Job and Batch order costing slides.Defination, Advantages, Disadvantages, Objectives of both batch order costing and job order costing.DETERMINATION OF ECONOMIC BATCH QUANTITY , DIFFERENCE BETWEEN JOB AND BATCH COSTING. Features of batch costing.Procedure Involved in the Job Order Costing.Identify Job
Production Order
Material Cost
Labour cost
Manufacturing & other overhead
Compute Total cost
Completion of Job
2. Job Costing
01 Features
02
Batch Costing
03
Advantages
Table of contents
Limitations
01
02
03
Basic Features
Advantages
Limitations
3. Job Costing ?
System of assigning the cost of production to a specific
manufacturing job.
Say a customer bought shoes personalized with their
name written on the sides and shoelaces made of
cotton, rather a basic nylon material.
4. Features
Cost of production of
each job is ascertained
after completion
Production is against
customer's order and
not for stock
Production is irregular and
not continuous
Each job has its own
characteristics and
needs special treatment
Each job is treated as a
cost unit
Work in progress differ
from period to period
according to the number of
orders or jobs in hand
01
03
05
02
04
06
5. To find out the cost of
production of every job
01
Objectives
To make more
accurate estimates for
costs of similar jobs
02
To control the
operational in efficiency
03 To provide a valuation
of work-in-progress
04
6. Procedure Involved in the Job Order Costing
1. Identify Job
2. Production Order
3. Material Cost
4. Labour cost
5. Manufacturing & other overhead
6. Compute Total cost
7. Completion of Job
7. Documents used in a Job Order Costing
● Production Order Or Manufacturing Order
● Cost Sheet
● Other Documents
8. 01
02
03
01
02
03
04
Helps in knowing profitability
of each job
Provides sufficient cost data
for preparing cost estimates
and quotations
Facilitates cost control by
enabling comparison of actual
costs with estimated costs
Spoilage and defective work
can be identified
Excessive clerical work and
paperwork
Expensive as cost is ascertained
for each job separately
Being historical in nature, do not
enable prompt remedial action
Advantages Limitations
9. Batch Costing?
Batch costing is nothing but a modified form of job costing
in which the cost of each batch of production is calculated
The batch costing method is also known as lot costing
because products are produced in lots of, for example, 500,
1,000, or any other number
10. Cost Unit
Each Butch is treated
as a cost unit
Assertion
All costs are accumulated
and ascertained for each
batch
Unit Cost
The cost per unit is ascertained by
dividing the total cost of each
batch by the number of items
produced in that batch
Cost Sheet
A separate Batch Cost sheet
is used for each batch
Application
Batch Costing is applied
in those industries where
similar articles are
produced
Area
Readymade Garments
Industry, Pharmaceutical
Industry, Toys
Manufacturing
Features
11. DETERMINATION OF ECONOMIC BATCH QUANTITY
(EBQ)
● Determination of economic batch lot is the important work in batch
costing.
● The two types of costs involved in batch costing are
1. Set up cost
2. Carrying cost
● Economics Batch Quantity will balance both opposing costs.
12. DETERMINATION OF ECONOMIC BATCH QUANTITY
(EBQ) Cont…
● EBQ is calculated by using the following formula:
Economic batch quantity =
● Where
● Q = Batch size
● D = Demand per annum
● Ch = Cost of holding one year
● Co = Cost of setting up a batch ready to be produced
● R = Annual rate of production
13. DETERMINATION OF ECONOMIC BATCH
QUANTITY (EBQ) Cont…
● If the production of the batch is done over a short period, D/R loses its
significance.
● For short period, EBQ is given by:
EOQ =
● Where:
● D = Demand per annum
● Co = Cost of placing one order
● Ch = Reorder quantity (EOQ)
● Q = Reorder quantity (EOQ)
14. DIFFERENCE BETWEEN JOB AND BATCH COSTING
1. Nature
2. Time Consumption
3. Entity
4. Cost Calculation
5. Supervision