabour :
Date (s)Job Time Card no.
Overhead :Rate/basis
Amount absorbed
Cont :
Cost Summary :
Dept 1 Dept 2 Dept 3 Total
Material __________ __________ __________ _________Labour __________ __________ __________ _________Overhead __________ __________ __________ _________Total __________ __________ __________ _________Units Completed :
Date Completed :
Example 1 :Chantique Furniture manufacturers many products. Each product passes through 2 production dept, which have the following cost structure :
Dept A Dept BNormal monthly volume 5,000 DLH 10,000 DLHBudgeted Overhead RM 25,000 RM 60,000
Below was the job went through the factory last month, JobA001:Direct Materials RM 2,400Direct Labour : Dept A (180 hrs) RM 1,620
Dept B (60 hrs) RM 420Output 600 units
Calculate :i. Total costii. Unit cost
Solution :a).Direct materialsRM 2,400Direct Labour :
Dept A RM 1,620Dept B RM 420
Overhead :Dept A (RM5/dlh x 180hrs)RM 900Dept B (RM6/dlh x 60 hrs) RM 360
Total Cost RM 5,700
b). Unit cost = RM 5,700 = RM 9.50600 unit
Notes : How did the overhead figure derived ??
Example 2 :MEGAH SDN BHD is an office furniture’s manufacturer . It is the company policy to charge factory overhead based on direct labour hour in Dept A and machine hour in Dept B.
Dept A Dept BNormal direct labour hour 5,000 DLH 10,000 DLHNormal machine hour 3,000 hrs 6,000 hrsBudgeted Overhead RM 25,000 RM 60,000
Below was the job went through the factory last month, JobA002:
Direct Materials RM 2,400Direct Labour : Dept A (180 hrs) RM 1,620
Dept B (60 hrs) RM 420Machine hour : Dept A 120 hrs
Dept B 100 hrsOutput600 units
Calculate :i. Total costii. Unit cost
Solution :a).Direct materialsRM 2,400Direct Labour :
Dept A RM 1,620Dept B RM 420
Overhead :Dept A (RM5/dlh x 180hrs)RM 900Dept B (RM10/dlh x 100 hrs) RM 1,000
Total Cost RM 6,340
b). Unit cost = RM 6,340 = RM 10.57600 unit
Notes : How did the overhead figure derived ??
Exercise 1 :Below are the information regarding an order from a customer for Pure Inside Manufacturing Co.Ltd : Budgeted cost:
Direct Labour Hour Variable OverheadDept. A 20,000 @ RM 3.25 RM 70,000Dept. B 18,000 @ RM 3.10 RM 45,000Dept. C 10,000 @ RM 3.00 RM 20,000 Cost information for a specific job, JOB008: Raw material bought RM 216Raw materials issued from store RM 270Labour – Dept. A 80 h - Dept . B 40 h - Dept. C 30 hDelivery Cost RM 60Administration cost is 10 % from manufacturing cost. Profit margin is15 %. Prepare a quotation for that customer.
Exercise 2 :Kayabaga Ltd is alloy product manufacturer in Ipoh. The business gave a bad reflection of profit and you are instructed to investigate this situation. You have found that a quotation with RM 1,350 for Job A223 have these following cost information : Raw material RM 456Labour – Dept. X ( 10 h x RM9) 90 - Dept . Y ( 4 h x RM7.50) 30 - Dept. Z ( 15 h x RM9.60) 144 264Total Cost RM ??Profit margin is25 %.Selling price ???
Administration & selling overhead is based on 50% of primary cost . Your investigation also found out these cost information :
Budgeted direct labour cost and manufacturing overhead for that 3 departments are as follows :
Department DL(RM) Overhead (RM)X 390,000 429,000Y 480,000 240,000X 300,000 450,000
Required :Recalculate the cost for JObA223 and what is the most suitable price to quote ?
(b)
Exercise 3 :Indah Furniture is a company producing quality kitchen cabinet in Semambu. Overhead was absorbed based on machine hour in Design Department and other department were based on direct labour hour. The company policy is to absorb 20% of manufacturing cost as administration & sales overhead.
Below are the budgeted data for current year :(RM’000)
Design Dept Painting Dept Furnishing Dept Total Raw materials RM2,850 RM150 RM29 RM3,029DLH (‘000hour) 30 120 23 173Machine Hour(‘000h) 100 40 - 140Wages/hour RM4.00 RM 3.25 RM 3.00Production OH RM200 RM300 RM92 RM592Admin&Selling OH - - - RM1,050
An order was received from a client for 30 units of kitchen cabinet. The expected cost was accumulated in order to prepare the quotation as follows :
Profit margin is 20% of selling price.
Required :a. Calculate production cost for each department b. Calculate quotation price, and profit from the order
Design Painting FurnishingRaw materials RM62,700 RM3,900 RM780DLH 950 h 2,800 h 560 hMachine hour 2,400 h 750 h -
Answer :
Design Painting FurnishingRaw materials RM62,700 RM3,900 RM780DLH 3800 9100 1680OH 4800 7000 2240Production OH 71300 20000 4700
Admin& Selling OH
14260 4000 940
Total costProfit marginSELLING PRICE
To accumulate the cost using ledger cost Example 1 :
Maya Engineering using job ordercosting to accumulate the cost for its product. Below are some data regarding a job :Extract of job cost sheet :
Ledger Cost
Opening bal.of WIP
Current cost Ending bal of WIP
Raw materials 10,620 32,840 12,630Labour 15,250 53,260 16,170Manufac OH 10,830 33,520 9,260
36,700 38,060
Below were data received from financial department:
Opening stock of raw material RM9,200 All jobs were finished and invoiced to clients. Selling & distribution OH were charged based on 10% of cost of
finished goods.
Based on the information, prepare ledger cost and profit & loss a/c
Purchase of Raw materials
RM 39,150
Selling & Distribution OH 12,780Manufacturing OH 30,620Sales 146,330
WIP Control A/cBal b/f 36,700 Cost of sales 118,260**Raw materials 32,840 Bal c/f 38,060Labour 53,260Manuf OH 33,520
156,320 156,320
Answer :
Raw materials Control A/cBal b/f 9,200 WIP 32,840Financial control
39,150 Bal c/f 15,510**
48,350 48,350
Labour A/cFinancial control 53,260 WIP 53,260
cont :
OH A/cFinancial control( actual OH)
30,620 WIP 33,520
P&L ( over absorbed OH)
2,900**
33,520 33,520
Selling & Distribution OH Control A/cFinancial control( actual OH)
12,780 Cost of sales(10% x cost of finished goods RM118,260)
11,826
P&L(under absorbed OH)
954
12,780 12,780
Cont :
P&LCost of sales ( 118,260 +11,826)
130,086 Sales 146,330
Gross Profit 16,244146,330 146,330
Under absorbed OH 954 Gross Profit 16,244Net profit 18,190** Over absorbed OH 2,900
19,144 19,144
Indah Ltd had 3 jobs in Jan. Cost related tp that 3jobs are as follows :
Exercise 1 :
Job A1(RM)
Job A2(RM)
Job A3(RM)
Raw materials issued from store
3,000 7,000 5,000
Raw materials returned to store
30 70 -
Special purchased of raw materials
100 - 300
Direct labour 600 2,000 400
Budgeted OH for the year is RM50,000 and budgeted DLH is 25,000 h. Overhead absorbed based on DLH. Actual OH for Jan is RM4,000.
Wages /hour is RM1.00. Only Job A1 had finished and sent to
customer with Selling price of RM7,000.
Prepare: a. Job cost card for Job A1,A2 and A3 b. WIP Control A/c and OH Control A/c c. Profit and Loss
Most of the shadows of this life are caused by our standing in our own sunshine.
Ralph Waldo Emerson
The acts of this life are the destiny of the next.
Eastern Proverb
a.Job Cost CardLet’s check the answer :
a1 a2 a3Raw materials 3,000 7000 5000
RM returned to store (30) (70)Special purchase of RM 100 300
Labour 600 2000 400Primary Cost XXXX XXXX XXXX
OH 1200 4000 800Total cost 4870 12930 6500
Selling price 7000Profit 2130
Don’t forget to show the calculation
for OH cost…
WIP Control A/cRM 15000 RM returned 100Special purchase of Raw materials
400 Cost of sales 4870
Labour 3000 Bal c/f 19,430Manuf OH 6000
24400 24400
Cont:
OH Control A/cActual OH (Financial control)
4000 WIP 6000
P&L (over absorbed of OH)
2000
6000 6000
P&LCost of sales 4870 Sales 7000Gross profit 2130 _____
7000 7000Gross profit 2130
Net profit 4130 Over absorbed of OH 20004130 4130
