1. Paper F2 Management Accounting
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2. Chapter 10 Job, batch and service costing
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3. Job, batch and service costing
Chapter Preview
Job, batch and service costing
Job and batch costing
Service costing
Job cost card
Define a cost units
2018/12/31
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4. Process Costing Job Costing Costing methods Chapter 11
Used for production according to customers’ special requirements.
Built to order rather than mass produced.
Many costs can be directly traced to each job.
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5. Process Costing Job Costing Costing methods Chapter 11
Typical job order cost applications:
Special-order printing
Building construction
Also used in service industry
Hospitals
Law firms
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6. Job and batch costing Job = a cost unit of a single order/contract
Batch = a cost unit which consists of a separate, readily identifiable group of units
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7. Events in Job Order Manufacturing
Receive orders from customers.
Begin production.
Schedule jobs.
Order materials.
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8. Job Order Manufacturing Activities
Direct
Materials
Indirect
Production Overheads
Allocate
Work in Process
Finished Goods
Cost of Goods Sold
Indirect
Direct
Labor
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9. Job Order Cost Documents
The primary document for tracking the costs associated with a given job is the job cost sheet.
Let’s investigate
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10. Job Cost Sheet
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11. Job Cost Sheet
Let’s see one
A materials requisition is used to authorize the use of materials on a job.
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12. Materials Requisition
C. Luther
M. Batemen
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13. Materials Requisition
C. Luther
M. Batemen
Cost of material is charged to Job B15.
Proper authorizaton
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14. Materials Requisition
C. Luther
M. Batemen
Type and quantity of material charged to Job B15.
Pre-printed, sequentially numbered form.
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15. Materials Requisition
C. Luther
M. Batemen
The materials requisition form also serves as the source document for recording material usage in the accounting records.
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16. Materials Ledger Card
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17. Job Cost Sheet
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18. Production Overhead Account
Job Costing Document Flow Summary
Direct materials
The materials requisition indicates the cost of direct materials to charge to jobs and the cost of indirect materials to charge to overhead.
Job Cost Sheets
Production Overhead Account
Materials Ledger Cards
Materials Ledger Cards
Materials Ledger Cards
Materials Requisition
Indirect materials
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19. production Overhead Account
Job Costing Document Flow Summary
Direct Labor
Employee time sheets indicate the cost of direct labor to charge to jobs and the cost of indirect labor to charge to overhead.
Job Cost Sheets
Job Cost Sheets
Job Cost Sheets
Job Cost Sheets
Employee Time Ticket
Employee Time Ticket
Employee Time Ticket
Employee Time Sheet
production Overhead Account
Indirect Labor
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20. Flow of All Job Costs
Let’s examine the cost flows in a job order system. We will use T-accounts and start with materials.
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21. Flow of All Job Costs Raw Materials Works in Process
Direct Material
Material
Purchases
Actual Overhead Costs
Indirect Material
Production Overhead
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22. Flow of All Job Costs
Next let’s add labor costs and absorbed production overhead to the job order cost flows. Are you with me?
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23. Overhead absorbed to WIP
Flow of All Job Costs
Wages payable
Work in Process
Direct Labor
Direct Material
Incurred
Actual Overhead Costs
Indirect Labor
Overhead absorbed to WIP
Overhead
Production Overhead
When
Actual absorbed production production overhead overhead / =
an adjustment is needed.
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24. Now let’s complete the goods and sell them. Still with me?
Flow of All Job Costs
Now let’s complete the goods and sell them. Still with me?
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25. Direct Material Direct Labor Overhead
Flow of All Job Costs
Work in Process
Finished Goods
Direct Material Direct Labor Overhead
Cost of Goods Mfd.
Cost of Goods Sold
Cost of Goods Sold
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26. If the finished output is found to be substandard rectification
Rectification costs
If the finished output is found to be substandard
rectification
Not a frequent occurrence as a direct cost
A frequent occurrence as a POH
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27. Cost plus pricing If profit is 20% of cost
If profit is 20% of sales price
Selling price %
Selling price %
Costs %
Costs %
Profit %
Profit %
MARGIN
MARK - UP
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28. Now let’s see more details of job costing
Example: Job Costing 2.9
Now let’s see more details of job costing
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29. Cost of direct materials is small Unit cost is difficult to calculate
Service costing
Specific characteristics of services
-- Simultaneity
-- Heterogeneity
-- Intangibility
-- Perishability
Service costing vs. other product costing
Cost of direct materials is small
Unit cost is difficult to calculate
Costing will vary from one service to another
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30. But what is a service cost unit ?
Cost per unit
Total costs for a period
______________________________
Cost per unit =
Number of service units in the period
But what is a service cost unit ?
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31. Defining an appropriate cost unit
Match up the following services with their typical cost units
Service Cost unit
Hotels Patient-day
Education Meal served
Hospital Full-time student
Canteen Occupied bed-night
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32. Composite cost unit
A composite cost unit takes into account several elements of a service
e.g. excess baggage service
Cost per KG? OR
Cost per mile transported?
Cost per KG/mile
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33. Service cost analysis for Internal services
Purposes:
Realistic apportionment
Increased responsibility and awareness
Control of service department costs
Control of user department costs
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34. Service cost analysis for service industry
What are service organisations?
--Don’t make or sell a tangible product
--Profit making or not-for-profit sector
E.g. Accountancy firms, hotels, schools, hospitals
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35. End of Chapter 10
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