14/11/2021, 13:23 What is Job Costing? – Features, Procedure & Example | Tally Solutions Job Costing: Definition, Features, Procedure and Example Home Inventory Job Costing: Definition, Features, Procedure and Example Yarab A | Updated on: May 14, 2021 Definition of job costing Features of job costing Types of business that use job costing system Job costing procedure and cost allocation for different activities Job costing example Filter Accounting ERP Software Inventory Business Guides GST Tally Technology Definition of job costing Job costing is a costing method used to determine the cost of specific jobs, which are performed according to the customer’s specifications. It is a basic costing method which is applicable where work consists of separate projects or contract jobs. Latest Blogs 5 Cash Flow Forecasting Mistakes That Small Businesses Do Manali Subramanian Nov-10-2021 How Automating Reports Boost Business Reporting Process Tally Solutions Nov-09-2021 What Role GST Software Plays For Your Business? Tally Solutions Nov-08-2021 Tips For Efficient Bank Reconciliation Statement Tally Solutions Nov-08-2021 How To Read And Analyze Profit And Loss Statement Tally Solutions Nov-08-2021 How To Read A Balance Sheet? Tally Solutions Nov-03-2021 Inventory management just became much simpler with TallyPrime. Let's Chat! https://tallysolutions.com/inventory/job-costing/ 1/6 14/11/2021, 13:23 What is Job Costing? – Features, Procedure & Example | Tally Solutions Take a free trial now Features of job costing Using job costing, the cost of each job is ascertained separately. This, in turn, helps in finding out the profit or loss on each job. It enables management to detect those jobs which are more profitable and unprofitable ones. Job costing provides the base for determining the cost of similar jobs to be undertaken in future as a part of future planning. Helps in managing and controlling costs, by comparing the actual costs with the estimated cost. In short, the calculation of variances. Types of business that use job costing system Generally, the application of job costing method is followed in industries such as printing press, automobile garage, repair workshops, shipbuilding, foundry, and other similar manufacturing units, which manufactures according to customer’s specific requirements. A business that applies costing method usually has the following characteristics: Production is carried out based on the customer's specification Products are manufactured in distinguishable lots Products produced are of not uniform nature It is practical to maintain a separate record of each lot from the time production is begun until it is completed. Advantages of job costing Profitability for each job can be individually determined Provides a detailed cost analysis of materials, labour and overheads for each job as and when required The efficiency of the plant can be controlled by confining attention to costs relating to individual jobs. Helps in preparation of estimates Comparison of actual cost with estimated cost and calculation of variances. Helps in identifying unprofitable jobs Helps in providing a precise quotation for a product Documents used in job costing Manufacturing or production order: This document authorizes the manufacturing or production department to produce a specified quantity of a product which constitutes the job. Cost sheet: In job costing, a cost sheet is often used to record costs incurred in stages of production. The cost sheet and job order work may also be combined, when costs are recorded on the production order document. Other documents: The other documents such as material requisition slips, tools and spares order, time tickets, inspection order etc., are used by the dispatching department as a control mechanism to carry out the dispatching functions. Job costing procedure and cost allocation for different activities SHARE Activity Procedure Allocation Latest Blogs 5 Cash Flow Forecasting Mistakes That Small Businesses Do Manali Subramanian Nov-10-2021 How Automating Reports Boost Business Reporting Process Tally Solutions Nov-09-2021 What Role GST Software Plays For Your Business? Tally Solutions Nov-08-2021 Tips For Efficient Bank Reconciliation Statement Tally Solutions Nov-08-2021 How To Read And Analyze Profit And Loss Statement Tally Solutions Nov-08-2021 How To Read A Balance Sheet? Tally Solutions Nov-03-2021 Let's Chat! https://tallysolutions.com/inventory/job-costing/ 2/6 14/11/2021, 13:23 What is Job Costing? – Features, Procedure & Example | Tally Solutions Materials Stage 1: Procuring and storing in the warehouse Spoilage or scrap - Charged to overhead cost pool for allocation at a later stage Stage 2: Picking up from the store and issued to a specific job. Abnormal loss (if any) - Charged directly to the cost of goods sold. On completion of the job order, the cost of the entire job is shifted from work-in-progress inventory to finished goods inventory. On the sale of goods, the cost of the asset is removed from the inventory account and shifted to cost of goods sold account when you record the sale transaction Labour Overhead Employee’s time is charged to a specific job which is then assigned to the jobs based on the labour cost of the employees. Direct labour - Charged directly to individual jobs when it is directly traceable. Here, the overhead cost is accumulated in the cost pools and then costs are allocated to jobs. Non-direct costs: - Accumulated into one or more overhead cost pools from where they are assigned to open jobs based upon the measure of cost usage. Indirect labour - Charged to an overhead cost pool and then assigned to various open jobs. The overhead allocation process for standard costs uses historical cost information to arrive at the standard rate per unit of activity and then allocate these amounts to jobs based on their units of activity. The difference between allocated overhead costs derived from the standard costing method is subtracted from the actual cost incurred for the job. The variance from the above is dealt as given in the notes below. Latest Blogs Note: The variance from the overhead cost and actual cost can be dealt with in any of the following manners. 5 Cash Flow Forecasting Mistakes That Small Businesses Do Manali Subramanian Nov-10-2021 The variances are directly charged to cost of goods sold. (or) It can be allocated to the individual activities such as finished goods, workin-progress and cost of goods sold based on the ending balances in these accounts. (or) It can be allocated to jobs which were open during the reporting period. Tally Solutions Nov-09-2021 What Role GST Software Plays For Your Business? Tally Solutions Nov-08-2021 Job costing example The following information was recorded in the books of ABC manufactures for the period ended 31-12-2019. Cost How Automating Reports Boost Business Reporting Process Completed Job Tips For Efficient Bank Reconciliation Statement Tally Solutions Nov-08-2021 How To Read And Analyze Profit And Loss Statement W.I.P Tally Solutions Nov-08-2021 How To Read A Balance Sheet? Raw materials supplied from stores Wages 78,000 22,000 1,10,000 50,000 Tally Solutions Nov-03-2021 Let's Chat! https://tallysolutions.com/inventory/job-costing/ 3/6 14/11/2021, 13:23 What is Job Costing? – Features, Procedure & Example | Tally Solutions Chargeable expenses 8,000 2,000 Materials returned to store 1,000 - Factory overheads are 80% of wages, office overheads are 25% of factory cost and selling and distribution overheads are 10% of the cost of production. The completed job materialized for Rs. 4,50,000 /- Consolidated Job Account as on 31.12.2018 Dr. Cr. Amount To Raw materials By sales (amount materialized on jobs completed) Consumed 78,000 Less: Returned to Amount 4,50,000 77,000 Store. 1,000 To wages To chargeable expenses To factory overheads (80% of wages i.e. 1,10,000 * 80 / 100) Factory Cost To Administrative overheads (25% of factory cost i.e. 2,83,000 * 25 / 100) 1,10,000 8,000 88,000 2,83,000 70,750 Latest Blogs Cost of Production To selling and distribution overheads (10% of cost of production i.e. 3,53,750 *10 / 100) Total cost/cost of sales 3,53,750 5 Cash Flow Forecasting Mistakes That Small Businesses Do Manali Subramanian Nov-10-2021 35,375 How Automating Reports Boost Business Reporting Process Tally Solutions Nov-09-2021 What Role GST Software Plays For Your Business? Tally Solutions Nov-08-2021 3,89,125 Tips For Efficient Bank Reconciliation Statement Tally Solutions Nov-08-2021 To transfer to Profit and loss account 60,875 How To Read And Analyze Profit And Loss Statement Tally Solutions Nov-08-2021 Total 4,50,000 Total 4,50,000 How To Read A Balance Sheet? Tally Solutions Nov-03-2021 Let's Chat! https://tallysolutions.com/inventory/job-costing/ 4/6 14/11/2021, 13:23 What is Job Costing? – Features, Procedure & Example | Tally Solutions How do business track and prepare job cost sheet? Given the complexities associated with managing costs for each job, most businesses have automated the preparation of job sheet using accounting software. The accounting software or TallyPrime software helps you manage and track multiple jobs easily. Know more about TallyPrime's features. Tracking material movement across the jobs, consumption and asserting profitability is easier using accounting software. With reports and summaries available instantly, informed decisions can be made on-time. Latest Blogs 5 Cash Flow Forecasting Mistakes That Small Businesses Do Manali Subramanian Nov-10-2021 How Automating Reports Boost Business Reporting Process Tally Solutions Nov-09-2021 What Role GST Software Plays For Your Business? Tally Solutions Nov-08-2021 Tips For Efficient Bank Reconciliation Statement Tally Solutions Nov-08-2021 How To Read And Analyze Profit And Loss Statement Tally Solutions Nov-08-2021 How To Read A Balance Sheet? Tally Solutions Nov-03-2021 Let's Chat! https://tallysolutions.com/inventory/job-costing/ 5/6 14/11/2021, 13:23 What is Job Costing? – Features, Procedure & Example | Tally Solutions Inventory management just became much simpler with TallyPrime. 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Tally Solutions Nov-08-2021 Tips For Efficient Bank Reconciliation Statement Tally Solutions Nov-08-2021 How To Read And Analyze Profit And Loss Statement Tally Solutions Nov-08-2021 How To Read A Balance Sheet? Tally Solutions Nov-03-2021 Let's Chat! https://tallysolutions.com/inventory/job-costing/ 6/6
