JOB COSTING

Business needs Costing System to meet their requirements. Single Costing System is not enough to fulfill everybodys need. Hence there is different methods of costing for different industries depending upon the type of manufacture and their nature.

There are 2 methods of Costing

Specific order costing Job Costing Batch Costing Contract Costing Continuous operation costing Operation Costing Output Costing Process Costing

JOB Costing???
It is that form of specific order costing which applies where work is undertaken to customers special requirements and each order is of comparatively short duration

Features
Production is undertaken against customers order Each job has its own characteristics Duration of job is short The job can be identified at each stage of production from start to end Cost of each jobs are collected at the end of its completion

 Only prime cost elements are traceable and overheads are assigned to each job on some suitable basis Main purpose is to determine profit or loss on each job undertaken A separate job cost sheet is prepared for each job The product is not meant for a mass market

Procedure of Job costing

Receiving an Enquiry Estimation of the Price of the Job Receiving of Order

 Preparation of Production Order

It is the instruction to start production on the job Contains all information regarding production 4 Copis are prepared

 Preparation of Design and Production Schedule

Production planning department and Engineering department prepares the design for the job. Production planning department also prepares Production schedule and machine loading for each department in order to avoid wastage of material ,labour and machine hour.

 Preparation of Job Cost Sheet

Cost Accounting department prepares this for each job Records all expenses incurred in a job

 Completion of Job
Job Completion Report is sent to the Planning Department and Costing Department Actual cost is then compared with the estimated cost

Profit or Loss
Finished job is sent to the Finished products store Profit or Loss is ascertained by finding out the difference between the cost of the job and the price charged for the job

Job Order Costing in Service Companies

Job order costing is also used in service organizations such as : Law firms
Movie studios Hospitals Repair shops

 In a law firm, for example, each client represents a "job," and the costs of that job are accumulated day by day on a job cost sheet as the client's case is handled by the firm. Legal forms and similar inputs represent the direct materials for the job. The time expended by attorneys represents the direct labour. The costs secretaries, clerks, rent, depreciation, and so forth, represent the overhead.

In a movie studio, each film produced is a "job. Materials :costumes, props, film, etc. Labor :actors, directors and extras Overhead costs :different utilities, depreciation of equipment, wages of maintenance workers etc. These are recorded in each film's job cost sheet.

Thank You..