No.

1 for CA/CWA & MEC/CEC MASTER MINDS

13. JOB COSTING & BATCH COSTING

SOLUTIONS TO ASSIGNMENT PROBLEMS
Problem No. 1
Statement showing the price for the year ending 1998 and 1999

Particulars 1998 1999

Direct Materials (W.N – 1) 80,000 1,15,200
Direct Labour (W.N – 2) 1,20,000 1,51,200
Prime cost 2,00,000 2,66,400
Add: Factory Overhead (W.N – 3) 50,000 66,600
Net works cost 2,50,000 3,33,000
Add: Administration overhead:
Staff & Salaries 60,000 60,000
Rent, Rates & Insurance 10,000 10,000
General Expenses 20,000 20,000
Cost of Production 3,40,000 4,23,000
Add: Selling & Distribution Overhead (W.N – 4) 30,000 36,000
Cost of Sales 3,70,000 4,59,000
Add: Profit (W.N – 5) 30,000 51,000
Sales 4,00,000 5,10,000
 4,00,000   5,10,000 
Selling price per unit  = 400   = 425
 1,000   1,200 

W.N: Increase in Costs during 1999:

 1,200 
1. Direct Material =  80,000 × × 120%  = 1,15,200
 1,000 

 1,200 
2. Direct Labour = 1,20,000 × × 105%  = 1,51,200
 1,000 

 2,66,400 
3. Factory Overhead =  50,000 ×  = 66,600
 2,00,000 
 1,200 
4. Selling & Distribution overhead =  30,000 ×  = 36,000
 1,000 
 10 
5. Profit =  4,59,000 ×  = 51,000
 90 

Problem No. 2
Statement showing the cost (per unit) & offer price
Particulars A B C D
Material Cost 40 60 100 300
Add: Machine Center  60 × 480   50 × 480   50 × 480   65 × 480 
Cost (WN–1)   16   48   80   120
 1800   500   300   260 
Total Cost 56 108 180 420
Add: Profits (20% on cost) 11.20 21.60 36 84
Offer Price / Sale Price 67.20 129.60 216 504

IPCC_34e_Costing (Problems)_Job Costing & Batch Costing ______________1

 Ph: 0863 – 22 42 355 www.gntmasterminds.com
W.N-1: Calculation of Overhead Distribution to Products on the basis of Machine Hours
1800
Machine hours for Product A = = 60 Machine hours
30
500
Machine hours for Product B = = 50 Machine hours
10
300
Machine hours for Product C = = 50 Machine hours Copy Rights Reserved
6
260 To MASTER MINDS, Guntur
Machine hours for Product D = = 65 Machine hours
4
Total Machine Hours = 225 Machine hours

Total Factory Overhead per month = (50,000 + 10,000 + 2,000 + 6,000 + 40,000) = Rs.1,08,000
1,08,000
Factory Overhead Recovery rate per machine hour = = Rs. 480 per Machine Hour
225

PROBLEM NO.3
Job Cost Sheet
Customer Details ——— Job No._________________
Date of commencement —— Date of completion _________
Particulars Amount(Rs.)
Direct materials 70
Direct wages :
Deptt. X Rs. 2.50 × 8 hrs. = Rs. 20.00
Deptt. Y Rs. 2.50 × 6 hrs. = Rs. 15.00
Deptt. Z Rs. 2.50 × 4 hrs. = Rs. 10.00 45
Chargeable expenses 5
Prime cost 120
Overheads:
5,000
Deptt. X= X100 = 50% of Rs. 20 = Rs. 10.00
10,000
9,000
Deptt. Y = X100 = 75% of Rs. 15 = Rs. 11.25
12,000
2,000 23.75
Deptt. Z = X100 = 25% of Rs. 10 = Rs. 2.50
8,000
Works cost 143.75
20,000 14.38
Selling expenses = X100 = 10% of work cost
2,00,000
Total cost 158.13
Profit (20% of total cost) 31.63
Selling price 189.76

PROBLEM NO.4
Particulars Last year Relationship Next year
Direct Materials 9,00,000 Actuals 12,00,000
Direct Wages 7,50,000 Actuals 7,50,000
Price Cost 16,50,000 Actuals 19,50,000
Add: POH 4,20,000 Rs. 4,50,000 4,50,000
Absorbed at =60% on Wages
Rs. 7,50,000

IPCC_34e_Costing (Problems) _ Job Costing & Batch Costing ______________2

 No.1 for CA/CWA & MEC/CEC MASTER MINDS
Cost of Prodn 25,20,000 Rs. 5,25,000 28,80,000
Add: S & D OH 5,25,000 Taken at = 25% on Factory Cost 6,00,000 +
Rs. 21,00,000
15% =
+ 15% thereon 6,90,000
Cost of Sales 30,45,000 35,70,000
Add: Profit 6,09,000 Rs. 6,09,000 7,14,000
= 20% on Cost of Sales
Rs. 30,45,000
Sales 36,54,000 42,84,000

PROBLEM NO.5

Particulars Job 1 Job 2

Direct Materials 154.00 108.00
Direct Labour: Department A 20 hours X Rs.7.60 = 152.00 16 hours X Rs. 7.60 = 121.60
Department B 12 hours X Rs.7.00 = 84.00 10 hours X RS. 7.00 = 70.00
Department C 10 hours X Rs. 6.80 = 68.00 14 hours X Rs. 6.80 = 95.20
Prime Cost 458.00 394.80
Add: Overheads: Department A 20 hours X Rs. 12.86 = 257.20 16 hours X Rs. 12.86 = 205.76
Department B 12 hours X Rs. 12.40 = 148.80 10 hours X Rs. 12.40 = 124.00
Department C 10 hours X Rs. 14.03 = 140.03 14 hours X Rs. 14.03 = 196.42
Total Cost 1,004.03 920.98
th
Add: Profit (25% i.e. 1/4 on
Price = 1/3th on Cost) 334.68 306.99
Quoted Selling Price 1,338.71 1,227.97

PROBLEM NO.6
Job cost sheet
Particulars Amount
Direct material (a) 57
Direct wages (b) 85
Prime cost (a) + (b) 142
Add: Factory overhead:
Machining department – 15h x 4 60
Finishing department – 150% on DW 60
Total cost / works cost 262
No .of units 10
Cost per unit 26.2

Working notes:
Estimated overhead
Overhead recovery rate =
Estimated base
80,00,000
For machining department = = Rs.4 M.H
20,00,000
60,00,000
For finishing department = x 100 = 150%
40,00,000
PROBLEM NO.7
Job costing Work in progress Finished goods
Particulars Job 1 Job 2 Job 3
Direct material 17,150 29,025 -
Direct wages 12,500 23,000 4,500
Prime cost 29,650 52,025 4,500
(+) Factory overhead 43,750 80,500 1,50,750

IPCC_34e_Costing (Problems)_Job Costing & Batch Costing ______________3

 Ph: 0863 – 22 42 355 www.gntmasterminds.com
(350% on wages)
Gross works cost 73,400 1,32,525 20,250
(+) Work in progress 8,500 - 46,000
81,900 1,32,525 66,250

Closing work in progress:

Job 1 + job 2 = 81,900 + 1,32,525 = 2,14,425

PROBLEM NO.8

Particulars Rs.
Direct Material Given 6,800.00
Direct Wages Department I Given 2,000.00
Department II Given 1,500.00
Department III Given 3,000.00
Prime Cost 13,300.00
Add: Factory Overheads (absorbed based on Direct Labour Cost)
Rs.8,000 1,600.00
Department I = 80% on Direct Labour Cost of Rs. 2,000
Rs.10,000
Rs.4,000 750.00
Department II = 50% on Direct Labour Cost of Rs. 1,500
Rs.8,000
Rs.7,200
Department III = 60% on Direct Labour Cost of Rs. 3,000 1,800.00
Rs.12,000
Factory Cost 17,450.00
Rs.11,420
Add: AOH absorbed based on Factory Cost = = 10% on Works Cost
Rs.1,14,200
1,745.00
of Rs. 17,450
Total Cost 19,195.00
th
Add: Profit (20% on Price, i.e. 25% on Total Cost) i.e. 1/4 of Rs. 19,195 4,798.75
Estimated Selling Price 23,993.75

Problem No. 9
Statement showing the profit from sale of 60% capacity and additional 20% capacity (i.e. at 80,000 units)

Particulars 60,000 units 20,000 units 80,000 units

Per unit Total Per unit Total Total
Sales 15 9,00,000 (b/f)11.15 2,23,000 11,23,000
Less: Variable cost:
Direct material (W.N – 1) 4.20 2,52,000 4.20 84,000 3,36,000
Direct wages (W.N – 2) 1.20 72,000 1.20 24,000 96,000
Factory Overhead 3.00 1,80,000 3.00 60,000 2,40,000
Selling Overhead 0.25 15,000 0.25 5,000 20,000
Contribution 6.35 3,81,000 2.50 50,000 4,31,000
Less: Fixed Cost (W.N – 3) 2,47,500 (Note) - 2,47,500
Profit required 1,33,500 50,000 1,83,500

W.N-1: Revised Direct Material Cost = 4 X 105% = 4.20

W.N-2: Revised Direct Wages = 1 X 120% = 1.20

W.N-3: Calculation of Fixed Cost:

IPCC_34e_Costing (Problems) _ Job Costing & Batch Costing ______________4

 No.1 for CA/CWA & MEC/CEC MASTER MINDS
Particulars Amount
Factory Overhead = 6 X 50% = 3 X 60,000 1,80,000
Selling Overhead = 1 X 75% = 0.75 X 60,000 45,000
2,25,000
Add: Increased by 10% 22,500
Total Fixed Cost 2,47,500

2,23,000
Selling Price per piece = = Rs. 11.15 per piece.
20,000
Note: Fixed Cost is to be ignored, as there will be no increase in it, on acceptance of this order.

BATCH COSTING
Problem No. 1
2DS 2 x 500 x 12 x 60
EQB = = = 600 units.
C 0.1x 20

Problem No. 2

2AS
1. EBQ =
C
Where:
A = Annual Demand for Finished Product = 2,40,000 units
S = Set-Up Cost per batch = Rs.75
C = Carrying Cost per unit of Finished Product per annum = Re. 1.00
On substitution, EBQ = 6,000 units.
2. Comparison of Associated Costs at different Batch Output Levels:

Particulars EBQ Existing Policy Arun’s suggestion

a. Batch Quantity 6,000 units 20,000 units 5,000 units
b. Number of Batches 2,40,000 ÷ 6,000 = 2,40,00 ÷ 20,000 = 12 2,40,000 ÷ 5,000 =48
p.a 40
c. Set-up Costs p.a. at 40 X Rs. 75 = Rs. 12 X Rs. 75 = Rs. 900 48 X Rs. 75 = Rs.
Rs.75 3,000 3,600
d. Average Inventory ½ X 6,000 = 3,000 ½ X 20,000 = 10,000 ½ X 5,000 = 2,500
units units units
e. Associated Costs Rs. 6,000 Rs. 10,900 Rs. 6,100
p.a. = (c + e)

Note: At EBQ using the above formula, Set-up Costs p.a. = Carrying Costs p.a. = ½ of Associated
Costs p.a.

Annual Re quirement ( A ) 2,40,000

3. Number of Batches p.a. = = = 40 batches per annum. (for
PRoduction per Batch (Q) 6,000
least cost)

Problem No. 3

2DS
a. Optimum production run size (Q) =
C

IPCC_34e_Costing (Problems)_Job Costing & Batch Costing ______________5

 Ph: 0863 – 22 42 355 www.gntmasterminds.com
Where,
D = No. of units to be produced within one year.
S = Set-up cost per production run
C = Carrying cost per unit per annum.
2DS 2 x 24,000 x Rs.324
= = = 3,600 bearings.
C 0.10 x 20

b. Total Cost (of maintaining the inventories) when production run size (Q) are 3,600 and 6,000
bearings respectively
Total cost = Total set-up cost + Total carrying cost.

When run size is 3,600 bearings When run size is 6,000 bearings
Total set up cost 24,000 24,000
= x Rs. 324 =Rs. 2,160 = x Rs. 324 =Rs. 1,296
3,600 6,000
Total Carrying cost 1/2×3,600 × 0.10P × Rs.12 1/2 × 6,000 × 0.10P × Rs.12
= Rs. 2,160 = Rs. 3,600
Total Cost Rs. 4320 Rs. 4,896

c. Minimum inventory holding cost = 1/2 Q × C

(When Q = 3,600 bearings) = 1/2 × 3,600 bearings × 0.10P × Rs. 12 = Rs. 2,160

Problem No. 4

Jan. Feb. March April May June Total

Batch output (in units) 210 200 220 180 200 220 1,230
Sale value Rs. 1,680 1,600 1,760 1,440 1,600 1,760 9,840
Material cost Rs. 650 640 680 630 700 720 4,020
Direct wages Rs. 120 140 150 140 150 160 860
Chargeable expenses* Rs. 600 672 672 621 780 800 4,145
Total cost Rs. 1,370 1,452 1,502 1,391 1,630 1,680 9,025
Profit per batch Rs. 310 148 258 49 -30 80 815
Total cost per unit Rs. 6.52 7.26 6.83 7.73 8.15 7.64 7.34
Profit per unit Rs. 1.48 0.74 1.17 0.27 -0.15 0.36 0.66
Overall position of the order for 1,200 units
Sales value of 1,200 units @ Rs. 8 per unit Rs. 9,600
Total cost of 1,200 units @ Rs. 7.34 per unit Rs. 8,808
Profit Rs. 792
Ch arg eable exp enses
* xDirect labour hours for batch
Direct labour hour for the month
Problem No. 5
1. Computation of OH Absorption Rates:
Rs. 6,000
Wedding Department: = Rs. 4 per Labour Hou.
1,500
Rs.10,000
Assenmbly Department: = Rs. 10 per Labour Hour.
1,000
2. Batch Cost Sheet:

Particulars Rs.
Direct Material Given 12,000
Direct Wages 100 hours in Welding Shop at Rs. 10 per hour 1,000

IPCC_34e_Costing (Problems) _ Job Costing & Batch Costing ______________6

No.1 for CA/CWA & MEC/CEC MASTER MINDS
200 hours in Assembly Shop at Rs. 8 per hour 1,6000
Direct Expenses Hire of Special Scan Equipment 500
Prime Cost 15,100
Add: Overheads: 100 hours in Welding shop at Rs. 4 per hour 400
200 hours in Assembly Shop at Rs. 10 per hour 2,000
Factory Cost 17,500
Add: SOH absorbed at 20% on Factory Cost of Rs. 17,500 3,500
Total Cost 21,000

Cost per unit =

Rs. 21,000
= Rs. 84.00 THE END
250

IPCC_34e_Costing (Problems)_Job Costing & Batch Costing ______________7