Job costing
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1 Job costing
description
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 - PowerPoint PPT Presentation
Transcript of Job costing
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Job costing
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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
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Costing under three different method Actual costing Normal costing Standard costing
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Costing system Production cost
Actual costing Actual direct materials + Actual labour + Actual overhead
Normal costing Actual direct material + Actual direct labour + Applied overhead (I.e. Per-determined overhead rate * actual level of productivity)
Standard costing Standard direct material + standard direct labour + applied overhead
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Which one better?
Normal product costing and standard costing are preferable
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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
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Flow chart
Delivery of materials to job
Payment of wages to workers
Charging of applied overheadCosts to work in progress
Work
In
Progress
Cost of sales
sold
indirectdirect
directindirect
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Accounting entries
Dr. Store ledger control
Cr. Cost ledger control
To record the purchase of materials
Dr. WIP (direct)
Dr. manufacturing overhead (indirect)
Cr. Store ledger control
To record direct and indirect material issued
Dr. wages control
Cr. Cost ledger control
To record wages paid
Dr. WIP (direct)
Dr. Manufacturing overhead (indirect)
Cr. Wages control
To record direct and indirect wages incurred
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Accounting entries
Dr. Manufacturing overhead
Cr. Cost ledger control
To record indirect expenses
Dr. WIP
Cr. manufacturing overhead
To apply overhead using predetermined overhead absorption rate
Dr. Cost of sales
Cr. WIP control
To record cost of sales of goods produced
Dr. Cost of sales
Cr. Other overhead
To record other applied overhead charged to cost of sales
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Accounting entries
Dr. Costing Profit and loss
Cr. Cost of sales
Cr. Under-absorbed overheads /Dr. Over-absorbed overheads
To transfer the balance of cost of sales and under- / over- absorbed overheads to profit and loss account
Dr. Cost ledger control
Cr. Costing Profit and loss
To transfer the sale value of jobs completed
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Example Refer to textbook P.198
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Job 682
Bal b/f 2310
Materials 9780Wages 3000Factory overhead (3000*50%) 1500
Job 683 a/c – material transfer 900Material return 1600
Cost of sales 14090
16590 16590
Job 683Materials 7480Wages 4000Factory overhead (4000*50%) 2000
Job 683 a/c – material transfer 900Material return 1600
Cost of sales 14090
14880 14880
Job 682 a/c – material transfer 900Job 684 a/c – Material transfer 500
Job Account
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Job 684
Materials 7900Wages 2500Factory overhead (2500*50%) 1250
Job 683 a/c – material transfer 500
Cost of sales 11150
11650 11650
Job 685Materials 8840Wages 2500Factory overhead (2500*50%) 1250
Material return 340
Cost of sales 12250
12590 12590
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Job 682 Job 683 Job 684 Job 685Materials 8540 8880 7400 8500Wages 3700 4000 2500 2500Factory overhead 1850 2000 1250 1250Factory cost 14090 14880 11150 12250Adm. Overhead(20%) 2818 2976 2230Cost of sales 16908 17586 13380Sales value 21000 24000 16000Profit/ (Loss) 4092 6144 2620
1260+9780-900-1600
3000+700
1500+350
Job Cost Sheet
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Control AccountsStore ledger control account
Bal b/f 8400
Cost ledger control (purchase) 31000WIP control (material return to store) 1940
WIP control (issue direct material 34000Factory O/H control (issue indirectMaterial 3000Bal c/f 4340
41340 41340
Wages control account
Cost ledger control ((wages paid) (12000+1000) 13000
WIP control (direct labour) 12000Factory O/H control ( indirectLabour) 1000
54310 54310
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Factory overhead control account
Store ledger control (indirect) 3000Wages control (indirect) 1000
WIP control (12000*50%) 6000
Under-absorbed overhead 600
6600 6600
Cost ledger control - Factory indirect exp. 2600
Actual overheadEstimated overhead absorbed
Work in progress control account
Store ledger control (direct) 34000Wages control (direct) 12000
Store ledger control – return 1940Cost of sales (14090+14880+11150) 40120Bal c/f 12250
54310 54310
Factory O/H (O/H absorbed) 6000
Bal b/f 2310
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Admin & marketing overhead control account
Cost ledger control (actual) 79501000
Cost of sales 8024(2818+2976+2230)
Over-absorbed overhead 74
8024 8024
Actual overheadEstimated overhead absorbed
Under - / Over- absorbed overhead control
Factory overhead control- Under absorbed 600
Admin & Marketing overhead- Over absorbed 74
Costing profit and loss 526
600 600
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Cost of Sales
WIP control 40120Admin & marketing O/H 8024
Costing profit and loss 48144
481444 48144
Costing profit and loss
Cost of sales 48144Under-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 10710Store ledger control 31000Wages control 13000Factory overhead control 2600Admin & Marketing O/H control 7950
Consolidated profit and loss 12330
77590 77590
Bal c/d (12250 + 4340) 16590
