Job Costing: Appropriate Industries, Method, and Cost Allocation

For, Concetta Ltd. 2019
Answer 1:
Job costing as a costing approach is appropriate for industries which
manufactures specialised goods or have spate product lines for various
products manufactured and each such separate product line have
significant separable costs. Example of company for which using job
costing is appropriate are construction companies, FMCG companies,
companies in aviation industry, merchandising company etc.
Job costing also known as the traditional costing method is the simplest of
all costing approaches used. This method collects all the cost that has
been incurred by the company in a given period of time and then allocates
the entire cost to the various products of the company based on one
single allocation factor which can be total machine hours or labour hour
worked, total labour cost incurred, total production in the company or any
such similar allocation base (Bragg, 2019).
The total cost for the allocation is all costs including Direct Material, Direct
Labour and Manufacturing overheads of the company.
Answer 2:
The company Concetta Ltd. has 3 jobs as opening Work In process
Inventory as on 30 November. The company was able to complete some
and transfer to finished goods. The ending WIP for the company can be
computed as below:
For Concetta Ltd
Job No. Opening WIP
- 30
November
Completed
and
transferred
Closing WIP -
December 31
CC723 20,000 20,000 0
CH291 15,000 15,000 0
PS812 25,000 0 25,000
We see there were 3 jobs as opening WIP and completed 2 of them
completely in December. The ending WIP of the company was 25,000
units of Job No PS812 as at 31 December.
1

For, Concetta Ltd. 2019
The cost of the ending WIP inventory account as at 31 December is
computed as below:
Computation of balance in Ending WIP - 31/12
Particulars Amount Amount
Opening Balance as on 11/30 $2,50,000
Add: Additions in December
Raw Material $1,24,000
Purchased Parts $87,000
Labour Cost $2,00,500
Manufacturing
Overhead
(19,500 * $5/hr)
$97,500 $5,09,000
Balance in WIP inventory account as at
31/12
$7,59,00
0
Explanation:
1. The cost of the ending WIP is opening + costs added to the WIP
during the month in direct material, direct labour and overheads
applied.
2. The company applies overhead to the product based on the
machine hours worked by the company. The company estimated
that a total of 900,000 machine hours will be worked during the
year.
3. The total estimated overhead of the company is $4,500,000.
4. Based on this, the pre-determined overhead rate based on total
machine hours is computed as below:
Computation of pre-determined Overhead
Rate
Total manufacturing overhead
budget
$4,500,00
0
Total Machine Hours 900,000
2

For, Concetta Ltd. 2019
Therefore, pre-determined
overhead rate
(Total Overhead / Total Machine
Hours)
$5
Answer: The balance in Work in process inventory account as at 31
December for Concetta Ltd. is $759,000.
Answer 3:
The cost of the chairs in Concetta’s Finished Goods Inventory as at
December 31 is computed as below:
Value of Finished Goods Inventory
Per unit cost $34
Ending inventory 12/31 $13,400
Value of Finished Goods Inventory $4,55,60
0
Explanation:
1. The no. of units in the finished good inventory for chairs is
computed as below:
Finished Goods Inventory of Chair
Particulars Amount
Inventory as on 11/30 19,400
Add: Units Completed during the month 15,000
Units available for sale 34,400
Less: No. of units sold during the month 21,000
Thus, Ending inventory 12/31 in units 13,400
2. The company uses FIFO method of inventory valuation. This
indicates that the Inventory as on 11/30 have been sold first and
thus the Inventory as on 12/31 consists of units that were
manufactured during the month.
3. The cost of the 15,000 units that were manufactured during the
month is computed as below:
3