Job Order Costing Concept 2022

Section B:
1.
a. Job Order Costing is a method of costing wherein, the manufacturing cost relating to an individual unit of product is
assigned. This method is useful when the cost for a particular manufacturing job is different to the cost of other jobs.
Based on this method, the cost of each job is ascertained individually and then the selling price is computed based on
the individual costing (Hassan A. Danguguwa, 2017).
b. This concept is used by various companies and workplaces, such as constructors of custom-designed buildings,
manufacturers of customized vehicles.
In my previous organisation, which was engaged in construction of buildings, the concept of job order costing is
followed, the company used to prepare the costing sheet for each building from the scratch, based on the requirement
from the customer.
c. Job order costing, like any other method, has both advantages as well as disadvantages, which are as explained under:
Advantages:
i. Job order costing prepared for a job provides good basis for a similar job being taken-up by the company in the
future
ii. Since the costs are recorded accurately for each job, it provides a clear picture to the management, on the
profitability of a job as compared to the other.
Disadvantages:
i. Preparation of a job costing sheet, requires a lot of efforts, as each cost, such as cost of materials, wages,
overheads, etc. are required to be computed for the job, requiring a lot of clerical efforts, based on which, the
job costing sheet is prepared.
ii. Since this method records the cost of each activity separately, the comparison of cost becomes difficult, majorly,
in cases where each jobs differs significantly (Ashish Lodha, 2018).

d. In the future, the computations required for these costs will be made by the ERP systems deployed by the companies,
and the manual efforts would reduce significantly. But yes, the concept will still remain after ten years, as this concept
provides accurate amount of profit for a job requiring significant degree of customization.
2.
a)
Particulars $
Opening WIP 58,500
Direct Material cost
Direct Materials Purchased
756,0
00
Add: Beginning Direct Materials
Inventory
45,00
0
Less: Ending Direct Materials
Inventory
-
24,50
0 776,500
Wages paid for direct labourers 456,000
Wages paid to factory supervisors 234,000
Electricity used in plant 130,000
Overhead supplies used in plant 23,500
Oil for factory heating 87,000
Rent paid for factory equipment

34,000
Less: Closing WIP (102,000)
Cost of good manufactured 1,697,500
b) Particulars $
Cost of good manufactured 1,697,500
Add: Beginning finished goods
inventory 175,600
Less: Ending finished goods inventory (164,300)
Cost of goods sold 1,708,800
c) Particulars $
Revenue 2,550,000
Less:
Cost of goods sold (1,708,800)
President’s Salary (450,000)
Head office salary costs (350,000)
Wages paid for Indirect Labour (23,450)
Advertising and marketing expenses (356,000)
Marketing Manager wages

(125,000)
Fuel purchased for delivery trucks (35,600)
Depreciation on factory equipment (86,000)
Property Tax for the factory (32,000)
Rent paid for head office (75,000)
Operating income (691,850)
d) Particulars $
Direct materials costs 776,500
Direct labour costs 456,000
Prime cost 1,232,500
Particulars $