1. Job Costing

2. Used in businesses which perform work on specific jobs, orders or contracts which can be identified throughout the various stages of production eg –building –contracting –garages –foundries –engineering Each job is manufactured or carried out to the customer's requirements It is also widely used for the costing of BATCHES of similar articles such as shoes or nuts and bolts.

3. Purpose of Job Costing To determine the profit or loss made on each job. This serves as a check on the accuracy of the estimate or with the cost of similar jobs completed in the past, and helps to bring to light any inefficiencies that have occurred in the course of production. Thus job costing separates PROFITABLE jobs from UNPROFITABLE ones and provides a check on past estimates as well as a basis for estimating for similar work in the future.

4. How to Cost a Job Job costing involves a considerable amount of clerical work and in factory work it is essential to have reliable production records The accounting procedure requires: –Recording Materials Used –Recording Wages –Recording Overheads

5. Recording Materials Materials are issued on either a LIFO, FIFO or AVCO basis to each job Only materials which are direct in relation to the cost unit (job) are posted in this manner Indirect materials are analysed and accumulated under Overhead Expenses.

6. Recording Wages Direct Labour entries shown on the individual time sheets or piece work records must be analysed by job number and the totals posted to the individual Job Cost Sheets Only wages which are direct in relation to the cost unit (job) are posted in this manner The Indirect Wages are accumulated and treated as Overheads.

7. Recording Overheads Overhead expenditure is allocated as far as possible to cost centres (jobs) and items which are not capable of direct allocation are apportioned

8. JOB COST ACCOUNT Department AJob A/70/144 DateDescription Total Cost (£) July 1MATERIAL Direct 130.00 LABOUR Direct 100 hours @ £0.90 per hour 90.00 OVERHEADS 100 labour hours @ £0.80 per hour 80.00 July 13TOTAL COST £300.00