Jeans pant and Jeans Jacket:

Here, we are assuming a hypothetical company that produces jeans pants and jackets. Here,

we have assumed the sales unit of the pants and the jackets[ CITATION Bar93 \l 1033 ]. The

selling price and the direct material, along with direct labor time and total direct labor are

also assumed[ CITATION Tsu17 \l 1033 ]. The direct labor rate, variable overheads and

fixed overheads are all hypothetical[ CITATION Pol18 \l 1033 ].

Pant Jacket
Sales Unit 54,000 40,000
Selling Price 25 40
Direct Materials 8 15
Direct Labor Time 20 mins 30 mins

Direct Labor Rate = 20$ per hour

Variable Overhead = $5 per unit

Fixed Overhead = $141,000

FOH absorbed based on units

Based on the assumptions made above, we can make the income statement via job order

costing in the following way[ CITATION Gre10 \l 1033 ].

FOH/Units =$141,000/(54,000+40,000) = $1.5 unit

Job Order Costing:

Pant Jacket Total

Sales 1,350,000 1,600,000 2,950,000

DM 432,000 600,000 1,032,000

DL 360,000 400,000 760,000

VOH 270,000 200,000 470,000

FOH 81,000 60,000 141,000

Total Expenses 1,143,000 1,260,000 2,403,000

Net Profit 207,000 340,000 547,000

To make an income statement through activity based costing, we have assumed the

following[ CITATION Ban95 \l 1033 ].

Activities under fixed overhead

Activity Cost Pant Jacket Cost Basis

Storage 47,000 432,000 600,000 TDM
Supervisors 23,500 18,000 20,000 TDL
Salary
Rent 70,500 54,000 40,000 Units

Taking the initial assumptions and the assumptions mentioned above for activity based

costing, we can compute the following income statement for our business[ CITATION Thy06

\l 1033 ].
 Cost Total Activity Rate Pant Jacket
Activity
Storage 47,000 1,032,000 $0.046 $19,674 27,326
Supervisor 23,500 38,000 $0.62 $11,132 $12368
Salary
Rent 75,000 94,000 $0.75 $40,500 $30,000

Income Statement on Activity Based Costing:

Pant Jacket Total

Sales 1,350,000 1,600,000 2,950,000
DM 432,000 600,000 1,032,000
DL 360,000 400,000 760,000
VOH 270,000 200,000 470,000
FOH
Storage 19,674 27,326 47,000
Supervisor Salary 11,132 12,368 23,500
Rent 40,500 30,000 70,500
Total Cost 1,133,306 1,269,694 2,403,000
Net Profit 216,694 330,306 547,000

Conclusion:

Comparing the two income statements, we can notice that the individual profits made on each

product is different but the overall profits are the same. This is the difference that we can see

in the two methods and this can help us in decision making by showcasing us the different

costs and how they are apportioned.

References
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Barbara, W. (1993). Job order costing. The national public Accountant, 5-18.

Greenberg, R., & Schneider, A. (2010). Job order costing. Acaddemy of educational

leadership journal, 39-57.

Pollard, W. (2018). An Active Learning Approack to Job order costing. Management

accounting quarterly, 10-19.

Thyssen, J., & Israelsen, P. (2006). Activity based costing as a method for assessing the

economincs of modularization. International journal of production economics, 252-

270.

Tsung, Y. L., & Shu-Li, W. (2017). Competitive Price strategy with Activity Based Costing.

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