Furniture Shop Order

Costing
Team 3:
T.R Srinath 16BM60041
Jayesh R - 16BM60091
Abhiram Aditya C - 16BM60119

Furniture world, Hyderabad

Costing Method Job-Order

Cost Object: Job that is being manufactured (Ex: Sofa set)
Cost Driver: Labor hours.
Cost Allocation Base: A single cost pool of direct labor hours is used. All the
indirect costs are allocated based on this cost driver.

Direct Materials: Wood, Ply and Laminates

Indirect Materials: Sand Paper, Wood Polish, Varnish, Nails, Hinges, Glue,
Screws, Paint, etc.

Stages in production: Cutting, Sawing, Joining, Rounding, polishing, varnishing

etc.

Inventory Cost is mostly related to the WIP and finished goods holding cost.

Introduction To Job Order

Costing
Job order costingorjob costingis a system for
assigningmanufacturing coststo an individual product
or batches of products. Generally, the job order costing
system is used only when the products manufactured
are sufficiently different from each other. (When
products are identical or nearly identical, theprocess
costingsystemwill likely be used.)
Source - Internet

Analysis
Furniture World sells all the furniture like Sofas, Chairs etc.

required for a household, on demand

Costs provided are a rough estimate by the worker at the shop;
standardized costs are not available
Since its an un-organized sector, data may not be completely reliable
The monthly demand is not consistent; the data provided regarding
number of orders a month is a rough estimate
The workers also were not able to provide figures for administrative
and selling expenses such as electricity cost, transportation cost.

Standard Costs
1. Costs of direct material
i. Teak wood- Rs. 2500 per cubic feet
ii. Burma wood- Rs. 3000 per cubic feet
iii. Ply wood (per sq. feet) - Rs. 20 for 30mm
iv. Neem wood- Rs. 650 per cubic feet
v. Rose Wood Rs. 2200 per cubic feet

2. Costs of direct labor

i. Carpenter- Rs. 800 per day
ii. Assistants- Rs. 500 per day

Other Costs Involved

Manufacturing over head
Indirect Labor
Electricity Expense
Fixed Costs
Machinery
Rental for the store
Periodic Costs
Salary
Transportation

Cost Analysis For a Sofa

Selling price - Rs. 35000
Costs of good manufactured

Direct Material - Rs. 22000

Direct Labor - Rs. 6000

Gross Profit Rs. 7000

Manufacturing overhead - Rs. 2000

Profit before Administrative and Selling costs - Rs. 5000

Thank you