Job Costing Examples, Practical Problems and Solutions
Job No. 58 passes through three departments: X, Y, and Z. The following information is given regarding this job:
Required: Calculate the cost of Job No. 58 from the above figures.
Note: Calculation of overheads chargeable to Job No. 58 was made as follows:
The expenses shown below were incurred for a job during the year ended on 31 March 2019.
The total price for the above job was $180,000.
Required: You are required to prepare a statement showing the profit earned from the job during the year ended 31 March 2019, as well as an estimated price of a job which is to be executed in the year 2019-20.
You should charge the same percentage of profit on sales as was the case for the the year 2019-20. Materials, wages, and chargeable expenses will be required at $50,000, $70,000, and $20,000, respectively, for the job.
The various overheads should be recovered on the following basis while calculating the estimated price:
- Factory overheads as a percentage of direct wages
- Administrative and selling and distribution overheads as a percentage of factory cost
Note: Calculation of overheads rates and percentage of profit on sales took place as follows:
M/s. Perfect Printers Ltd. operates a printing press. During November 2019, the plant was operating at full capacity. The material and labor costs of Job No. 101 and all other jobs worked on in November are shown below.
In addition to these costs, factory overheads incurred in November amounted to $44,000. Overhead is allocated to production based on direct labor costs.
- Show the factory’s profit or loss on Job No. 101 using two different methods of accounting for overtime premium. Assume that the contract price for the job is $40,000.
- Indicate under what circumstances each method should be used.
- State whether the profit or loss of the company during November would be affected by the choice of one method or another.
Factory Overhead Recovery Rate = (Factory Overhead / Direct Labor Cost) x 100
= (44,000 / 44,000) x 100 = 100%
If the overtime premium is fully charged to Job No. 101, the job cost sheet would be prepared as shown below.
If the overtime premium is charged pro-rata to all jobs, the job cost sheet would be prepared as follows:
The overtime premium should be charged fully to Job No. 101 if it was a rush job and it was done at the request of the customer.
However, if the overtime work was due to limited production capacity and it was accidental that Job No. 101 was undertaken during the overtime, then the overtime premium should be charged pro-rata to all jobs.
The company’s profit and loss during November will be affected by the choice of any method if all the jobs performed during the month are not completed by the end of the month.
If the overtime premium is fully charged to Job No. 101 but is not completed by 30 November 2019, then the loss on the job will not be included in the account for November 2019.
Similarly, if the overtime premium is charged pro-rata to all the jobs, the profit or loss on any job that remains incomplete will be carried over to the next month.
The job details shown below were taken from the costing books of a contractor for the month of December 2019.
The respective job accounts showed the following balances in the contract ledger on 30 November 2019.
- Job No. 201 = $321,580
- Job No. 202 = $141,865
A certificate of completion was obtained for Job No. 201. Of the balance of this account standing on 30 November 2019, $61,500 was in respect of plant and machinery. The remainder consisted of wages and materials.
A machine costing $5,500, specially brought for this contract, was also sold for $2,000 in December 2019. For the remainder of the balance on plant and machinery, $40,000 was used on the job for 8 months and the rest for 6 months.
Of the former, 50% was transferred to Job No. 202 and the whole of the remaining plant was returned to stores. The contract price for Job No. 201 was fixed at $375,000.
Required: Prepare contract accounts for Job Nos. 1 and 2 and state the profit made on jobs certified as completed. Allow depreciation on machinery at 15% per anum. Assume 10% for establishment charges on the cost of wages and materials consumed.
1. Establishment charges in respect of Job No. 201 A/c were calculated as follows:
2. Depreciation on plant and value of plant returned to stores were calculated as follows:
3. A plant costing $40,000 was used for 8 months and a plant costing $16,000 was used for 6 months:
4. Half of the plant, with a total depreciated value of $36,000, was transferred to Job No. 202:
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