Management Accounting Job Costing Essay Example



Management Accounting Job Costing

1. Job Costing also known as Job Order Costing is appropriate for products that are distinct. Products and services that can be singly manufactured produced or offered to a customer. These could be a single product, a batch of products or a single project. It involves the tracing or attaching the all the direct (raw materials and labour) and overhead (depreciation, maintenance, administration etc) costs to a particular job or job activity.

Calculation methodology: Beginning WIP + Manufacturing costs – Finished Goods.

Beginning WIP:

Job No. Description Units Total Cost

CC723 Computer caddy 20,000.00 900,000.00

CH291 Chair 15,000.00 431,000.00

PS812 Printer stand 25,000.00 250,000.00

Add: Direct Manufacturing Costs

Job No. Raw materials Purchased parts Total Cost

CC723 51,000.00 104,000.00 155,000.00

CH291 3,000.00 10,800.00 13,800.00

PS812 124,000.00 87,000.00 211,000.00

DS444 (desks) 65,000.00 187,000.00 252,000.00

Add: Manufacturing Overhead Costs. (Machine O.H) costs Labour O.H costs

ie, Manufacturing Overhead budget/Machine hours planned ie, 360,000/45,000= 8

ie, 360,000/70,000 =5

Job No. Machine hrs Labour hrs Machine O.H costs Labour O.H cost Labour cost Total Cost

CC723 12,000.00 11,600.00 61,714.29 92, 8000.00 122,400.00 276,914.29

CH291 4,400.00 3600.00 22,628.57 28,800.00 43,200.00 94,628.57

PS812 19,500.00 14,300.00 100,285.71 114,400.00 200,500.00 415,185.71

DS444 14,000.00 12,500.00 72,000.00 100,000.00 138,000.00 310,000.00

Less: Value of finished goods

Job No. Units completed Cost per Item Total Cost

CC723 20,000 64.00 1,280, 000.00

CH291 15,000 35.00 525,000.00

PS812 23,000.00 55.00 1,265,000.00

DS444 5,000.00 102.00 510,000.00

WIP Inventory as at 31st, December

Job No. Description Total Cost

CC723 Computer caddy 51,914.29

CH291 chairs 14,428.57

PS812 Printer stand 876,185.71

DS444 Desks 52,000.00

3. Cost of Chairs in finished goods as at 31st, December

Calculation methodology: Cost of Chairs manufactured (Direct costs, manufacturing overheads)+beginning WIP-ending WIP.

Cost of Chairs manufactured during the month of December :

Job No. Description Total Cost

CH291 Chairs 525,000.00

Add: Balance of completed chairs b/f 679,000.00

Cost of chairs in the finished goods inventory as at 31st, December = 1,204,000.00

4. Actual O.H = 252,000

Applied O.H = 592,628.57; Under applied manufacturing Overhead balance = 340,628.57

5. Depending on the amount, over or under applied manufacturing overheads can be closed off to the cost of goods sold. If the amount is insignificant, write off the under or over applied amount to the cost of goods sold. This entry will cause the cost of goods sold to either increase or decrease, reducing or increasing the revenue/profit respectively.

If the amount is significant, allocate the overhead amounts to the different accounts containing overheads. Namely, Work in Progress, Finished goods and Cost of Goods sold. This allocation method restates the individual accounts closer to their historical cost.


Finney,H.A. and Miller E. Herbert. Principles of Accounting , fourth edition, 1953