Job Costing

Job Costing
 Used in businesses which perform work on
specific jobs, orders or contracts which can
be identified throughout the various stages of
production eg
– building Each job is
manufactured or
– contracting It is also widely
carried outused for the
to the
– garages costing of BATCHES of similar
customer's
articles such as shoes or nuts
requirements
– foundries and bolts.
– engineering
 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.
 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
 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.
 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.
 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
JOB COST ACCOUNT
Department A Job A/70/144
Date Description Total Cost (£)
July 1 MATERIAL
Direct 130.00
LABOUR
Direct 100 hours @ £0.90 per hour 90.00
OVERHEADS
100 labour hours @ £0.80 per hour 80.00
July 13 TOTAL COST £300.00