1. Chapter 10 Job, Batch and Service costing

2. Study guide Describe the characteristics of job and batch costing. [k]
Describe the situations where the use of job or batch costing would be appropriate. [k]
Prepare cost records and accounts in job and batch costing situations. [s]
Establish job and batch costs from given information. [s]
Identify situations where the use of service/operation costing is appropriate. [k]
Illustrate suitable unit cost measures that may be used in different service/operation situations.[s]
Carry out service cost analysis in simple service industry situations.[s]

3. Job and batch costing 1.1 Job and job costing
A cost unit is a unit of product or service to which costs can be related.
A job is a cost unit which consists of a single order or contract
Job costing has the following features:
Work is undertaken to customers’ special requirements
Each order is of short duration
Jobs move through operations as a continuously
identifiable unit
Jobs are usually individual and separate records should
be maintained on an individual job costing sheet / job card

4. 1.2 Job cost information A job cost card word like: Direct materials
The organization may also absorb non-production overheads and include these in the estimate of the total jobs cost
Direct materials
Direct labour
Variable overheads
Prime cost
Fixed overheads
Total cost
Job XYZ xx

5. Material costs for each job are determined from material requisition notes.
Labour times on each job are recorded on a job ticket, which is then costed and recorded on the job cost sheet.
Some labour costs, such as overtime premium or the cost of rectifying sub-standard output, might be charged either directly to a job or else as an overhead cost, depending on the circumstances in which the costs have arisen.
Overhead is absorbed into the cost of Jobs using the predetermined overhead absorption rates,

6. → Is charged as a direct cost to job
1.3 Rectification costs P193
If the finished output is found to be substandard, it may be possible to rectify the fault.
Rectification costs can be split into two categories:
Rectification work that is not a frequent occurrence
→ Is charged as a direct cost to job
Rectification work that is a frequent occurrence
→ Is treated as a production overhead.

7. 1.4 Pricing the job P193
The usual method of fixing prices in a jobbing concern is cost plus pricing （成本加成定价法）.
Cost plus pricing means that a desired profit margin is added to total costs to arrive at the selling price.
The final price quoted will, of course, be affected by what competitors charge and what the customer will be willing to pay.

8. 1.5 Batch costing
Batch costing is very similar to job costing - each batch of similar articles is separately identifiable
A batch is a group of similar articles which maintains its identity through production and is treated as a cost unit.
The cost per unit manufactured in a batch is the total batch cost divided by the number of units in the batch.

9. 2. Service costing P199
Service costing is a costing method concerned with establishing the costs, not of items of production, but of services rendered. Service organisations do not make or sell tangible goods.
There are two main types of service:
Services provided by a company operating in a service industry
Services provided internally by a service department to other departments

10. 2.1 Specific characteristics of service P200
Simultaneity
Heterogeneity
Intangibility
Perishability

11. 2.2 （Composite）Cost unit in service costing
Road, rail and air transport service
Passenger/mile or kilometre, ton/mile or kilometre
Hotels
Occupied bed-night
Hospitals
Education
Patient
Full-time student
Catering establishment
Meal served

12. 2.2 Service costing versus product costing P199
Many services are revenue earning but others are not
In many services the cost of direct materials will be relatively small compared to the labour, expenses and overheads cost
The purpose of service costing might be to provide management information on costs and efficiency
This is in contrast to product costing where the aim is to establish profit/loss

13. 2.3 The objectives of service cost analysis P.201
Compare planned cost with actual cost
Calculate a cost per unit of service
Use cost per service unit as part of control function
Calculate prices for services being sold to third parties
Analyse costs to assist planning, control and decision making
Internal service situations aim to control costs of service department and user department
External service providers need cost per unit

14. 3. Service cost analysis ——in internal service situations
Service department costing is used to establish a specific cost for an ‘internal service’ that is a service provided by one department for another, rather than one sold externally to customers. Services departments therefore include canteens and data processing departments.
Two basic purposes:
To control the costs and efficiency in the service department.
To control the costs of the user departments, and prevent the unnecessary use of service.

15. 3.1 Transport costs P201
If a company has a fleet of lorries or vans which it uses to distribute its goods, it is useful to know how much the department is costing for a number of reasons.

17. 3.2 Canteen costs P202
A feature of canteen costing is that some revenue is earned when employees pay for their meals, but the prices paid will be insufficient to cover the costs of the canteen service. The company will subsidise (给……津贴) the canteen and a major purpose of canteen costing is to establish the size of the subsidy.

18. Canteen
costs

19. Canteen costs Overhead cost Food and Drink Depreciation Labour costs
Gas and electricity
Consumable stores

20. 3.3 Maintenance costs p203
If maintenance costs in a factory are costed as jobs (that is, if each bit of repair work is given a job number and costed accordingly), repair costs can be charged to the departments on the basis of repair jobs actually undertaken, instead of on a more generalised basis, such as apportionment according to machine hour capacity in each department. Departments with high repair costs could then consider their high incidence of repairs, the age and reliability of their machines, or the skills of the machine operatives.

21. 4. Service cost analysis ——in service industry situations P204

22. Chapter roundup
A costing method is designed to suit the way goods are processed or manufactured or the way services
Job costing is a costing method applied where work is undertaken to customers' special requirements and each order is of comparatively short duration,
Costs for each job are collected on a job cost sheet or job card.

23. Material costs for each job are determined from material requisition notes. Labour times on each job are recorded on a job ticket, which is then costed and recorded on the job cost sheet. Some labour costs, such as overtime premium or the cost of rectifying sub-standard output, might be charged either directly to a job or else as an overhead cost, depending on the circumstances in which the costs have arisen. Overhead is absorbed into the cost of Jobs using the predetermined overhead absorption rates,

24. The usual method of fixing prices within a jobbing concern is cost plus pricing.
It is possible to use a job costing system to control the costs of an internal service department, such as maintenance department or the printing department.
Batch costing is similar to job costing In that each batch of similar articles is separately identifiable, The cost per unit manufactured in a batch is the total batch cost divided by the number of units in the batch.
Service costing can be used by companies operating In a service Industry or by companies wishing to establish the cost of services carried out by some of their departments, Service organisations do not make or sell tangible goods.

25. Specific characteristics of services
Simultaneity
Heterogeneity
Intangibility
Perishability
The main problem with service costing is the difficulty in defining a realistic cost unit that represents a suitable measure of the service provided. Frequently, a composite cost unit may be deemed more appropriate.
Service department costing Is also used to establish a specific cost for an Internal service which is a service provided by one department for another, rather than sold externally to customers.