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    Title01 - Job Costing and Batch Costing

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    Poonam
    The document discusses different types of costing systems including unit costing, job costing, and batch costing. It provides details on cost sheets, production accounts, and allocating overhead costs. Key aspects covered include determining prime cost and factory cost, tracking work-in-progress, and calculating total production costs.

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    © All Rights Reserved
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    Title01 - Job Costing and Batch Costing

    Uploaded by

    Poonam
    67 views72 pages
    The document discusses different types of costing systems including unit costing, job costing, and batch costing. It provides details on cost sheets, production accounts, and allocating overhead costs. Key aspects covered include determining prime cost and factory cost, tracking work-in-progress, and calculating total production costs.

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    Title01_Job costing and Batch costing

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    The document discusses different types of costing systems including unit costing, job costing, and batch costing. It provides details on cost sheets, production accounts, and allocating overhead costs. Key aspects covered include determining prime cost and factory cost, tracking work-in-progress, and calculating total production costs.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    67 views72 pages

    Title01 - Job Costing and Batch Costing

    Uploaded by

    Poonam
    The document discusses different types of costing systems including unit costing, job costing, and batch costing. It provides details on cost sheets, production accounts, and allocating overhead costs. Key aspects covered include determining prime cost and factory cost, tracking work-in-progress, and calculating total production costs.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 72

     After reading this lesson, the user should be

    able to
     Understand the meaning of different costing
    system.
     Use the different costing systems in practical
    scenario.
     Understand the characteristics. Advantages and
    limitations of different costing systems.
    Title _01
     After reading this lesson, the user should be
    able to understand:
     Unit and Output Costing
     Production Account
     Job Costing and its features, basic principle &
    special term, applications, advantages &
    limitations
     Batch Costing and its features, difference
    between job & batch costing and applications
     Need of different costing systems
     Designing costing system depending upon the
    type of manufacture and their nature have
    been developed.
     There are two basic methods of costing viz.
     Specific
    order or job costing
     Continuous operation or process costing
     A document which provides for the assembly
    of the detailed cost of a cost centre or cost
    unit.
     A periodical statement of cost
     Designed to show in detail the various
    components of cost of goods produced like
    prime cost, factory cost, cost of production,
    total cost and cost per unit
    Opening stock of raw materials

    Add: Purchase of raw materials

    Less: Closing stock of raw materials 
    Value of raw materials consumed

    Prime cost —
    Add: Factory overheads —
    Work-in-progress (beginning) —
    Less: Work-in-progress (closing) —
    Works cost 
    Cost of production 
    Add: Opening stock of finished goods 
    Less: Closing stock of finished goods 
    Cost of goods sold
    From the following particulars prepare a Production Account showing all details of cost
    and their break up and also calculate gross profit and net profit.
    1-9-2012 30-9-2012
    Rs. Rs.
    Stock of Raw Material 75,000 91,500
    Stock of Work-in-Progress 28,000 35,000
    Stock of Finished Goods 54,000 31,000

    Rs. Rs.
    Direct Expenses 1,500 Sales 2,11,00
    Raw Materials Purchased 66,000
    Salesmen Salaries and Commission 6,500
    Direct Wages 52,500 Office Rent, Rates etc.
    2,500
    Indirect Wages 2,750 Sundry Office Expenses
    6,500
    Factory Expenses 25,000 Advertisement 3,500
    Depreciation on Plant and Machinery 3,500 Carriage Outwards 2,500
    Cost sheet Production Account

    (1) It is prepared as a statement. It is prepared as an account.

    (2) Expenses are classified to Expenses are not classified.


    ascertain prime cost, factory
    cost, total cost, etc.
    (3) To enable comparison, No figures of previous
    figures of previous period are period are provided. Hence
    provided. no comparison is possible.

    (4) It is based on actual and It is based on actual figures.


    estimated figures of
    expenses.
    (5) It is prepared for each job It is prepared for each
    and sometimes for the whole production department.
    factory.
    Job-ticket/Job card
     record the time spent on each job
     Job cards may be of two types,
     material consumption as well as time spent by
    operators.
     issued to an operator by the supervisor and contains
    only the operation details.
     time recording clock on the card.
     The finishing time is recorded when the operation is
    completed.
    job ticket/job cost card

     reduces normal idle time.


     gives clear, logical and suitable
    information to the costing
    department.
     provides a very useful link between
    the production control and costing.
     information about number and
    particulars of job accurately.
     The quantity specified on a production order was 2,000 units of an article in the
    manufacture of which four operations were involved. The piece-rates for these
    four operations were in sequence. Rs. 20, 25, 20 and 30 per unit. The company
    recovered factory overhead expenses on the basis of direct labour cost and the
    current overhead rate is 80%. The entire quantity of material authorised for the
    order, viz. 1,000 kgs. @ Rs. 200 per kg. was issued to the shop. Of this 50 kgs.
    were returned as scrap arising in course of manufacture, valued at Rs. 800.
     At the year end, the order was incomplete; only 200 units were fully completed
    and transferred to finished stock. Stock-taking of the work-in-progress revealed
    the following position
     Calculate the cost of the work-in-progress at the year end.
    Materials in process 650 kgs.

    Material in hand, in shop (unprocessed) 200 kgs.

    Production in partly completed stage 1,300 units

    Extent of work performed:

    Upto the first operation 600 units

    Upto the second operation stage 400 units

    Upto the third operation stage 300 units

    Upto the fourth operation stage Nil


    Rs. Rs.

    Cost sheet showing cost of work-in-progress

    Material Cost

    Material in hand 200 kgs. @ Rs. 200 per kg. 40,000

    Material in process 650 kgs. @ Rs. 200 per kg. 1,30,000

    Less: Proportionate cost of scrap 650 1,29,350

    1,69,350

    Labour Cost

    Operation I - 600 units @ Rs. 20 12,000

    Operation II - 400 units @ Rs. 45 18,000

    Operation III - 300 units @ Rs. 65 19,500 49,500

    Factory overhead 80% on direct labour 39,600

    Total cost of work-in-progress 2,58,450


    Job Costing Batch Costing

    It is carried out or a product The process of producing


    is produced by specific the product has a
    orders. continuous flow and
    product is homogeneous.

    It is determined for each job. It is compiled on time basis.

    Each job is separate and Product lose their


    independent of other jobs. individuality as they are
    manufactured in a
    continuous flow
    ABC Limited manufactures ring binders which are embossed with the customers’ own
    logo. A customer has ordered a batch of 600 binders. The following illustrate the
    cost for a typical batch of 100 binders.
    Rs.
    Direct materials 60
    Direct labour 20
    Machine set up 6
    Design and art work 30
    Prime cost 116
    Direct employees are paid on a piecework basis.
    ABC Limited absorbs production overheads at a rate of 20% of direct wages cost. 5 % is
    added to the total production cost of each batch to allow for selling, distribution
    and administration overheads.
    ABC Limited requires a profit margin of 25% of sales value.
    The selling price for 600 binders (to the nearest penny) will be:
    A. Rs. 756
    B. Rs. 772.8
    C. Rs. 806.4
    D. Rs. 1008
    Rs.
    Prime cost (Rs. 116 x 6) 696
    Overheads (Rs. 20 x 6 x 20%) 24
    720
    Selling, distribution and admin overheads (180
    x 5%) 36
    Total cost 756

    Selling price (756/75x100) 1008


     Allocation
     Policy and organisational conditions.
     Cost Unit.
     Location
     additional work not stipulated in the
    contract
     the expenditure on this additional work
    should be separately analysed
     work of a specialised character
     The cost of such sub-contracts is a direct
    charge
     changes in the price
     utilisation of material and/labour.
     The value of the contract is ascertained by
    adding a certain percentage of profit over
    the total cost of the work.
     A reasonable profit accrues : risky projects.
     simplifies the work offering tenders and
    quotations.
     provides escalation clauses.
     Customer is assured of paying only
    reasonable amount of profit.
     No initiative for cost reduction by affecting
    economies of production and reducing
    wastages.
     creates delay in preparing purchase budget
    by the customer.
     High Costs
     a contractor is engaged on a contract for
    several years,
     The sum retained is called retention money
     Usually the contractor may be paid 75% or
    80% of the work certified depending upon the
    terms of the contract.
     unforeseen contingencies.
     heavy fluctuations in the future for profit from year to
    year.
     intermittent years for the work in progress,
     unknown contingencies
     Unit costing refers to the costing procedure, which is ideally used in case of concerns producing a
    single article on large scale by continuous manufacture. The cost units are identical with identical
    costs. The cost incurred during a period is divided by the total output for ascertaining the cost
    per unit.
     Cost sheet is a document which provides for the assembly of the detailed cost of a cost centre or
    cost unit.
     Production account is an account giving details of cost of production, cost of sales and profit
    made during a particular period.
     Job costing ascertains the cost of a job that is produced as per the requirements of the
    customers.
     Job costing is a costing system which considers job a cost unit. A job is a cost unit which consists
    of a single order or contract.
     Batch costing system is used when production is in batches.
     A batch is a cost unit which consists of a separate, readily identifiable group of product units
    which maintains its separate identity throughout the production process.
     Contract costing is that form of specific order costing which applies where work is undertaken as
    per customers’ special requirements and each order is of long duration.
     Escalation clause is a provision in the contract for adjustment of prices quoted and accepted , in
    the event of specified contingencies.
     Cost plus contract is a contract where the contractee agrees to pay to the contractor the cost
    price for the work done on the contract plus an agreed percentage thereof by way of overhead
    cost and profit.
     Work certified is the work approved by the contractee or his nominee on a specific date.
     Work which has not been so far approved by the contractee or his nominee is known as work
    uncertified.
     Cost and Management Accounting byRavi
    Kishore,Taxmann’s 4th Edition.
     Cost Accounting by Dr. S.N Maheshwari,
    Sultan.

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