Chapter – Job costing

The cases given below are from standard materials on this subject

Case 1: Raymond Ltd CaseRaymond Ltd worked on only two jobs during May. Information on the jobs is given below

Job M1 Job M2Direct material Rs 75,000 Rs 50,000Direct manufacturing labor 2,70,000 2,10,000Direct manufacturing labor hours 6,000 5,000

Manufacturing overhead costs are allocated at the budgeted rate of Rs 30 per direct manufacturing labour hour. Job M1 was completed in May.

1. Compute the total cost of Job M12. Calculate per unit cost for Job M1 assuming it has 15,000 units.3. Determine the ending balance in WIP.

Case 2: Hero Honda CaseHero Honda uses a job costing system at its gurgaon plant. The plant has a machining department and a finishing department. Hero Honda uses two cost bases: Machine hours for machining department and labour costs for finishing department. The current year budget is as follows:

Machining department Finishing departmentOverhead 1,00,00,000 80,00,000Labour cost 9,00,000 40,00,000Labour hours 30,000 1,60,000Machine hours 2,00,000 33,000

During the month of January, the job cost record for job 431 shows as follows;Particulars Machining department Finishing departmentDirect materials 14,000 3,000Direct manufacturing labour costs 600 1,250Direct manufacturing labour hours 30 50Machine hours 130 10

Compute the cost of the job consisting of 200 units?

Case 3: Suprawin technologies caseSanjay Iyer, president of suprawin technologies is examining alternative ways to compute indirect cost rates . he collects the following information from the budget for the current yearBudgeted variable indirect costs : Rs 20 per hour of professional labour timeBudgeted fixed indirect costs; Rs 1,00,000 per quarterThe budgeted billable professional labor hours per quarter are:January to March – 20,000 hoursApril to June – 10,000 hoursJuly to September – 4,000 hoursOctober to December – 6,000 hoursSanjay pays all IT professionals employed by suprawin on an hourly basis, Rs 60 per hour

Suprawin’s job costing system has a single direct cost category, professional labour at Rs 60 per hour and a single indirect cost pool allocated using professional labor hoursSuprawin charges client Rs 130 per hourCompute the cost of the job and income for the following four customers1. M/S Winman (P) Ltd – 200 hours in February2. Robosoft (P) Ltd – 120 hours in march and 80 hours in april3. Delloite – 100 hours in January, 40 hours in September and 60 hours in November

Case 4: LG electronics caseLG Electronics Ltd uses two manufacturing overhead cost pools – one for overhead costs incurred in the machining department and another for overheads incurred in the assembly department. LG Electronics uses machine hours and labour hours as cost drivers.The following data is available

Machining department Assembly departmentBudgeted manufacturing overhead rate Rs 60 per machine hour Rs 40 per labour hourActual Rs 1,24,00,000 Rs 94,00,000

Machine hours and labour hours data is as followsMachine hours Labour hours Balance before proration

COGS 1,35,000 1,80,000 3,20,00,000Finished goods 9,000 9,600 15,00,000WIP 36,000 50,400 65,00,000

Compute under allocation or over allocation of overheads and write off