Business Performance and Strategy

Question 1

Q1.a) Job costing vs process costing

 According to this method costs are collected and accumulated according to jobs, contracts, products or work orders. Each job or unit of production is treated as a separate entity for the process of costing. Job costing is carried out for the purpose of ascertaining costs of each job and takes into account the cost of materials, labour, overheads etc.

Whereas process costing is a method of costing used in industries where the material has to pass through two or more process for being defined as a method of cost accounting whereby costs are charged to processes or operations and averaged over units produced.

Two situations:-

Job costing:-

1)      Where jobs are executed for different customers according to these specifications.

2)      When no two orders are alike and each order job needs special treatment.

Process costing:-

1)      Each plant is divided into a number of processes, cost centres or departments and each such diversion is a stage of prod or a process.

2)      The output of one process becomes the input of another process.

(b) Total manufacturing overheads = 750000+450000= 1200000

Total direct labour cost =250000+600000 =850000

Manufacturing overhead rate =1200000/850000= 1.4117 per unit

Total direct labour cost =1000+1600=2600

Total manufacturing OH =1.4117*2600= 3670.42

Total direct matrial cost =15000+5000=20000

Total cost of job 011 using plant wide =3670.42+20000=26270.42

(c) Under departmental absorption rate system different departments of the company can follow different methods and therefore there can be different absorption rate followed by the different departments .The basis of overheads that might be preferable are

For machining department - machining hours

For finishing department -labour hours

(d) Cost of job 011

The manufacturing OH rate of machining dept= 750000/25000= 30

Manufacturing OH for machining...