JOB Costing

Q1. Handout

WN1 Computation of OH Absorption

Total cost of labor
Job 1 12500
Job 2 23000
Job 3 4500
Total 40000

OH (given) 140000

Given that OH are absorbed based on Direct Labour

OH Recovery Rate = Overheads/Total Labour cost*100

140000/40000*100

OH Recovery rate = 350% on Labour cost

The valuation of Cost happens only for the Completed Jobs,

so we will compute the Total cost only for Job 1 and Job 2

Particulars Job 1
Opening WIP 8500
Material cost 17150
Labour cost 12500
OH (350% on Labour) 12500*350%
OH (350% on Labour) 43750
Total cost 81900

Q2 Handout

PARTICULARS JOB 1
Direct Material 154
Direct Labour = Labour hrs*labour rate
Dept A 20*7.6
152
Dept B 12*7
84
Dept C 10*6.8
68
PRIME COST 458
OH - Labour hrs*OH Rate (given)
Dept A 20*12.86
257.2
Dept B 12*12.40
148.8
Dept C 10*14.03
140.3
TOTAL COST 1004.3
Add Profit - 25% on sales
25/(100-25) = 25/75 or 1/3 or 33.33%
So, 33.33% on Cost 335
Selling price 1339

Q3. Handout

WN1 Calculation of profit margin

30% on sales On cost?

30/100-30 30/70

WN2 Fixed OH
Oh 100000
Budgeted hrs for the year 10000
OH Recovery per labour hr 10

Determination of Quote for the Job

Particulars Computation
Direct Material 10kgs*10
Direct Labour 20hrs*5
Variable OH 20hrs*2
Fixed Oh 20hrs*10 per labour hr
Selling, dist and Admn 50 per job
Total cost
Add: Profit 42.86%
Quote (Selling price)

Q4 Handout

WN1

Particulars Job 1102

given Selling Price - A 107325
Profit as percentage to cost 8%
Profit as % to Sales 8/100+8%
7.407%
Profit Amount as per sales - B 107325*7.407%
Profit Amount as per sales - B 7950
Cost = Sales - Profit = A-B 99375

Alternatively

Sales/100+Profit on
Total cost for Job 1102 cost*100
107325/100+8*100
Total cost for Job 1102 99375

Sales/100+Profit on
Total cost for Job 1108 cost*100
157920*100/100+12
Total cost for Job 1108 141000

Lets assume Factory OH Recovery rate be X and Selling and Admn OH Recovery rate be Y

Statement of cost
Particulars Job 1102
Direct materials (GIVEN) 37500
Direct wages (GIVEN) 30000
Prime cost 67500
Add. Factory OH X
Recoved based on Direct wages 30000*x
Factory cost 67500+30000x
Add Selling,admn and dist exp
recoverd based on Factory cost (67500+30000x)*y

67500+30000x
Total cost +(67500+30000x)y

67500+30000x +(67500+30000x)y
67500+30000x+67500y+30000xy = 99375 Equation 1

96000+42000x+(96000+42000x)y
96000+42000x+96000y+42000xy= 141000 Equation 2

Lets solve equation 1 and 2 42000/30000 = 1.4

Lets multiply Eq 1 * 1.4 so as to cancel at least 2 variables 94500

94500+42000x+94500y+42000xy = 139125 Eq 1 after multiplying with 1.4

96000+42000x+96000y+42000xy= 141000 Eq 2 as it is
-
-1500-1500y='-1875
-1500y = -1875+1500
-1500y = -375
y = 375/1500
0.25
y= 0.25 or 25%

Sub y = 0.25 in eq 1
67500+30000x+67500y+30000xy = 99375
67500+30000x+67500(0.25)+30000(x)(0.25) = 99375
67500+30000x+16875+7500x = 99375 67500+16875+7500x++30000x = 99375
84375+37500x = 99375
37500x = 99375-84375 15000
37500x = 15000
x = 15000/37500
x = 0.4 or 40%

Checking if the % are correct sub in eq 2

96000+42000x+96000y+42000xy= 141000 16800
96000+42000(0.4) +96000(0.25)+42000(0.4)(0.25) = 141000
141000 141000

Factory OH Recovery rate = 40%

Selling and Dist Recovery rate = 25%

Computation of Selling for the New order

Direct materials (new job) 64000

Direct wages (new job) 50000
Prime cost 114000
Fac OH
40% on Direct wages = 50000*40% 20000
Factory cost 134000
Add: S&D OH = 134000*25%
25% on Factory cost 33500
Total cost 167500
Add Profit - 20% on sales
20/100-20 = 20/80 or 1/4 or 25% on cost 41875
Selling price for the New job 209375
OH Absorption

350 %

Job 2 Total
0 8500
29025 46175
23000 35500
23000*350%
80500 124250
132525 214425

JOB 2
108

16*7.6
121.6
10*7
70
14*6.8
95.2
 394.8

16*12.86
205.76
10*12.40
124
14*14.03
196.42
920.98

307
1228

ofit margin

or 3/7 42.86%

per labour hour

Amount
100
100
40
200
50
490
210
700

Job 1108
157920
 12%
12/100+12%
10.714%
157920*10.714%
16920
141000

108= 107325
100=? 107325*100/108

112-157920
100 - ? 157920*100/112

Job 1108
54000
42000
96000
X
42000*x
96000+42000x

(96000+42000x)*y

96000+42000x+(960
00+42000x)y
 139125

lying with 1.4

84375

500x++30000x = 99375
Illu 1 Module

Total loss 8%
Cost 100000
Total loss 100000*8% 8000
Normal loss 2%
100000*2% 2000
Therefore abnormal loss
Total loss - Normal loss 6000

Given , the rejection has realizable value of 2000

which has to given in the ratio of normal and abnormal losses
2000:6000 or 2:6 ratio
Normal realizable value 2000*2/8 500 As part of production - Material cos
Abnormal 2000*6/8 1500 Overheads
Balance 4500 Costing p&l

Total loss 8000

Less Normal loss -2000
Abnormal 6000 Realizable and apportioned to OH - 1500
Not realizable and loss - Costin P&L 4500 (6000-1500)

Journal
Material control account 2000
Overhead control account 1500
Costing P&L account 4500
To Work in
progress account 8000

Illu 2 Module

WN1 Overhead absorption rates

Overheads are absorbed using Direct wages

Based on th2 2019 figures from P&L

We have, OH/Direct wages*100

Dept X 5000/10000*100 50%

Dept Y 9000/12000*100 75%
Dept Z 2000/8000*100 25%
WN2 Absorption of selling expenses

Selling expenses can be absorbed based on works cost/cost of goods sold/production

We have, Selling expenses/Works cost*100

20000/200000*100 10%

Job cost sheet

Customer details Job No 303
Date of commencement Date of completion

Particulars Amount
Direct materials 70
Direct wages:
Dept X 8 hours*2.50 20
Dept Y 6 hours*2.50 15
Dept Z 4 hours*2.5 10

Chargeable expenses 5
Prime cost 120

Overheads WN1 Absorption rates

Dept X = Direct wages of X*Absorption % 20*50% 10
Dept Y= Direct wages*Absorption % 15*75% 11.25
Dept Z= Direct wages*Absorption % 10*25% 2.5

Works cost 143.75

Add: Selling expenses 10% of works cost 143.75*10% 14.375

Cost of Sales 158.125
Add: Profit @ 20% on cost 158.125*20% 31.625
Selling price 189.75
production - Material cost

P&L 4500 (6000-1500)