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Title: Job Costing Made Easy
Description: Job Costing Made Easy is a comprehensive tool for assessing the individual costs of performing a Job. This is important in organizations that produce a range of different products and also in service organizations.
Description: Job Costing Made Easy is a comprehensive tool for assessing the individual costs of performing a Job. This is important in organizations that produce a range of different products and also in service organizations.
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JOB COSTING
Your goals for Job Order Costing System are to learn about
1
...
Information systems for job costing environments
3
...
Multiple persons, parts, and processes may be needed to bring about a deliverable output
...
Note that job costing is best suited to those situations where goods and services are produced upon
receipt of a customer order, according to customer specifications, or in separate batches (as a result
many companies would refer to this costing method as the job order costing method)
...
An aircraft manufacturer would
find this method logical
...
Each job is somewhat unique
...
Jack Castle
owns an electrical contracting company, Castle Electric
...
Jack has four employees, maintains a neat (rented) shop, a broad inventory of
parts and equipment, and a fleet of five service trucks
...
Around 8:00 a
...
, his
electricians begin to arrive, and he gives them their assignments, as well as the necessary parts and
equipment they will need
...
One of Jack’s electrician is Donnie Odom
...
m
...
His three tasks for the day included:
•
•
•
Job A: Cleaning and reconnecting the electrical connections and replacing a flood light atop a
billboard (materials required include one lamp at $150)
Job B: Replacing the breakers on an old electrical distribution panel at an office building
(materials required include 20 breakers at $20 each)
Job C: Pulling wire for a new residence under construction (material required include 500
feet of wire at $0
...
He spent 1 hour on the billboard, 2 hours
on the electrical panel, and 3 hours on the residential installation
...
During the day, Donnie also used a roll of
electrical panel, and 3 hours on the residential installation
...
During the day, Donnie also used a roll of electrical
tape ($3) and a box of wire nuts (60 nuts at $0
...
Donnie is paid $18 per hour
...
Jack is paid $25 per hour, and he does not usually work on any specific job
...
The “ job costing” question is: How much did it “cost” to change the light on the billboard, etc?
Obviously, the job cost included the direct costs of the job; specifically, Donnie’s direct labour time
(1 hour) and the direct material (one lamp at $150)
...
These latter items constitute the indirect costs, or overhead, for the job
...
Donnie, and
the other electricians, fill out a time report documenting time spent on each job, as well as the time
spent on tasks that cannot be traced to a specific job:
Castle Electric
Daily Time sheet
Employee: Donnie Odom
Date:
7/14/X5
Start/Stop Time
Job Name
Task
client
Admin
Hours
Direct
Labour
Hours
8:00
8:30
Admin
Assignment and load
8:30
8:45
Travel
8:45
9:45
Job A
9: 45
10:15
Travel
10:15
12:15
Job B
Replace breakers
12:15
1
Lunch
n/a
1:00
4:00
Job C
Pull wiring
4:00
4: 45
Travel
and
Admin
Return to shop and
unload
Service and replace bulb
n/a
0
...
25
Image Advertising
n/a
1
...
5
TechWay Office Park
2
...
00
n/a
0
...
00
6
...
The direct labor for the billboard task (Job A) was one hour of Donnie’s time (at $18 per
hour)
...
Tracking Direct Materials
Jack keeps detailed records of the material released to each job
...
The document that is used for this process is called a materials
request” or “materials requisition” form
...
Sometimes a separate form is prepared for each
item, and sometimes a running list similar to the following is used:
Castle Electric
Material Requisition
Employee: Donnie Odom
Date:
7/14/X5
Material
Job Name
Light Bulbs
Job A
Breakers
Job B
Wire
Job C
Quantity
1 Unit
20 Units
500 feet
Per Unit Cost
$150
$20 each
$0
...
05 each
$3
$3
Indirect Material
Indirect Material
This form provides essential documentation to safeguard and track inventory; a manager that fails to
control and monitor inventory does so at great peril! It also reveals that the “direct material” for the
billboard will be dealt with as overhead which is discussed later
...
Sometimes, a business will not be particularly interested in letting employees see cost information,
or cost information may not be readily available
...
A subsequent clerical task will be to identify the cost of the particular parts that
were put into production
...
For example, the 500 feet of wire may be on one roll, but it is priced by the
foot, and the quantity should be 500 feet, not 1 roll; the job cost calculation would be incorrect if
only $0
...
For instance:
•
•
How hard would it be to track the “indirect material”? How many wire nuts were used on
the billboard? How many inches of electrical tape were used? What was the cost of these
items?
What about indirect labor? Donnie spent two hours on job-related administration and travel
issues for the six hours of direct labour time on the 14th
Title: Job Costing Made Easy
Description: Job Costing Made Easy is a comprehensive tool for assessing the individual costs of performing a Job. This is important in organizations that produce a range of different products and also in service organizations.
Description: Job Costing Made Easy is a comprehensive tool for assessing the individual costs of performing a Job. This is important in organizations that produce a range of different products and also in service organizations.