JOB COSTING

CA. Ashim Bhatta

 Definition of Job Costing
This costing method is used in firms which work on the basis of job work.
There are some manufacturing units which undertake job work and are
called as job order units. The main feature of these organizations is that
they produce according to the requirements and specifications of the
consumers. Each job may be different from the other one. Production is
only on specific order and there is no pre demand production.
 Process of Job costing
Prepare a separate cost sheet for each job
Disclose cost of materials issued for the job
Employee costs incurred (on the basis of bill of material and time cards
respectively)
When job is completed, overhead charges are added for ascertaining total
expenditure
 Suitability of Job Costing

When jobs are executed for different customers according to their

specifications.
when no two orders are alike and each order/job needs special treatment
Where the work-in-progress differs from period to period on the basis of the
number of jobs in hand.
 Advantage of Job costing
Accurate information is available regarding the cost of the job
completed and the profits generated from the same.
 Proper records are maintained regarding the material, labor and
overheads so that a costing system is built up
 Useful cost data is generated from the point of view of management
for proper control and analysis.
 Performance analysis with other jobs is possible by comparing the data
of various jobs.
 If standard costing system is in use, the actual cost of job can be
compared with the standard
Helpful to justify the customer in cost plus basis pricing
Difference Between:
Difference Between:
COST SHEET
COST SHEET
 Advantages of Cost sheet or Cost Statements

 It provides the total cost figure as well as cost per unit of

production.
 It helps in cost comparison.
 It facilitates the preparation of cost estimates required for submitting
tenders.
 It provides sufficient help in arriving at the figure of selling price.
 It facilitates cost control by disclosing operational efficiency
 Frequently Asked Questions

1. Job costing and process costing

2. Job costing and Batch costing
3. Job costing and contract costing
4. What is job costing? In which type of industries this system would
be suitable? Give a specimen of Cost sheet.