BBA Cost Accounting Study Material to Output Job And Batch Costing Short Notes

BBA Cost Accounting Study Material to Output Job And Batch Costing Short Notes : BBA 1st Year Semester Cost Accounting Year 2019 Most Important Notes Questions Answers Study Material in English.

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BBA Cost Accounting Study Material to Output Job And Batch Costing Short Notes
BBA Cost Accounting Study Material to Output Job And Batch Costing Short Notes

Learning objectives

  • Methodology and applicability of output costing
  • Preparation of proformas cost sheet
  • Overview of job costing and its applicability
  • Procedure involved in job costing
  • Features and advantages of job costing
  • Definition and meaning of batch costing
  • Economic batch size
  • Meaning of operation costing
  • Applicability of multiple costing

Bba Cost Accounting Study Material to Output Job And Batch Costing Short Note Of Output Costing

Output Costing

Output costing is also called as ‘single costing’ or ‘unit costing’. It is applied where the organisations produce single product and the whole production process involve in manufacture of single product. This is done generally in highly mechanised and routine production environments. Most frequently different grades of identical product is produced. For example, dairy industry, paper industry, cement manufacture, mines, quarries, beverages use this method of costing. This method is suited for organisation producing a single article on mass scale by continuous manufacture. The cost units are identical with identical costs. In unit costing, cost is collected element wise like   direct materials, direct labour, prime cost, factory overhead, administration overhead, selling and distribution overhead etc. the cost of each element is divided by total production quantity to determine cost per unit of each element. The cost ascertainment of each unit under output costing.

Under output costing detailed analysis of costs is done as in the case of job costing. Since, the entire expenditure is normally incurred for only one type of product. If the product differs in grades or sizes, then analysis of costs is necessary for ascertainment of cost of each grade or size of the product. For ascertainment of cost of production and profit, cost sheets are prepared on periodical basis. The proformas cost sheet is given below:

Cost Sheet of X  Y  Z Ltd. For the year ended……………………..

 The cost sheet not only shows the total cost but also the cost per unit for a particular period and it helps the management in cost comparison, analysis and control.  The accumulation of costs as shown in the cost sheet is easy to prepare and simple to understand and it help in ascertainment of each element of cost in total cost and it is useful in fixation of prices of the products.

Bba Cost Accounting Study Material to Output Job And Batch Costing Short Note Of Job Costing

Job Costing

CIMA job costing is “ that form of specific order costing which applies where work is undertaken to customers’ special requirements and each order is of comparatively short duration( compared with those to which contract costing applies). The work is usually carried out within a factory or workshop and moved through processes and operations as a continuously identifiable unit. The term may also be applied to work such as a continuously identifiable unit. The term may also be applied to work such as property repairs and the method may be use in the costing of internal capital expenditure jobs”.

A job is a specific order for work usually carried out within a factory or workshop and moves through activities and operations as a continuously identifiable unit. Job costing is used in engineering jobs, construction companies, printing jobs, automobile servicing, ship building, furniture making, fabrication jobs etc. A job is a cost unit which consists of a single order or contract. Job costing is a system in which the elements of cost incurred are specifically identifiable with the item being made to a customer’s specific requirements. The cost s of each job are recorded in job account. The unit of cost in job costing is the cost of the job itself. The cost of completed job will be the materials used for the job, the direct labour employed and the production overheads charged to it.

Features

  • It is a specific order costing.
  • The job is carried out or a product is produced to meet the specific requirements of the order. It may be related single unit or a batch of similar units.
  • It is concerned with the cost of an individual job or batch regardless of the time taken to produce it but normally short duration jobs.
  • Costs are collected to each job at the end of it s completion.
  • The cost of each job is ascertained by adding materials labour and overheads.
  • Only prime cost elements are traceable basis and sometimes it is difficult to select a suitable method of absorption of overheads to individual jobs.
  • Standardisation of controls is comparatively difficult as each job differs and more detailed supervision and control is necessary.
  • Work – in – progress may or may not exist at the end of the accounting period.

Procedures

The job order costing involves the following procedures:

  • Each job is given a job number or work order number that identifies it and distinguishes it from every other job.
  • Each job has a job cost card prepared for it that bears the job number and which is used to collect all cost data relating to the job. Job cost cards must be carefully designed so that they effectively and logically collect all the cost data pertaining to the job. A proformas of job cost cast is card is shown in figure 9.1. this card is used for small jobs and for larger jobs, summary details will be entered in job cost cards and supporting schedules relating to material labour and overheads will be enclosed.
  • Materials requisitions are sent to stores. The material requisition note will be used to cost the materials issued to the job concerned, and this cost may then be recorded on a job card, which records all costs relating to a particular job. The cost may include items already in stock, at an appropriate valuation, and / or items specially purchased.
  • A job time sheet is given to the worker who is to perform the first operation of the job. The times of his starting and finishing the operation are recorded on the time sheet, which is then passed to the person who is to carry out the second operation, where a similar record of the times of starting and finishing is made. When the job is completed, the job time sheet is sent to the cost office, where the time spent will be costed and recorded on the job card.
  • The job tickets would be priced by reference to day and overtime rates, piece work and bonus rates. The materials issued would be priced using the stores record cards employing on pricing methods like LIFO, FIFO, average price etc.
  • During production stage all the direct costs like direct material, labour and direct expenses are charged to the job and a share or overheads of each cost centre that the job passes through is charged by means of overhead absorption rates.
  • When the job is completed and sent to the finished goods store, all the direct costs and factory overheads apportioned to it should be specified on the job cost card. The sum of the cost is called, factory, production or works cost and are charged to the job account in the work- in – progress ledger.
  • When the job is sold or delivered, its share of administration, selling and distribution overhead is charged to it and the cost of delivery is charged and recorded on job cost card and the sum of all costs charged to the job is the total cost of the job.
  • The difference between the total cost and selling price of the job represents profit or loss on the job completed. 


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