Job Costing: Definition, Calculation, and Benefits

This document explains the concept of job costing, its calculation, and benefits. It also discusses the difference between traditional and activity-based costing. The document provides insights into the balance of finished goods and manufacturing overhead costs. It is a useful resource for students studying accounting and finance.

Running Head: JOB COSTING
JOB COSTING

Running Head: JOB COSTING
Table of Contents
Job costing...................................................................................................................................................3
Question 1...................................................................................................................................................3
Question 2...................................................................................................................................................4
Question 3...................................................................................................................................................5
Question 4...................................................................................................................................................6
Question 5...................................................................................................................................................7
Question 6...................................................................................................................................................8

Running Head: JOB COSTING
Job costing
The job order costing is a cost framework otherwise called the activity costing framework is
utilized when the items are driven by or made according to the requirements of the client. Every
item created is considered as an occupation. The activity request cost framework must catch and
track expenses of creating each activity to guarantee the reasonability, which incorporates
materials, work, and overhead in an assembling domain (Zahller, 2017).
Question 1
Particulars
31st may 2019
During June
2019
Estimated overhead (in $)
$
3,300,000
$
288,000.00
Estimated allocation base
$
73,000
$
6,000.00
Predetermined overhead rate (in
$)
$
45.21
$
48.00
L15-005
$
118,700
$
55,000
$
173,700
L15-006
$
78,000
$
50,400
$
128,400
Total
$
196,745
$
105,448
$
302,193

Running Head: JOB COSTING
Particulars L15-005 L15-006
Direct material (in $)
$
118,700
$
78,000
Direct labour (in $)
$
55,000
$
50,400
Machine hours/Direct labour cost 2500 800
Predetermined overhead rate (in $)
$
45
$
45
Overhead (in $)
$
113,014
$
36,164
Question 2
Manufacturing
overhead costs
Job numbers
Direct
material
Direct
labour Total costs
B-12-008
$
2,500
$
13,500
$
16,000
K12-009
$
14,000
$
36,000
$
50,000
K12-011
$
71,800
$
85,100
$
156,900

Running Head: JOB COSTING
L15-005
$
118,700
$
55,000
$
173,700
L15-006
$
78,000
$
50,400
$
128,400
Total
$
285,000
$
240,000
$
525,000
Particulars B-12-008 K12-009 K12-011 L15-005 L15-006
Direct material (in $)
$
2,500
$
14,000
$
71,800
$
118,700
$
78,000
Direct labour (in $)
$
13,500
$
36,000
$
85,100
$
55,000
$
50,400
Machine hours/Direct
labour cost
$
300.00
$
1,000.00
$
1,400.00 2500 800
Predetermined
overhead rate (in $)
$
48
$
48
$
48
$
48
$
48
Overhead (in $)
$
14,400
$
48,000
$
67,200
$
120,000
$
38,400
Question 3
Particulars 31st may 2019 During June 2019
Actual direct labor cost 1,035,000 90,000
Predetermined overhead rate of finishing department 45.21 48.00

Running Head: JOB COSTING
Applied overhead $ 46,787,671 $ 4,320,000
Actual overhead $ 3,300,000 $ 288,000
Under-applied overhead -$ 43,487,671 -$ 4,032,000
Question 4
On the off chance that, the debit balances exists in the manufacturing overhead and a debit
balance in assembling overhead indicates either that insufficient overhead was connected to the
individual occupations or overhead was under connected. In the event that, toward the part of the
arrangement, there is a credit balance in assembling overhead, more overhead was connected to
occupations than was really brought about (Kim, 2017) .
This also demonstrates the genuine sum was over connected overhead. Since the overhead is first
recorded in the assembling overhead account, at that point connected to the individual
employments, followed through completed merchandise stock, and in the end moved to cost of
products sold, the year-end equalization is disposed of through a changing section,
counterbalancing the expense of products sold. If at the end the assembling overhead has a
charge balance, the overhead is under connected, and the subsequent sum in expense of
merchandise sold is downplayed (Kaplan and Atkinson, 2015). To alter for over connected or
under connected assembling overhead, a few organizations have a progressively convoluted,
three-section designation to work in procedure, completed merchandise, and cost of products
sold. This strategy is ordinarily utilized in case of bigger changes in their parities or in greater
organizations. The actual overhead costs are recorded through a debit to manufacturing
overhead.

Running Head: JOB COSTING
Question 5
Activity based costing is the method of costing that helps in the allocation of the costs on the
basis of the activity assigned to the particular items. Activity based costing is the procedure
where the expenses have been determined and apportioned based on the action key drivers. A
movement based costing technique perceives the connection between the expenses and the
results of the administrations just as producers and through this relationship the expenses of the
aberrant nature are doled out less self-assertively than the ordinary strategies (Childers and
Maggard-Gibbons, 2018).
In case of the traditional or the conventional system of recording the costs, which is subjected to
the volume include though in the action based costing, it orders the units delivered regarding the
bunch level movement, unit level action, association continuing action, client level action and
ultimately based on the item level action (Cooper, 2017).
As observed in many corporate manufacturing companies there are several measures by which
the activity based costing helps in improving the procedure of the costing. Such ways are
resolved in the total way.
 First it extends the quantity of the pools by the movement; also it makes the elective
reason for the appointing the expenses of the overheads based on the machine hours or
the immediate expenses (Dale and Plunkett, 2017).
 The change of the idea of the few backhanded costs helps the association in moving the
overhead costs from the results of the high volume to the low volume items.
 Maybe a couple of different advantages that will help the association after the
establishment of the ABC costing is it makes a stage for the challenge, gives the cost

Running Head: JOB COSTING
sparing chances and aides in modifying the items. Henceforth, in general the action based
costing is profitable and beneficial (Dwivedi and Chakraborty, 2016).
While comparing the implementation of the activity based costing in the current system it can be
stated that the activity based costing will be beneficial to the extent he costs are allocate to the
different jobs according to their timeline and machine hours as done in the current situation. The
Jobs are assigned on the basis of the machine hours individually. Further the jobs are also
segregated on the basis of the jobs till May, 2019 and the jobs till June 2019. The table above
also indicates the lower of the manufacturing costs incurred in case of the Jobs such as L15-005
and L15-006. Under this particular job section the costs incurred at overhead rate of $48 is
$120000 whereas the same was just $113014. Hence it can be concluded that the activity based
costing helps in proper allocation of the resources (Fisher and Krumwiede, 2015).
Question 6
The balance of the finished good as on 30th June 2019 is
Raw materials as on 1st July 2018 Amount($)
Opening balance 315000
Work in process 288000
Less: cost of goods sold 255000
Closing inventory as on 30th June 2019 348000

Running Head: JOB COSTING
References
Childers, C.P. and Maggard-Gibbons, M., 2018. Understanding costs of care in the operating
room. JAMA surgery, 153(4), pp.e176233-e176233.
Cooper, R., 2017. Target costing and value engineering. Routledge.
Dale, B.G. and Plunkett, J.J., 2017. Quality costing. Routledge.
Dwivedi, R. and Chakraborty, S., 2016. Adoption of an activity based costing model in an Indian
steel plant. Business: Theory and Practice, 17(4), pp.289-298.
Fisher, J.G. and Krumwiede, K., 2015. Product costing systems: finding the right
approach. Journal of Corporate Accounting & Finance, 26(4), pp.13-21.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Kim, Y.W., 2017. Activity Based Costing for Construction Companies. John Wiley & Sons.
Zahller, K.A., 2017. Truffle in paradise: Job costing for a small business. Journal of Accounting
Education, 40, pp.32-42.