job costing
JOB COSTING
JOB COSTING
Cost object is a unit or multiple units of a distinct product or service called a job.
Product or service is
A single unit such as:
1.Specialised machine done at Hitachi.
2.A construction project managed by L & T.
3.Advertising campaign produced by Saatchi and Saatchi.
Multiple identical unit such as:
1.Agni missile for Ministry of Defense manufactured by HAL.
JOB COSTING
SERVICE
SECTOR
JOB
COSTING
MERCHANDISING
SECTOR
- Audit engagements done - Special promotion of by PWC. new products by
- Consulting engagements Shopper’s Stop. done by McKinsey & Co.
-Advertising campaigns run by Ogilvy and Mather.
- Movies produced by R K
Movies.
MANUFACTURING
SECTOR
-Assembly of individual aircrafts at
Boeing.
- Construction of ships at Mazgaon Dock
JOB COSTING – DECISION MAKING PROCESS
1. Identify the problems and uncertainties – What it will cost to complete the job and the prices that its competitors are likely to bid. 2. Obtain information – Is the job consistent with the companies strategy. 3. Make predictions about the future – Do the employees have requisite skill sets, Likelihood of the cost overruns.
4. Make decisions by choosing among alternatives – Place the bid by taking into account likely bids of competitors, risks, qualitative factors.
5. Implement the decision, evaluate performance and learn.
JOB COSTING – APPROACH
1. Identify the job that is chosen as the cost object.
2. Identify the direct cost of the job.
3. Select the cost allocation bases to use for allocating indirect costs to the job.
4. Identify the indirect costs associated with each cost allocation base. 5. Compute the rate per unit of each cost allocation base used to allocate indirect costs to the job.
6. Compute the indirect cost allocated to the job.
7. Compute the total cost of the job by allocating the direct cost and indirect cost.
JOB COSTING - ILLUSTRATION
ILLUSTRATION
Heavy engineering corporation manufactures and installs specialized machinery for
JOB COSTING
Cost object is a unit or multiple units of a distinct product or service called a job.
Product or service is
A single unit such as:
1.Specialised machine done at Hitachi.
2.A construction project managed by L & T.
3.Advertising campaign produced by Saatchi and Saatchi.
Multiple identical unit such as:
1.Agni missile for Ministry of Defense manufactured by HAL.
JOB COSTING
SERVICE
SECTOR
JOB
COSTING
MERCHANDISING
SECTOR
- Audit engagements done - Special promotion of by PWC. new products by
- Consulting engagements Shopper’s Stop. done by McKinsey & Co.
-Advertising campaigns run by Ogilvy and Mather.
- Movies produced by R K
Movies.
MANUFACTURING
SECTOR
-Assembly of individual aircrafts at
Boeing.
- Construction of ships at Mazgaon Dock
JOB COSTING – DECISION MAKING PROCESS
1. Identify the problems and uncertainties – What it will cost to complete the job and the prices that its competitors are likely to bid. 2. Obtain information – Is the job consistent with the companies strategy. 3. Make predictions about the future – Do the employees have requisite skill sets, Likelihood of the cost overruns.
4. Make decisions by choosing among alternatives – Place the bid by taking into account likely bids of competitors, risks, qualitative factors.
5. Implement the decision, evaluate performance and learn.
JOB COSTING – APPROACH
1. Identify the job that is chosen as the cost object.
2. Identify the direct cost of the job.
3. Select the cost allocation bases to use for allocating indirect costs to the job.
4. Identify the indirect costs associated with each cost allocation base. 5. Compute the rate per unit of each cost allocation base used to allocate indirect costs to the job.
6. Compute the indirect cost allocated to the job.
7. Compute the total cost of the job by allocating the direct cost and indirect cost.
JOB COSTING - ILLUSTRATION
ILLUSTRATION
Heavy engineering corporation manufactures and installs specialized machinery for