COST ACCOUNTING

JOB ORDER AND BATCH

Introduction
JOB ORDER
Aim is to identify cost associated with completing an order.
It is used when each job is unique from another job.
It is used where work is undertaken according to special requirements of customers.
Every job is given a unique job number and selling price of a job are calculated by
adding certain amount of profit.
Meaning
Job Order Costing
Involves aggregation of all the cost elements necessary for the final product of a specific order
job.

Calculation of total cost

D.Material x
D.Labour x
P.Overhead x
NP.Overhead x
Total cost x

Example 1

The following information is available from a manufacturing company operate under job
costing system, Job 812 requires:

Direct material = Tzs.600

Direct labour = Tzs.400
Direct expenses = Tzs.200

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Direct labour is paid Tzs.800 per hour.Production overhead are absorbed at a fixed
overhead absoption rate of Tzs.160 per labour hours and non production overhead are
absorbed at the rate of 60% of prime cost.

If margin is estimated to be 20%

Required

Calculate total cost of a job product and its sales.

Question
Star Modern Shoemakers Company Limited, Wambai, Kano, found that their production
costs For the 2000 accounting year had been as follows:
Direct wages Tsh 8,000,000
Direct material cost Tsh 5,000,000
Direct expenses Tsh,500,000
Production overhead cost Tsh,400,000
Total shoe manufactured 160,000 units
Machine time used 10,000 hours
Direct Labour time used 40,000 hours
500 pairs of shoes were produced during the first two weeks of the year as a single job,
which had a direct wages cost of Tsh 8,000, direct material cost of Tsh 5,000 and direct
expenses of Tsh 1,500. The company apportions fixed overhead cost using the
percentage rate on direct wages and charges administrative expenses and selling
expenses at the rate of 15% and 10% respectively, of production cost.
Required: Determine the following:
(a) Production cost
(b) Total cost

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Batch costing

Meaning
Costing method which used where each batch of similar products is separate
identifiable.
Batch is a group of similar products.
Batch costing is used for manufacturing companies such as clothing, baking industries.
Cost per unit= Total production cost of a batch/number of units in a batch
Example 1

The following information is available from a manufacturing company operate under

Batch costing system, Batch number 3100 comprising 200 men Tshirt.
Direct material = Tzs.300,000
Direct labour = 120 hours @Tzs. 500 per hour

Production overhead is absorbed at a rate of Tzs. 1200 per labour hour.

Non productions overhead are absorbed at the rate of 50% of prime cost.
If markup is given at 20%

Required

Calculate total cost of per unit od each Tshirt and its selling price.

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QUESTION 01
Mapamabano plc makes batches of “own brand” ready meals for supermarkets using a
semi-automated production process.
The cost for batch number 12678 comprising 1000 fish meals were as follows

Tsh
Direct material 70,000
Wages (80 hrs) 8000.00
The batch took 40 machine hours to produce.
Production overhead is absorbed at a factory rate of Tzs.50 per machine hours.
Non Production overhead are absorbed at a factory rate of Tzs.150 per labour hours.
Required

Calculate total cost per meal in the batch.

QUESTION 02
Mambo jambo lts was asked to quote for supplying 1,000 and 4,000 booklets.
The company normally expects a profit of 20% on sales. Costs were recognized
as follows:

Paper and other materials, Tsh

(per 200 copies) 20.00
Wages (per 200 copies) 10.00
Layout cost 200.00
Fixed overhead 100.00
Variable overhead= 10% of
wages
Required: Prepare cost statement showing minimum selling prices that might
be quoted per 200 copies each of the supplies