COST AND MANAGEMENT ACCOUNTING

Mrs. Anita Sahoo

Assistant Professor
Faculty of Management Sciences
Siksha ‘O’ Anusandhan (Deemed to be University)
Bhubaneswar, Odisha, India
 Overview of previous class
•Methods of costing
•Introduction to job costing, batch costing, contract
costing, process costing, operation costing,
operating costing, unit costing, etc.
•Procedure of unit costing
•Cost sheet purposes
•Treatment of stocks
•Items excluded from cost
•Treatment of scrap
•Illustrations on unit costing
 2. Job Costing
•In job order industries, production work is done against
orders from customers. Each job is completed as per
customer’s specifications.
•Each job work needs special treatment and can be
clearly distinguished from other jobs.
•Examples of job order industries are printing press,
construction of buildings, bridges, roads, ship building,
etc.
•Job costing is a method of cost ascertainment used in
job order industries basically printing press, automobile
repair shop, interior decoration, general engineering,
machine tools, etc.
 Objectives of job costing
• Cost of each job is ascertained separately. It helps
in finding out the profit or loss on each individual
job.
• It enables the management to know those jobs
which are more profitable and those which are
unprofitable.
• It provides a basis for determining the cost of
similar jobs undertaken in future.
• It helps the management in controlling costs by
comparing the actual costs with the estimated
costs.
 Job costing procedure
• Job number: when an order has been accepted, an
individual job number must be assigned to each job so that
separate jobs are identifiable at all stages of production.
• Production order: the production control department then
makes out a production order thereby authorising to start
work on the job. several copies of the production order are
prepared.
• Job cost sheet: these are not prepared for specified
periods but they are made out for each job regardless of
the time taken for its completion. However, material,
labour and overhead costs are posted periodically to the
relevant cost sheet.
 3. Batch Costing
• A batch is a cost unit consisting of a group of
identical items.
• Batch costing is used when production consists of
limited repetition work and a definite number of
articles are manufactured in each batch to be held
in stock for sale to customers generally.
• Batch costing is used in shoe manufacture, toys,
readymade garments, tyres and tubes, component
parts, etc.
 Batch costing procedure
• Each batch is given a batch number in exactly the
same way as a job is given a job number.
• Direct materials, direct labour, direct expenses
and overheads can be identified and absorbed
with the batch are recorded on the batch cost
card.
• When a batch is completed, the total cost of the
batch is divided by the quantity produced in the
batch to arrive at the cost per unit or per dozen
etc., as required.
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