Job Costing

Question 1

Record keeping

Answer 1

• Job numbers - job cost sheet
• Material requisitions - allocated to correct job?
• Labour hours allocations - make sure correct hours worked on each project are registered
• Allocation of overheads-

Question 2

Costs

Answer 2

Materials - actual materials used

Labour - use time sheets
Overheads - use direct labour hours or machine hours or unit costs

Question 3

Overhead recovery

Answer 3

Very important to obtain accurate overhead absorption rate

Too high - jobs will …

Question 4

Calculating overhead recovery rate

Answer 4

Total indirect costs

Decide on the most appropriate rate

Direct labour hours

Machine hours
Budgeted units
Calculate BOAR (budgeted overhead absorption rate)
apply BOAR to jobs

At end of the year calculate Any over/under absorption

Question 5

Application of manufacturing overhead

Answer 5

BOAR=estimated total manufacturing overhead cost for the coming period / estimated total units in the allocation base for the coming period

Overhead applied = BOAR X Actual activity (actual amount of the cost driver e.g. units produced , direct labour hours etc)

Question 6

Cost plus pricing

Answer 6

How to achieve profit

Cost plus percentage which the market will bear

Look at competitors

Industry customs

Local customs

Question 7

Direct method

Answer 7

Cost between service departments are ignored and all costs are allocated directly to operating departments

Question 8

Step method

Answer 8

Service department costs are allocated to other service and operating departments

Question 9

Reciprocal method

Answer 9

Interdepartmental services are given full recognition rather than partial recognition as the with the step method

Question 10

Service costing

Answer 10

Cost per service unit = total cost for period/ number of service units in the period

Transport - cost per mile
Hospital - cost per patient
Catering - cost per meal