Job Order Costing
There are different types of manufacturing company.
Most of companies produce goods for their own sells.
Some companies produce goods for other company.
Nowadays most of national and multinational companies do not manufacture most of their branded goods themselves.
For example:
‘ENO fruit salt’ is manufactured by Southern Drug and Pharmaceuticals and marketed by Glaxo Smith Kline Asia Pvt. Limited (batch No. 0008; MFD. 01/2019)
‘Listerine Mouthwash’ is manufactured by Makjal Laboratories and marketed by Johnson-n-Johnson (Lot No. 0903015 MP; MFD. 03/2019)
‘RCM Revito Hair Revitalizer Oil’ is manufactured by Spring Dells and marketed by Fashion Suiting Pvt. Ltd (Batch No. 011; MFD. 05/2019)
Nepal’s branded food and grain company Hulas gets rice and pulse from Bhudeo Khadya Udyog (P) Ltd; Lalbandi, Sarlahi, Nepal.
In job order costing, manufacturing companies supply manufactured goods to marketing companies.
Marketing companies are customers of manufacturing companies.
All marketing strategy is done by marketing company.
Manufacturing company only produces goods for marketing company.
Feature of Job Order Costing
The main features of job order costing are:
Goods are manufactured according to customer’s requirement.
Sometime certain materials can be supplied by customers
Repairs are done either in factory or in customer’s premises.
Manufacturing goods are closing stock, it is for only delivery purpose.
Each job may be different in shape, size, colour and price.
The cost of production is calculated after every production.
Work in progress is different from one period to another period.
Objectives of Job Order Costing
The main objectives of job order costing are:
It helps to find out the cost of every production of job or order.
It helps to determine profit or loss from job.
It helps to management to make accurate estimate for similar job.
It helps to management to provide a valuation of work in progress.
Every job or order can be checked continuous from beginning to complete stage.
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Differences between Job Order Costing and Contract Costing
Bases |
Job Order Costing |
Contract Costing |
In or out |
Job order costing is done inside manufacturing company. |
Contract costing is done outside, that is called site. |
No. of jobs |
Job order may be more than one at same time in one manufacturing place. |
Contract costing is only at one site; but different work may be at different site. |
Charges |
In job order costing, it is difficult to charge direct expenses for one job. |
In contract costing, it is easy to charge all direct expenses for one job. |
Profit |
Job work is completed in short time; profit is calculated after work complete. |
Contract work is long process; it takes more time than job work; so profit calculation is difficult. |
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Click on the link for YouTube videos |
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Accounting Equation |
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Journal Entries in Nepali |
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Journal Entries |
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Journal Entry and Ledger |
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Ledger |
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Subsidiary Book |
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Cashbook |
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Trial Balance and Adjusted Trial Balance |
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Bank Reconciliation Statement (BRS) |
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Depreciation |
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Financial Accounting and Analysis (All videos) |
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Accounting Process |
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Accounting for Long Lived Assets |
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Analysis of Financial Statement |
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Specimen copy of production order
ABC Company Production Order |
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Sr. No; ………………………………………………..…….. |
Quantity Ordered: …………………………………….……….. |
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Description: ……………………………………………… |
Date: …………………………………………………………….…… |
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Code No; ……………………………………….…………. |
Date of Commencement: …………………..……………… |
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Customer Order No; …………………………………. |
Date of Finish: …………………………………………………… |
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Materials Requisition No; …………………………. |
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Operation No; …………………………………………… |
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Machine No; …………………………………..………… |
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Clock |
Operation |
Department |
Operation |
Quantity |
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Time |
Number |
Number |
No. |
details |
Made |
Rejection |
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Specimen copy of job cost sheet
Note: This format is used by large scale manufacturing company
Job Cost Sheet |
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Job/production order No; ……………………..………. |
Customer: …………………………………………..………… |
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Name of materials: ……………………………………..…. |
Quantity: ……………………………………………………… |
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Date commenced: …………………………………………. |
Date completed: …………………………………………. |
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Materials |
Labour |
Overhead |
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Date |
Department |
Materials |
Amount |
Date |
Department |
Time |
Amount |
Date |
Department |
Rate |
Amount |
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Requisition No. |
(Units x $) |
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taken |
(Hours x $) |
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(Hours x $) |
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Total |
xxxx |
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xxxxx |
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xxxxx |
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Summary |
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Particulars |
Estimated cost $ |
Actual cost $ |
Different $ |
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Materials |
xxxxx |
xxxxx |
xxxx |
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Labour |
xxxxx |
xxxxx |
xxxx |
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Overhead [variable] |
xxxxx |
xxxxx |
xxxx |
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Overhead [fixed] |
xxxxx |
xxxxx |
xxxx |
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Profit |
xxxxx |
xxxxx |
xxxx |
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Total |
xxxxx |
xxxxx |
xxxx |
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