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Job Costing
Job Costing
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 tailormade goods or services that conform to the specifications designed by customer Costs can be determined separately for each job order
Production cost Actual direct materials + Actual labour + Actual overhead Actual direct material + Actual direct labour + Applied overhead (I.e. Per-determined overhead rate * actual level of productivity) Standard direct material + standard direct labour + 4 applied overhead
Normal costing
Standard costing
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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In
Charging of applied overhead Costs to work in progress Progress
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
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- / overabsorbed 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 Account
Job 682 Bal b/f 2310 Job 683 a/c material transfer Material return Cost of sales 900 1600 14090 16590
Job 683 Materials 7480 Job 683 a/c material transfer Wages 4000 Material return Factory overhead (4000*50%) 2000 Cost of sales Job 682 a/c material transfer 900 Job 684 a/c Material transfer 500
14880
14880
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Job 684 Materials 7900 Wages 2500 Factory overhead (2500*50%) 1250 Job 683 a/c material transfer Cost of sales 500 11150
11650 Job 685 Materials 8840 Material return Wages 2500 Factory overhead (2500*50%) 1250 Cost of sales 12590
11650
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Job 682 Materials 8540 3000+700 Wages 3700 Factory overhead 1850 1500+350 Factory cost 14090 Adm. Overhead (20%) 2818 Cost of sales 16908 Sales value 21000 Profit/ (Loss) 4092
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Control Accounts
Store ledger control account Bal b/f Cost ledger control (purchase) WIP control (material return to store) 8400 31000 WIP control (issue direct material 34000 Factory O/H control (issue indirect Material 3000 Bal c/f 4340 41340
1940
41340
Wages control account Cost ledger control ((wages paid) (12000+1000) 13000 WIP control (direct labour) Factory O/H control ( indirect Labour) 12000 1000
54310
54310
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Actual overhead Store ledger control (indirect) Wages control (indirect) Cost ledger control - Factory indirect exp. 3000 1000
2600 6600
Estimated overhead absorbed Factory overhead control account WIP control (12000*50%) 6000
Under-absorbed overhead
600 6600
Work in progress control account Bal b/f Store ledger control (direct) Wages control (direct) Factory O/H (O/H absorbed) 2310 34000 12000 6000 54310 Store ledger control return Cost of sales (14090+14880 +11150) Bal c/f 1940 40120 12250 54310
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7950
74 8024
8024
8024
Under - / Over- absorbed overhead control Factory overhead control - Under absorbed Admin & Marketing overhead 600 - Over absorbed Costing profit and loss 600 74 526 600
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Cost of Sales WIP control Admin & marketing O/H 40120 Costing profit and loss 8024 481444 48144 48144
48144 526
12330 61000
61000
61000
Cost ledger control account Costing profit and loss - sales Bal c/d (12250 + 4340) 61000 16590 Bal b/f Store ledger control Wages control Factory overhead control Admin & Marketing O/H control Consolidated profit and loss 10710 31000 13000 2600 7950 12330
18 77590
77590