Professional Documents
Culture Documents
Job Batch and Service Costing
Job Batch and Service Costing
Job Batch and Service Costing
▪ Specific order costing method is used when the work consists of separately identifiable jobs,
batches or contracts. W ork only commences after an order is received.
▪ Continuous operation costing method is used when there is a continuous flow of identical units.
Process costing is a typical form of continuous production process.
✓ JOB COSTING
A job is a cost unit which consists of a single order or contract. It consists of a single order undertaken to
customers’ special requirements and is usually for a short duration.
It relates to a costing system where each unit of batch of output is unique. This creates the need for the
cost of each unit to be calculated separately.
Direct Expenses:
▪ Estimated expenses shall be determined from the suppliers.
▪ Details of actual expenses will be determined from the invoices.
Production Overheads:
▪ Estimated production overheads will be calculated from overhead absorption rate is operation based
on an estimated activity level (like budgeted labour hours).
▪ Actual production overheads are charged to the job using absorption rate and actual results (like
actual labour hours). This means absorbed overheads are charged to jobs.
Non-Manufacturing Overheads:
▪ Non-Manufacturing overheads are charged to a job as a percentage of some cost such as Prime
Cost, Production Cost etc.
Profit:
▪ Usual method of setting a selling price is cost plus pricing method. This method adds a profit to total
cost to arrive at a selling price. The final price to be charged will be affected by what competitors
charge and by what a customer is willing to pay.
Work In Progress:
At the period end, the value of work in progress is simply the sum of cost incurred on incomplete jobs
(charged as closing work in progress).
✓ BATCH COSTING
Batch costing is very much similar to that of job costing. A batch of identical products is treated as an
individual job. A batch is a cost unit where a quantity of identical items is manufactured. It consists of a
separate, readily identifiable group of product units which maintains their separate identity throughout the
production process.
Batch costing is essentially a variation of job costing. Instead of a single job, a number of product units
are manufactured as a batch. Batches may be made specifically to customer requirements or produced
for holding in stock prior to sale. The procedures for costing batches are very similar to job costing.
Once the batch is completed, the cost per unit can be calculated.
Service Costing
Service costing is a costing method concerned with establishing the cost, not for items of production, but
the cost of services provided. It is also called operation or function costing.
Service organisations do not make or sell tangible goods. Profit seeking service organisations include
accountancy firms, law firms, transport companies, hair salons, banks and hotels. Non-profit
organisations include hospitals, schools and libraries.
Cost per service unit = Total service costs for the period .
Number of services provided in the period