Strategic Cost Management
ACCT90009
Seminar 2
Job Costing
Seminar 2
Job Costing
•
Learning Objectives
•
To understand the nature of costing systems
•
To be able to distinguish between job costing and process
costing
•
To distinguish actual costing from normal costing
•
To understand the purpose and design issues in both service
and manufacturing contexts
•
To understand how the steps in the production process are
tracked in a job costing system
•
To understand the alternative methods of disposing of under
or over allocated overhead.
Seminar 2
•
Reading:
•
Chapter 3
•
Questions and problems:
•
Review Questions: 3.1, 3.3, 3.4, 3.5, 3.9.
•
Exercises: 3.13, 3.14, 3.21.
Product Costing Systems
•
The aim of a costing system is to report the
organisational resources consumed by a
particular cost object
•
Costing system considerations:
–
Cost-benefit-context
–
Underlying operations
–
One source of information
4
Building Blocks of Cost Systems
Indirect
Cost Flows
•
Corporate Headquarters
•
Salaries of executives
•
Occupancy costs
•
Travel & entertainment
•
Supporting staff & operating costs
Indirect
Cost Flows
•
Division or Group
•
Allocated corporate headquarter cost
•
Occupancy costs
•
Divisional management and functional staff salaries
•
Marketing staff salaries and costs
Indirect
Cost Flows
•
Allocated Costs
•
corporate headquarters and division overhead
•
Plant Costs
•
Materials and labour
(Seperable and Joint)
•
Factory indirect (Utilities, Maintenance, Depreciation, Plant Management,
Materials Handling etc.)
The Product
1.
Direct Materials
2.
Direct Labour
3.
Fair share of allocated indirect
costs
Job costing vs. Process costing
Job costing system
Distinct
unit of a product
or service
Process costing system
Masses of
identical
or similar
units of a product or a service
•
In a job-costing system, the cost object is an
individual unit, batch or lot of a distinct
product or service called a
job
.
•
In process costing, the cost object is masses of
identical or similar units or a product or
service.
•
Process costing allocates costs among all the
products manufactured during that period
Job-Costing and Process-Costing
Systems (Continued)
Job costing vs. Process costing
SERVICE SECTOR
MERCHANDISING
SECTOR
MANUFACTURING
SECTOR
Job costing
used
•
Accounting firm
audits
•
Advertising
agency campaigns
•
Individual legal
cases by a law firm
•
A special
promotion by
Myer of a new
product
•
Sending a
catalogue to a
mailing list
•
Aircraft assembly
•
House
construction
•
Bespoke shoe
maker (made-to-
order)
Process costing
used
•
Postal delivery
(standard items)
•
Deposit
processing by
banks
•
Grain dealing
•
Processing new
magazine
subscriptions by
magshop
•
Oil refining
•
Beverage
production
General Approach to Job Costing
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- Three '19
- Job costing, Finished Goods
