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Test Questions – Job Costing

TEST QUESTIONS 

  1. What is meant by job costing ?
  2. Explain the meaning of Batch costing.
  3. What are the advantages of job costing ?
  4. List out the limitations of job costing.

 

 PROBLEMS AND SOLUTIONS

 

Problem 1. The details given below have been taken from the cost records of an engineering works in respect of the job No 303. 

Material $ 4,010 

Wages :           Department A : 60 hours @ $ 3 per hour

Department B : 40 hours @ $ 2 per hour

Department C : 20 hours @ $ 5 per hour 

The overhead expenses are as follows.

Variable :        Department A : $ 5,000 for 5000 hours.

Department B : $ 3,000 for 1500 hours.

Department C : $2,000 for 500 hours. 

Fixed expenses $20,000 for 10,000 working hours. 

Calculate the cost of the job No 303 and the price for the job to give a profit of 25% on the selling price.

Solution :

Job Cost Sheet (Job No. 303)

Particulars                                                                  $                                 $

Materials                                                                                                                                  4,010

Wages :           Dept A (60 * $ 3)                                                        180

Dept B (40 * $ 2)                                                        80

Dept C (20 * $ 5)                                                        100                               360

Overhead Expenses :

Variable

Dept A = 5000 / 5000 = $  1 * 60 =                           60

Dept B = 3000 / 1,500 = $ 2 * 40 =                            80

Dept C = 2000 / 500 = $ 4 * 20 =                               80                                220

Fixed Expenses :

20,000 / 10000= 2 *  (60 + 40 + 20)                                                                                      240

Cost of job                                                                                          4830

Add :   Profit 25% on Selling Price                                                                                         1610

Selling Price                                                                                                    6440

 

Problem 2:  Printwell Ltd took up two jobs during the 1st week of April 1992. The following details are available.

Solution: Job Account

Cost of each job :

Job 101 : $ 2,900

Job 102 : $ 2,050

Problem 3. A worker takes 9 hours to complete a job on daily wages and 6 hours on scheme of payment by results. His day rate is 75 paise per unit. The material cost of the product is $ 4 and the works overheads are recovered at 15% of the total direct wages. Calculate the factory cost of the product under (a) Halsey plan and (b) Rowan plan.

 

Solution :                                            Under Halsey Plan

Time Taken * Hourly Rate +(50% of time Saved * Hourly Rate)

= 6 hours x 0.75 + (50% of 3 hours x 0.75)

= 4.5 + 1.12 = $ 5.62

Time saved : 9-6= 3 Hours 

Under Rowan Plan

Time Taken * Hourly Rate + [Time Taken / standard Time  * Time Saved * Hourly Rate]

= 6 hours x 0.75 + [6/5 x 3 x 0.75]

= 4.50 + 1.50 = $  6.00

Statement of Factory Cost

Problem 4.  A company has to submit a tender for the manufacture of a machine in 1988. The estimate of the costing department indicates that the materials and wages would cost $ 40,000 and $ 50,000 respectively. Percentage of factory on cost to wages and percentage of office on cost to works cost would be 20% and 10% respectively. 

Solution :                             Estimate for Tender Price

 

Materials

Wages

 

Prime cost

Factory on cost 20% on wages

 

Works cost

Office on cost 10% on works cost

 

Cost of production

Profit 20% on selling price i.e., 25% on cost

 

Selling price for tender

$

40,000

50,000

 

90,000

10,000

 

1,00,000

10,000

 

1,10,000

27,500

 

1,37,500

 

Problem 5. From the following particulars of KRG Ltd. find out the value of the tender 

Material used

Production Wages

Direct Expenses

3,000

2,300

250

 

Provide 60% of productive wages for works on cost and 12·%% on works cost for office on cost. Profit to be realised 15% on the tender price. 

Solution :                                Statement of Value of Tender

 

Problem 6. What is the cost of a job consuming materials worth $ 8,000, wages for 200 Labour hours at $ 5 per hours in Dept. A and 100 Labour hours at $ 4 per hour in Dept. B. The overheads of the factory amounted to $ 15,000 for 7,500 total working hours of all the departments. 

Solution :                                                                    Cost Sheet