METHODS OF COSTING 
                                  
                                  
                           JOB COSTING 
         
                                  
         
         
                        PAPER: 4.1 COST ACCOUNTING  
                         FOR B.COM SEM: IV SEC: B 
                                BY 
                            SHRUTI GULATI 
         
         
         
         
         
         
                                       WHAT IS JOB COSTING? 
                                Job costing is a method of costing applied in industries where production is measured in 
                                    terms of completed jobs. Industries where job costing is generally applied are printing press, 
                                    ship building, repair workshops, foundry, automobile garage and other similar 
                                    manufacturing units which manufacture to customer’s specific requirements. 
                                Job costing is a method of costing whereby cost is compiled for a job or job order/work 
                                    order. The production is against customer’s orders and not for stock.  
                                The cost is not related to the unit of production but is a cost for the job, e.g., printing of 
                                    1,000 ledger sheets, repairs of 10 equipments, instead of printing one sheet or repair of one 
                                    equipment.  
                                The elements of cost comprising prime cost viz. direct materials, direct labour and direct 
                                    expresses are charged directly to the jobs concerned, the overhead/indirect expenses 
                                    charged to a job is an apportioned portion of the departmental overhead. 
                                     
                                    CIMA terminology defines job costing as “a form of specific order costing which applies 
                                    where work is undertaken to customer’s special requirement. As distinct from contract 
                                    costing, each job is a comparatively short duration”.  
                                     
                                It implies that under job costing, production is always against the customer’s special 
                                    requirement. 
                         
                                    FEATURES OF JOB COSTING 
                                    (i)        The production is generally against customer’s order and not for stocks 
                                    (ii)       Under job costing method, production is at irregular intervals and not continuous 
                                    (iii)      Each job has its own characteristics and needs special treatment 
                                    (iv)       Each job is treated as a cost unit under this method of costing 
                                    (v)        The work-in-progress differs from period to period according to the number of jobs 
                                               is hand 
                                    (vi)       There is no uniformity in the flow of production from department to department, 
                                    (vii)      Job costing is adopted by manufacturing organizations as well as non-manufacturing 
                                               organizations,  
                                    (viii)     Under this method, the profit and loss can be ascertained in respect of each job 
                                (ix)       Each job is distinctively identified by a production order throughout the production 
                                           stage. 
                       
                                COMPONENTS OF JOB COSTING 
                                Following are the components of Job Costing : 
                                 
                                                                                                                
                                 
                                OBJECTIVES OF JOB COSTING 
                                (i)        The important objective of job costing is to ascertain the cost as well as the profit or 
                                           loss for each job 
                                (ii)       It provides a basis for determining the cost of similar jobs undertaken in future. It 
                                           thus helps in future production planning 
                                (iii)      Job costing is to find out jobs which are more profitable and those which are not 
                                           profitable or less profitable 
                                (iv)       It helps the management in controlling costs by comparing the actual costs with the 
                                           budgeted costs 
                                ADVANTAGES OF JOB COSTING  
                                (i)        Job costing is useful in quoting cost plus contract 
                                (ii)       Job costing facilitates identification and control of spoilages and defectives 
                                (iii)      Job costing facilitates estimation of cost of similar jobs 
                                (iv)       It helps the management to know about the profitability of the jobs 
                              (v)       Job costing is helpful to ascertain the cost as well as the profit or loss for each job 
                                        separately 
                              (vi)      The data of the job costing are quite helpful for the future planning, and  
                              (vii)     Job costing helps in making detailed analysis of cost of materials, labour, direct 
                                        expenses and overheads. 
                     
                              DISADVANTAGES OF JOB COSTING 
                              (i)       It is expensive to operate as it requires considerable detailed official or clerical work 
                              (ii)      With the increase in the official or clerical works the chances of errors or mistakes 
                                        are increased 
                              (iii)     Job costing does not facilitate control of cost unless it is used with standard or 
                                        budgetary costing 
                              (iv)      Job costing cannot be efficiently operated without highly developed production 
                                        control system. The job costing method requires intricate factory organisation 
                                        system 
                              (v)       When drastic economic changes take place cost comparison becomes difficult. 
                               
                              HOW IS JOB COSTING DONE?  
                              Job costing requires a system procedure to be followed for its proper implementation. 
                              Following are the steps that describe how exactly job costing is to be done: 
                               
                              Steps for Job Costing (Procedure) 
                              1.  Advance estimation of cost of job 
                              On receiving enquiry from the customer, an estimation of cost of the job and price to be 
                              charged is made. This is used for tender and price quotation. It is prepared by the Costing 
                              Department. 
                              2.  Assigning Job Order Number 
                              When an order is received from the customer, it is allotted a certain number. Every job order 
                              is known by its number throughout its production process.