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- Introduction to Cost and Management Accounting
- High/Low and Linear Regression Analysis
- Inventory Management
- Accounting for Inventory
- Accounting for overheads
- Absorption Costing
- Marginal Costing
- Job Batch and Service costing
- Process Costing
- Target Costing
- Variances
- Standard Costing
- Cost Volume Profit analysis
- Relevant costing and Decision-Making Techniques
- Time Value of Money (TVM)
Job Costing
- Job costing is used when a business entity carries out tasks or Jobs to meet specific customer orders.
- Jobs are short-time and work is usually carried out in a fairly short period of time.
- A cost is calculated for each individual Job and this cost can be used to establish the profit/loss from doing the Job.
- Each Cost unit is a Job.
- A Job costing system is usually based on absorption costing principles.
- In many cases, Job costs include not just direct material and direct labour but also direct expense;
- Rental cost for the Job,
- depreciation of equipment used for Job.
- Production overheads might be absorbed on a direct labour hours basis or any other suitable basis.
- Non – Production overheads might be added;
- as a percentage of prime cost of the Job; or
- as a percentage of production cost of the Job.
- Each Job is given a unique identity number or Job number.
- Direct costs and overheads are recorded on a Job sheet or Job card for the Job.
- A Job account is similar to a W.I.P account, except Job account is for only one Job.
- The W.I.P account is the total of all individual Job account.
- When the Job is finished the total cost of Job is transferred to the cost of sales.
Job Account Proforma
Batch Costing
- Batch costing is a system of costing for items that are produced in ‘Batches’ rather than individually. A batch might also be called a Production run.
- In batch costing the total cost is established for each individual batch where each batch consists of a large number of similar units/items.
- Unlike Job costing it is less common to include Non-Production overheads costs within the total batch cost.. Although it is certainly possible to do so.
Cost per unit = Total Batch cost
No. of units
- In all other respects batch costing is very similar to Job costing.
- Any ‘Setup costs’ can be charged directly to the cost of the batch.
Batch costing proforma
Service Costing
- The costs of a service are the sum of direct materials, direct labour, direct expenses and a share of operational overheads (unless marginal costing is used).
- Service costing differs from costing in manufacturing industries in several ways:
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- No production system therefore no production overheads.
- Direct materials are fairly small proportion of total costs.
- Direct labour costs are high.
- General overheads costs can be a very high proportion of total costs.
Composite cost units:
- One of the main problem with service costing is that it can be different to identify a suitable cost unit for the service.
- It is often appropriate to use a composite cost unit in service costing. This cost is made from two variables , such as a cost per man per day.
Service unit/composite cost unit = Total costs of services
No. of units of services