Tag: Labour Overhead

Job Cost Sheet is a detailed document used in job order costing to record and track all costs associated with a specific job or order. It includes direct materials, direct labor, and applied manufacturing overhead for each job. Each job is assigned a unique job number, and the sheet helps in monitoring the job’s cost, setting the selling price, and evaluating profitability. It ensures cost control and accurate pricing, especially in industries with customized production. Once the job is completed, the total cost from the job cost sheet is transferred to the Cost of Goods Manufactured (COGM).

Reports in Job Costing System:

1. Job Cost Sheet

A Job Cost Sheet is the main report used in a job costing system. It records all costs incurred for a particular job, order, or contract. The report includes direct material, direct labour, and allocated overheads. Each job is given a separate identification number for proper tracking. It helps management determine the total cost and profitability of each job. The Job Cost Sheet also assists in preparing quotations, controlling costs, comparing estimated and actual costs, and identifying inefficient use of resources during production.

2. Material Requisition Report

The Material Requisition Report shows the materials issued from the store for a specific job. It contains details such as job number, material description, quantity issued, and cost of materials. This report helps in charging direct material costs accurately to individual jobs. It also provides control over material consumption and prevents unnecessary wastage. Management can compare actual material usage with estimated requirements. The report is useful for inventory control, cost analysis, and determining whether excess materials were consumed during the completion of a particular job.

3. Labour Time Report

The Labour Time Report records the time spent by workers on a particular job. Employees mention the job number, hours worked, nature of work, and applicable wage rate. The report helps in calculating the direct labour cost chargeable to each job. It also enables management to measure worker productivity and identify idle time. By comparing actual labour hours with estimated hours, management can evaluate efficiency. This report provides an important basis for wage calculation, labour cost control, job costing, and analysis of production performance.

4. Overhead Analysis Report

The Overhead Analysis Report provides information about indirect costs allocated or absorbed by different jobs. These costs may include factory rent, electricity, depreciation, supervision, and maintenance expenses. Since overheads cannot be directly identified with a single job, they are allocated using suitable absorption rates. This report helps management understand the amount of overhead charged to each job. It also assists in comparing actual and absorbed overheads. The report is useful for cost control, pricing decisions, identifying under or over absorption, and improving overall operational efficiency.

5. Job Profitability Report

The Job Profitability Report shows the profit or loss earned from each completed job. It compares the total revenue received from the customer with the total cost incurred on the job. The report helps management identify profitable and unprofitable jobs. It also supports decisions regarding pricing, customer selection, and acceptance of future orders. By analysing job profitability, management can identify areas where costs are excessive. This report is particularly useful for evaluating business performance and improving future cost estimates and quotations.

Problems / Example of Job Costing System:

Problem 1: Calculation of Total Job Cost

A company undertakes Job No. 101. The following costs are incurred:

Calculate the total cost of Job No. 101.

Solution:

Total Job Cost = Direct Materials + Direct Wages + Direct Expenses + Factory Overheads

= 25,000 + 15,000 + 2,000 + 8,000

Total Job Cost = ₹50,000

Problem 2: Job Cost with Overhead Percentage

Job No. 205 requires direct materials of ₹40,000 and direct wages of ₹20,000. Factory overheads are charged at 50% of direct wages.

Calculate the total job cost.

Solution:

Factory Overheads = 50% of ₹20,000
= ₹10,000

Total Job Cost = ₹70,000

Problem 3: Calculation of Selling Price

The total cost of Job No. 310 is ₹80,000. The company wants to earn a profit of 25% on cost.

Calculate the selling price.

Solution:

Profit = 25% of ₹80,000
= ₹20,000

Selling Price = Cost + Profit
= ₹80,000 + ₹20,000

Selling Price = ₹1,00,000

Problem 4: Job Cost Using Labour Hour Rate

A job consumes:

Calculate the total job cost.

Solution:

Factory Overheads = 600 × ₹20
= ₹12,000

Total Job Cost = ₹30,000 + ₹18,000 + ₹12,000

Total Job Cost = ₹60,000

Problem 5: Job Cost with Estimated and Actual Cost

A company estimated the cost of a job at ₹1,20,000. The actual costs were:

Calculate the actual cost and cost variance.

Solution:

Actual Cost = 55,000 + 35,000 + 25,000 + 8,000
= ₹1,23,000

Cost Variance = Actual Cost − Estimated Cost
= ₹1,23,000 − ₹1,20,000

Cost Variance = ₹3,000 Adverse

The actual cost exceeded the estimated cost by ₹3,000.