 Job costing is also known as job order costing.

 It is that form of specific order costing which applies where

the work is undertaken as per the customer’s specific
requirements and each order is of comparatively short
duration.

 E.g. Consulting and legal firms, Architects, Manufacturers of

ships and airplanes, Book publishers, Movie producers,
jewellers.
 The Terminology of CIMA defines batch cost as ‘aggregated
costs relative to a cost unit which consists of a group of similar
articles which maintains its identity throughout one or more
stages of production.’

 In batch costing, the cost unit is not a single product but some
specific quantity of similar products at the same time.

 E.g. Pharmaceutical Companies, Readymade Garments, Electrical

Tools And Machinery Spare Parts, Brick Producer, Milk Pouch,
wafer manufacturer.
a. Job printing
b. Manufacturers of special types of equipments
c. Design engineering concerns
d. Repair works
e. Engineering concerns
f. Construction companies
g. Ship building companies
h. Furniture makers
i. Hardware industries
j. Automobile garages
k. Interior decoration
1. Work is performed according to customers orders
and specification
2. Products are not produced for maintaining stocks
3. Every job can be identified clearly
4. Every job is charged with its own cost
5. Work in progress depends upon the number of
jobs in hand at the end of the period
6. Separate accounting unit and separate no allotted.
7. Separate production card maintained for each job
8. All the cost ascertained separately
9. Purpose is to segregate the cost of each job or lot
10. A job may extend over several accounting period
11. Job work is done in the factory premises.
 Identify the spoilage and hence fix up the
responsibility for inefficiency.
 Management can determine the trends in cost and
compare the operating efficiency of men and
machines.
 Preparation of estimates
 Comparison of actual with estimated cost.
 Makes available the complete file to the mgt.
 Ascertainment of profit/loss for each job
 Helps management to identify unprofitable jobs
 Helps in providing precise quotation
 It helps in production planning
 Helps in fixing of selling price.
 Involves lot of clerical work
 Mgt. cannot evaluate precisely the operating
efficiency of men and machines.
 Cost ascertained and compiled are historical cost
 It does not apply budgetary control to important
cost elements such as labour, materials etc.
 Job costs over any period of time cannot be
compared if any major economic changes take
place in between.
 It is expensive to operate and errors are possible
due to increase clerical work
1. Identify Job.
2. Production order.
3. Material costs.
4. Labour costs.
5. Manufacturing & other overheads.
6. Compute Total Costs.
7. Completion of job.
 Direct Material Material requisition
 Direct Labour Job Time sheets
 Direct expenses
 Factory overheads Recovery of
predetermined rates

Admn. &
Finished S&D Cost of Invoice
WIP Profit
goods overhead Sales Price
s
i) Identify Job:
The first step in the job-costing process is to
identify the scope of the project or job. To accurately
perform a job costing, it is important to know everything the
job entails. E.g. A carpenter receive an order to make a 100
benches for a tution class.

ii) Production order:

On receipt of an order from the customer for
manufacturing a certain product the production planning
department prepare a suitable design & drawings of the job
as per the specification. The department also prepares an
estimate of the materials required for the product in the form
of bills of payment.
 A production order is issued to the workshop to
proceed with the job. A production order contains all the
information that is relevant to the job. It consist of the
following information:

a) Particulars of the job.

b) Quantity to be produced.
c) Date of starting of the job.
d) Required date of completion of job.
e) Particulars of the materials require.
f) Particulars of various operations involved in the performance
& execution of the job.
Each production order is assigned a number called
job order number or production order number or work order
number.
 Copies of production order are sent to:

◦ A) The stores for issue of materials

◦ B) The department concerned to undertake production, and
◦ C) The cost dept. For determining cost of the job.
 PERFORMA OF PRODUCTION ORDER
SERIAL NO._____ DESCRIPTION NO:______
PRODUCTION ORDER NO & DATE______ DATE STARTED______
CUSTOMER REF NO.: _____ QUANTITY OF ORDER______
PARTICULARS OF JOB _____ OPERATION SCHEDULE NO______
DEPARTMENTS_____ TOOLS LIST NO:_________
BILLS OF MATERIAL NO_____
SPECIAL INSTRUCTIONS:
MATERIALS

PARTICULARS CODE NO. QUANTITY PARTICULARS CODE NO. QUANTITY

WOODEN 114 150 kg

NAILS 123 500 nos.

LABOUR

SR. NAME HOURS TIME TIME SR. NAME HOURS TIME TIME
NO START END NO START END
1 ABC 8 12 20

ORDERED BY:_______ APPROVED BY:_____

CHECKED BY:_______
iii) Material costs:
The cost of material are recorded in the job order
card. Any indirect materials required can also be drawn by
material requisitions & their cost are recorded in job order
card. Generally the cost of materials issued is ascertained
through a material issue analysis sheet.

iv) Labour costs:

on the basis of the time sheets or piece work cards
the labour costs are ascertained & classified into direct &
indirect wages. They are subsequently analysed in the wage
analysis sheet and included in the job order card.
v) Manufacturing & other Overheads:
Overheads may be predetermined or actual. They
are worked out for each cost. Overheads cost of each job is
summarised in an overhead absorption analysis sheet &
there from the overheads relating to the job are analysed and
entered in the job costs sheet as factory overhead,
administration o/h, and selling & distribution o/h.
vi) Compute Total Costs.
The final step in the job costing process is to add
the direct costs to the indirect costs that have been
calculated. The final figure is the estimated cost for the total
project. Compare this figure with the figure quoted to the
customer to complete the job. The difference between the
two figures identifies either the profit or the loss for
completion of the project.
vii) Completion of job:
On completion of the job a job completion report
is sent by the shop to the production planning dept. and a copy
of the same is sent to the cost dept. this report indicates that
the jobs are completed & the cost sheet may be closed. The
total cost is divided by the number of jobs executed or units
manufactured to determined the cost per job or unit.
 Each job work is undertaken to
customers’ special requirements.
 The time taken for execution of each
job is of short duration.
 Each job is treated as a cost unit
which consists of a single order or a
contract.
 Each job has a distinct number and
costs are collected against the same
number.
JOB COSTING
 It applies where similar article are
manufactured in batches for sale or
for use within undertakings.
 The process time for each article in a
batch is less than generally taken for
execution of a job.
 A batch is a group of similar product
and it is treated as a single cost unit.
 Each batch has a distinct number and
costs relating to the batch of units
accumulated.
BATCH COSTING
 Each job is separate & independent of
other job.
 Cost are computed when job is
completed.
 Jobs are different so cost of
supervision is more.
JOB COSTING
 Product lose their individual identity
as they are manufactured in
continuous flow.
 Cost are calculated at the end of cost
period.
 Process of production is equal so it
require less supervision.
BATCH COSTING
 So job order costing method is easy to calculate &
also provides the controll on costs which are unnecessary for
the job. But the cost sheet which can be use in this method is
vary by job or contract.