When products are made to customer order, each order is different in size/specifications. In such cases, it is not meaningful to calculate cost “per process” for the whole factory. Instead, we calculate cost job-wise.
Job costing collects and records costs separately for each job/work order so that we can:
Batch costing is a special form of job costing where the job is a batch of identical units (e.g., 500 pens as one batch). The cost is found per batch and then per unit.
Job costing is a method of costing in which costs are accumulated and ascertained separately for each job or work order.
A “job” is identifiable and separate. Each job can be:
Common areas where each order is unique:
Exam writing tip: Always mention that job number helps in cost collection and control.
For a job, we record:
So, job cost typically follows:
Good job costing requires good documentation; otherwise job costs become unreliable.
A job cost sheet is a statement showing cost of a specific job.
Typical format:
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Job costing is used where each customer order/job is separate and identifiable. The main features (write any three, explained) are:
Thus, job costing gives accurate job-wise cost and supports managerial control and pricing.
Cost accounting is a form of managerial accounting that aims to capture a company's total cost of production by assessing the variable costs of each step of production as well as fixed costs, such as a lease expense.
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When products are made to customer order, each order is different in size/specifications. In such cases, it is not meaningful to calculate cost “per process” for the whole factory. Instead, we calculate cost job-wise.
Job costing collects and records costs separately for each job/work order so that we can:
Batch costing is a special form of job costing where the job is a batch of identical units (e.g., 500 pens as one batch). The cost is found per batch and then per unit.
Job costing is a method of costing in which costs are accumulated and ascertained separately for each job or work order.
A “job” is identifiable and separate. Each job can be:
Common areas where each order is unique:
Exam writing tip: Always mention that job number helps in cost collection and control.
For a job, we record:
So, job cost typically follows:
Good job costing requires good documentation; otherwise job costs become unreliable.
A job cost sheet is a statement showing cost of a specific job.
Typical format:
Meaning of the headings:
Job No. J-21 details:
Step 1: Prime cost
Step 2: Factory overhead (80% of direct labour) Factory overhead = 80% × 20,000 = ₹16,000 Works cost = 52,000 + 16,000 = ₹68,000
Step 3: Administration overhead (10% of works cost) Admin OH = 10% × 68,000 = ₹6,800 Cost of production = 68,000 + 6,800 = ₹74,800
Assume no selling & distribution overhead given → treat cost of sales = cost of production = ₹74,800
Step 4: Profit (20% of cost of sales) Profit = 20% × 74,800 = ₹14,960
Quotation / selling price = 74,800 + 14,960 = ₹89,760
A compact job cost sheet:
Batch costing is a form of job costing where costs are collected for a batch of identical units.
Example: If a factory produces 1,000 identical bolts as one batch, that batch is treated as one job.
EBQ is the batch size that balances setup cost and carrying cost (concept similar to EOQ).
Basic idea: Larger batches reduce setup frequency, but increase carrying cost of finished goods.
Job/batch costing is useful for:
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Job costing and process costing differ on several bases (any three points with examples):
In short: job costing suits non-repetitive customer orders, while process costing suits continuous mass production.
Given:
Step 1: Direct labour cost Direct labour = 400 × 50 = ₹20,000
Step 2: Prime cost Prime cost = Direct material + Direct labour + Direct expenses = 30,000 + 20,000 + 2,000 = ₹52,000
Step 3: Factory overhead and works cost Factory OH = 80% of direct labour = 0.80 × 20,000 = ₹16,000 Works cost = Prime cost + Factory OH = 52,000 + 16,000 = ₹68,000
Step 4: Administration overhead and cost of production Admin OH = 10% of works cost = 0.10 × 68,000 = ₹6,800 Cost of production = 68,000 + 6,800 = ₹74,800
Assumption: No selling & distribution overhead is given, so Cost of sales = Cost of production = ₹74,800
Step 5: Profit and quotation Profit (20% on cost) = 0.20 × 74,800 = ₹14,960 Quotation/Selling price = 74,800 + 14,960 = ₹89,760
Job Cost Sheet (summary):
Note for exams: If profit is ‘on sales’, the working changes. Here profit is clearly stated as ‘20% on cost’, so we multiply cost by 20%.
